Whether GST will be applicable on the transfer of title in moulds from applicant to Indian buyer?

PJ/Case Law/2020-2021/3557

Automative Components Technology India Private Limited (GST AAR Tamilnadu) Order No. 05/ARA/2020 dated 31.01.2020

Brief Facts: -The applicant is engaged in the supply of automotive components. They have stated that they agree to supply certain parts, including moulds to Indian Company located in the State of Tamil Nadu, for which they place an order for manufacturing the said parts and moulds on a Thailand Company. The parts manufactured are physically imported, while the moulds developed are retained in Thailand and are not physically imported into India, but the ownership in the mould is transferred from the foreign supplier to the Applicant and from the applicant to the Indian buyer by raising of separate invoices. Thus, with regard to the moulds, there are two transactions involved inthe present case:

T1: Transfer of title in moulds from the foreign supplier to the Applicant.

T2: Transfer of title in moulds from the Applicant to the Indian buyer.

They have also stated that the moulds are never physically imported into India. Themoulds will be disposed as waste in Thailand after its usage for manufacturing the requisite parts.

Issue:-

Whether GST will be applicable on the transfer of title in moulds from applicant to Indian buyer?
If yes, whether the Indian buyer would be eligible to take credit of the GST paid to the applicant for said purchase?

Appellant’s Contention:- The applicant on his interpretation of law has stated that on application of Section 10 (1)(c) of IGST Act 2017, the place of supply is Thailand and the supplier is in India, therefore the supply could get covered under the ambit of Inter-State Supply in terms of IGST Act, but IGST levy can be imposed only to supplies within the territorial jurisdiction of the IGST Act. The applicant has stated that the supply in the case at hand takes place outside the territorial jurisdiction of IGST Act and thereby not subject to IGST and has sought to clarify the applicability of GST in the said transaction.

Further, the applicant contends that the said transaction does not constituteimport of goods as there is no physical movement of goods into India. Thus thetransactions do not qualify as an inter-state or intra state supply of goods andwould fall outside the purview of CGST/SGST/IGST. They have also stated thattransaction was not taxable under the erstwhile indirect tax.
Further, the applicant has submitted that if at all tax is applicable on thetransaction then input tax credit of the same should be available to the recipient of Supply. The applicant has stated that ITCshould be applicable as per section 16(2)(b) of CGST Act 2017. The Applicantcontends that if a transaction is hold to be liable qua the supplier and not thegoods or services or both, then in the same analogy on the very transaction thecredit of input tax needs to be allowed based on the recipient and not whether thegoods or services or both had been received or not. If the transaction is deemed to be an inter-state supply and if the same is made liable to GST, then it should be deemed that such goods have been received from perspective and the credit shouldaccordingly be made available to him.

M/s. Nissan Motors India Pvt Ltd had placed an order for manufacture of tool/mould basis which the applicant has placed an order for manufacturing the same with MSC Thailand. The 'Tool Ownership Certificate' is issued by the applicant on NMIPL as transfer of title in ownership of tools on payment of consideration.The tools shall be property of NMIPL only. The cost of the mould has not been amortized in the present transaction.The price of the manufactured mould/tools has been received by the applicant by raising a separate invoice.

Reasoning of Advance Ruling:-

The Act limits the Advance Ruling Authority to decide the issues earmarked for it under Section 97(2) and no other issue can be decided by the Advance Ruling Authority. Of the above questions on which ruling is sought by the applicant, relates to eligibility to credit of tax paid by them at their buyers'end.

The eligibility to credit of input tax paid by the applicant alone is covered underclause (d) of Section 97(2) above and the eligibility at the buyers' hand when raised by an applicant do not fall under any of the category specified under Section 97(2)of the Act and therefore not within the ambit of this authority.

However, the authority has given its ruling for the first question raised about GST taxability on transfer of title in moulds from applicant to Indian Buyer.
Taking into consideration, Vendor Tooling PO and Tool Ownership Certificate', it is evident that the moulds and tools shall upon completion of the cycle life of the moulds be disposed off in the premises of such parts manufacturer as maybe agreed in the future between the parties/ approval of Nissan Motors India Pvt Ltd.
The moulds/tools remains with the manufacturer for manufacturing the parts, i.e., the moulds aresupplied free of cost to the parts manufacturer and it is stated that the cost of themoulds are not amortised in the parts cost.

Supply is defined under Section 7 of the CGST Act 2017 andthe same is reproduced below for reference:

7. (1) For the purposes of this Act, the expression "supply" includes-

(a) all forms of supply of goods or services or both such as sale, transfer,barter, exchange, Iicence, rental, lease or disposal made or agreed to be madefor a consideration be a person in the course or furtherance of business;

(1A) where certain activities or transactions constitute a supply in accordancewith the provisions of sub-section (1), they shall be treated either as supply ofgoods or supply of services as referred to in Schedule II.;

Schedule II determines the list of activities to be considered as supply ofgoods/Services and entry Sl.No. 1 is as follows:

1. Transfer

(a) any transfer of the title in goods is a supply of goods;

From the above, it is evident that 'transfer of the title in goods' is supply of goods.In the case at hand there is transfer in title of moulds for a consideration and thesupply is in the course of business therefore, the same constitutes supply of goodsand GST is liable to be paid on such supply.

Ruling:-

GST is applicable on the transfer of title in moulds from the appellant to the India Buyer.
The Question is not answered as the same is not in the ambit of this authority as per section 97(2) of the Act.

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PJ/Case Law/2020-2021/3557

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