GST UPDATE ON TREATMENT OF STEEL DIE INVOICED TO FOREIGN BUYER BUT SCRAPPED IN INDIA 64/2020-21

The Karnataka Authority for Advance Ruling has recently pronounced an interesting decision in the case of M/s Dolphine Die Cast (P) Ltd wherein it has discussed in detail the treatment to be done in case where the steel dies used in manufacture of aluminium and zinc die castings were invoiced to the foreign buyer which were subsequently either exported to the foreign buyer or scrapped at the applicant’s end as per the instructions of the foreign buyer.
The applicant is a manufacturer and exporter of Aluminium and Zinc die Castings to the overseas customer. The applicant first manufactures the die mould as per the requirements and specification given by the customer. This die is retained by the applicant and is used for the manufacture and supply of Aluminium and Zinc die Castings. The applicant raises the tax invoice for this steel die in the name of overseas customer in foreign currency for receipt of payment though the die is rarely exported as per instructions of the customer. After the completion of the export order or completion of the die life, applicant either exports the dies to the overseas customer or scraps the die at applicant’s end as per the instruction of the customer.
Similarly, the applicant is an importer of the Aluminium casting and pressure die casting component of Aluminium from Thailand. The Thailand supplier first manufactures die as per the requirement and specifications given by the applicant and uses the same for the manufacture of the Aluminium casting and pressure die casting component of Aluminium for the applicant. The Thailand supplier raises the tax invoice in the name of the applicant though the die is not physically imported. After completion of the order or completion of the die life, the applicant either imports the dies and returns to the domestic customer or as per the instruction of the domestic customer the applicant inform the Thailand supplier to scrap the die at their end.
The applicant seeks advance ruling on taxability of the above transactions and admissibility of input tax credit.
The AAR ruled that in the case of manufacture of die by the applicant and invoiced to the overseas recipient, without moving the goods, the applicant has to raise the tax invoice addressed to the foreign buyer. The place of supply of goods, other than supply of goods imported into, or exported from India, shall be the location of such goods at the time of the delivery to the recipient as per section 10(1)(c) of the IGST Act 2017. Therefore, the place of supply of die in this case is the location of the applicant.
In view of the above, the location of the supplier of die and place of supply of die are one and the same i.e., location of the applicant and such being the case said transaction shall be treated as intra-state transaction. Since it is an intra-state supply, applicant has to collect CGST and SGST and discharge the liability. The applicant is not eligible to claim said payment as input tax credit on the invoice raised by him as he is not the recipient. Further if the said steel die is scrapped at applicant’s end as per the instruction of the overseas customer, while supplying the die scrap to the third party, the applicant has to issue intra/interstate tax invoice depending upon the nature of the transaction and collect and pay the applicable tax as per the provisions of the GST Act.
In the case of manufacture of die by the Thailand supplier, if applicant physically imports the die to a place in India then applicant has to pay the IGST under reverse charge mechanism and claim the IGST tax paid as input tax credit, subject to conditions applicable. Further if the steel die belonging to the applicant is scrapped at the location of the overseas supplier without die coming to India, then such transaction is occurring outside the taxable territory, i.e. India and hence not under the purview of GST Act.
This advance ruling raises various questions in the minds of the assessee as regards the transaction of supplying aluminium castings to the overseas buyer is concerned. One such question is whether raising of invoice for die without physically sending die abroad attracts the provisions of section 10(1)(c) of IGST Act, 2017? The reasoning adopted by the AAR is that since export of goods means taking out of India to a place outside India, and as this criteria is not fulfilled for the steel dies, the place of supply will be determined by invoking provisions of section 10 of the IGST Act, 2017 which prescribes place of supply of goods other than supply of goods imported into or exported from India. By application of this provision, the applicant is required to consider the transaction of selling of steel die to the overseas customer without physical delivery of said settle die as intra-state transaction attracting CGST and SGST of Karnataka. We all have basic perception in our minds that sale involves movement of goods but the provisions contained in section 10(1)(c) of the IGST Act, 2017 seeks to levy GST even if there is sale of goods without movement of such goods. The common example framed in our minds for this section 10(1)(c) was that of showroom sales but this advance ruling has changed our perception as regards application of the provision of section 10(1)(c) of the IGST Act, 2017.
Now further another question arises is as to whether the title of goods is transferred to foreign buyer when the goods does not move from the premises and also the scrap is also to be sold by Indian supplier in India only. Hence, it is clear when the title of goods is transferred then only supply will take place. If it is not a supply of goods, can it be termed as export of service of “ manufacturing of die steel” and will qualify for export of service. There are number of questions are raised in this advance ruling and each one is to be decided on facts of each case.

This is solely for educational purpose.
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GST UPDATE ON TREATMENT OF STEEL DIE INVOICED TO FOREIGN BUYER BUT SCRAPPED IN INDIA 64/2020-21

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