#Third Country Exports under GST - By SN Panigrahi Essenpee Business Solutions, Third Country Exports, Imports & Exports under GST, Exports under GST, GST,

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SN Panigrahi is a Versatile Practitioner, Strategist, Energetic Coach, Learning Enabler & Public Speaker.
He is an International-Corporate Trainer, Mentor & Author
He has diverse experience and expertise in Project Management, Contract
Management, Supply Chain Management, Procurement, Strategic
Sourcing, Global Sourcing, Logistics, Exports & Imports, Indirect Taxes –
GST etc.
He had done more than 150 Workshops Globally on above
Published more than 500 Articles; 90 YouTubes & more than
90 SlideShares
He is an Engineer + MBA +PGD ISO 9000 / TQM with around 29 Yrs of
Experience
He is a certified PMP® from PMI (USA) and become PMI India Champion
Also a Certified Lean Six Sigma Black Belt from Exemplar Global & KPMG
Trained in COD for 31/2 Yrs. on Strategy & Leadership
GST Certified – MSME – Tech. Dev. Centre (Govt of India)
ZED Consultant – Certified by QCI – MSME (Govt of India)
Member Board of Studies, IIMM
Co-Chairman, Indirect Tax Committee, FTAPCCI
Empanelled Faculty in NI MSME
He has shared his domain expertise in various forums as a speaker & presented a number of papers in various national and
international public forums and received a number of awards for his writings and contribution to business thoughts.
SN Panigrahi
9652571117
snpanigrahi1963@gmail.com
Hyderabad

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Indian
Business
US
Customer
Chinese
Supplier

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Indian
Business
US
Customer
Chinese
Supplier
Export of Goods : As per Section 2 (5) of IGST Act, 2017 : Export of Goods is Defined as
“Taking Goods out of India to a place outside India”
Since in the above Third Country Exports, Goods are not Physically moved
from India, therefore is not Considered as Exports

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Indian
Business
US
Customer

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Indian
Business
US
Customer
Entry No. 07 : CGST (Amendment) Act 2018 :
Supply of Goods from Non-taxable territory to another place in
Non-taxable territory without entering into India are treated
neither as ‘supply of goods’ nor ‘supply of services’.
In this Case Transaction between Indian Entity & US Customer is not Treated as
Supply & therefore GST is Not Applicable.
Non-
Taxable
Territory

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CGST (Amendment) Act 2018 : AMENDMENT IN SCHEDULE III
Notification No. 02/2019 – Central Tax dated 29.01.2019, Effective Date
01.02.2019
Schedule III lists out certain transactions which are treated neither as ‘supply
of goods’ nor ‘supply of services’.
Vide CGST (Amendment) Act 2018, Entry No. 07 has been inserted to give
effect to the following.
Entry No. 07: Earlier there was no provision to deal with a situation of supply
of goods from a place in non-taxable territory to another place in non-taxable
territory without such goods entering into India.
Now with the insertion of Entry No. 7, it has now become clear that such
supply shall not be a ‘Supply within the meaning of section 7(2)(a)’.

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Supplier
Non- Taxable
Territory
Customer
Non- Taxable
Territory
India

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However there are Two Differing Opinions
In Re Synthite Industries Ltd (AAR Kerala)
Not Liable to GST on the sale of goods
procured from China and directly supplied to
USA
In re Sterlite Technologies Ltd (GST AAR
Gujarat)
GST Liable on Goods Purchased & Sold
Outside India
Whether Third Country Exports are Treated as Supply & Applicable to GST?
Supply of Goods from Non-taxable territory to another place in Non-taxable territory without entering
into India are treated neither as ‘supply of goods’ nor ‘supply of services’. Therefore GST is Not
Applicable.
Whether Third Country Exports are Treated as Exports under GST?
Since in case of Third Country Exports, Goods are not Physically Moved from India, therefore is
not Considered as Exports : Section 2 (5) of IGST Act, 2017

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Supplier
Non- Taxable
Territory
Customer
Non- Taxable
Territory
Indian
Entity

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1. M/s Synthite Industries Ltd, Synthite Valley, Kadayiruppu P 0, Kolenchery, Ernakulam
District, Kerala – 682311 (hereinafter called the applicant) is a registered person under GST
having GSTN: 32AADCS5616E1ZQ.
2. They are in the business of trading in spices and spice products. They have
two modes of transactions. In the first kind, the applicant receives order from a
customer in USA for the supply of spice products. They place a corresponding
order to a supplier in China for supplying the goods ordered by the customer in
USA. The supplier in China, based on the request of the applicant, ship the
goods directly to the customer in USA.
In other words, the goods do not come to India. The Chinese supplier issues
invoice to the applicant, for which, payment will be made by the applicant in
due course. Subsequently, the applicant will raise invoice on the customer in
USA, and collect the proceeds.

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3. In the other mode of transaction, the applicant is availing storage facility in the form of a
presidential warehouse in Netherlands for storing their products and subsequent delivery to their
customers in and around Netherlands. The storage facility is open to all, and interested entities
across the globe can keep their products there by paying applicable storage rent. The applicant
is availing a portion of storage facility as and when required. They use the facility for quick and
timely delivery of their products to their customers based on demand. When an order is received
from the customer by the applicant, they can immediately deliver the products from this
warehouse and this reduces the freight expenses and delay in delivery.
These types of transactions are legally permitted and they have obtained necessary permission
from Reserve Bank of India. The applicant wants to buy materials from a company in China in
bulk and store it in the presidential warehouse in Netherlands for subsequent delivery to various
customers in and around the country as small and medium lots based on demand. The material
is not coming to India at any point. The Chinese supplier will invoice the applicant for which
payment will be given in due course. Subsequently, the warehouse authorities will arrange split
deliveries to their various overseas customers as per their instructions. The applicant would
issue invoice to the ultimate customers and collect the proceeds in foreign exchange.

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4. The applicant in his application dated 29.01.2018 has raised following issues for
determination by the Authority;
1. Whether on procuring goods from China, in a context where the goods purchased are
not brought into India, is GST payable by them?
2. On the sale of goods to the company in USA, where goods sold are shipped directly
from China to USA without entering India, is GST payable by them?
3. On procuring goods from China not against specific export order, in a context when the
goods purchased are not brought into India, is GST payable by them?
4. On the sale of goods from Netherlands warehouse to their end customers in and
around Netherlands, without entering India, is GST payable by them?

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Advance Ruling
The goods are liable to IGST when they are imported into India and
the IGST is payable at the time of importation of goods into India.
The applicant is neither liable to GST on the sale of
goods procured from China and directly supplied to
USA nor on the sale of goods stored in the warehouse
in Netherlands, after being procured from China, to
customers, in and around Netherlands, as the goods
are not imported into India at any point.

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In re Sterlite Technologies Ltd (GST AAR Gujarat)
Advance Ruling No. GUJ/GAAR/R/04/2020; 17/03/2020
In re Sterlite Technologies Ltd (GST AAR Gujarat)
The Gujarat bench of Authority for Advance Ruling recently passed a ruling in case of M/s. Sterlite
Technologies Ltd (applicant) which brought a sense of ambiguity in the minds of taxpayers. The Applicant
sought advance ruling on two transactions which it propose to undertake. However, In this article, only one
has been discussed as the relevant question on GST laws. The applicant sought advance ruling on
applicability of GST on supply of goods which were purchased outside India and then sold outside
India without being brought into India.
Brief Facts of the Case
➢ M/s. Sterlite Technologies Ltd proposed to undertake ‘’Merchant Trade Transaction’
➢ Wherein they would receive an order from customer located outside India;
➢ Back to back order would be placed by them to supplier located outside India;
➢ Goods would be directly shipped by vendor outside India to customer located outside
India;
➢ Payment would be made in foreign currency to vendor and applicant would receive foreign
currency from customer.
They therefore wished the Authority for Advance Ruling to determine if any GST is payable on goods
procured from vendor outside when goods purchased are not brought into India and whether GST would
be payable on goods sold to customer located outside India.

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Hearing before AAR
•With regards to the query on leviability of GST on outward supply from place of vendor to customer, it
is to mention that the thumb-rule for determining the taxability of any transaction is to ascertain whether the
transaction tantamount to ‘supply’ in terms of the provisions of law. The term ‘supply’ has been defined at
Sec. 7 of the CGST Act, 2017. In the instant case, the applicant is selling goods for a consideration in
the course or furtherance of business and as such the transaction tantamount to ‘supply’ in terms of
the definition of ‘supply’.
•Once the test of supply is met with, the next step is to determine whether the same is an Intra-state
supply or inter-state supply. In this regard it is pertinent to examine the provisions of Section 7 of the IGST
Act, 2017. Sub section (5) of section 7 of IGST is reproduced hereunder as “Supply of goods or services or
both,––
•When the supplier is located in India and the place of supply is outside India;
•To or by a Special Economic Zone developer or a Special Economic Zone unit; or
•In the taxable territory, not being an intra-State supply and not covered elsewhere in this section, shall
be treated to be a supply of goods or services or both in the course of inter-State trade or commerce.
The above statute indicates that in the event that the supplier is located in India and the place of
supply is outside India, such supplies shall be treated as Inter-stated supplies.

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•Thus, it is very clear that the transaction undertaken by the applicant tantamount to supply and is an
Interstate supply.
•Having travelled thus far, it is obvious that IGST will be leviable unless the goods are exempted or are zero-
rated supplies which have been defined as export of goods or services in terms of the provisions of Sec. 16
of the IGST Act, 2017. The only possibility of goods not subject to levy of IGST would be the
circumstances where the goods are exported.
•The term ‘export of goods’ has been defined under sub section 5 of Section 2 of IGST Act, 2017 which
reads as under: Export of goods would mean—‘With its grammatical variations and cognate expressions,
means taking goods out of India to a place outside India’. The above definition indicates that the act of taking
goods out of India to a place outside India qualifies as export. In the instant case, the goods have not
crossed the Indian customs frontier and as such it is clear that the goods are not physically available in the
Indian territory. When the goods are not available in the Indian territory, the question of taking goods
out of India does not arise. Thus, the subject transaction does not qualify as export of goods.
Decision by AAR
•In view of the above, it appears that the transaction is covered under the ambit of Inter-state supply and is
neither exempted nor covered under export of services. Thus, the theory of elimination takes us to the
conclusion that such supplies will be subject to levy of IGST.

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Comments
The above discussed ruling seems to be incorrect since it does not considers
all the provisions of the law. One can refer to the paragraph 7 to the Schedule-
III to the CGST Act 2017 which enlists the transactions which shall not be
regarded as supply. Paragraph 7 to the Schedule-III to the CGST Act 2017
(as amended by CGST (Amendment) Act 2018 is reproduced here – “Supply of
goods from a place in the non-taxable territory to another place in the
non-taxable territory without such goods entering into India”.
It can be seen that the above case of Sterlite Technologies Ltd falls under the
para 7 as mentioned above. Therefore, it should not be treated as
supply under the provisions of the law. While ruling was pronounced, this para
to Schedule III is ignored completely. The department should come into play
and remove the ambiguity created by this ruling.

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https://www.youtube.com/channel/UCVZ
ScNa_leR8XbYINEwTFwQ/videos

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26. Contact Details:
SN Panigrahi
9652571117
snpanigrahi1963@gmail.com
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