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Goods purchased, sold overseas liable to GST in India: AAR

  • Jun 22, 2020 | Divita S Gupta

Goods purchased, sold overseas liable to GST in India: AAR

The Appellate Authority for Advance Ruling in Gujarat has issued an advance ruling stating that GST is applicable on transactions wherein a domestic company purchases products from one country and sells them to another without entering sovereign Indian territory. The applicant had sought an advance ruling to understand if the Goods and Services Tax was applicable on merchant trade transactions. As per the Gujarat bench of the AAR, merchant trade transactions are covered under the ambit of inter-state supply but are neither exempted nor covered under export of services. By the theory of elimination, merchant trade transactions should attract liabilities under the integrated goods and services tax. As per this ruling, GST would be applicable on merchant trade transactions where an applicant would receive an order from customers located outside of Indian territory, and the vendor would ship those goods to their location in another country. In such a scenario, a vendor would issue an invoice on which the applicant would make a payment using foreign currency. As the goods do not technically originate in India or are sent from India or delivered to India or even routed through India, experts are recommending that the Gujarat HC reconsider its ruling. Experts reckon that the supply of goods not originating in the country and being shipped outside the Indian territory is not considered as supply and hence should technically not attract the Goods and Services Tax. 

Avalara helps businesses of all sizes get GST return filing, e-way bill generation and e-invoicing right with cloud-based GST compliance solutions in India. Goods and Services Tax (GST) rates, rules, and regulations change frequently. Although we hope you'll find this information helpful, this blog is for informational purposes only and does not provide legal or tax advice.
Avalara Author
Divita S Gupta
Avalara Author Divita S Gupta
Divita has served as a writer and editor for top financial services organizations in India. She has written on topics like mutual funds, insurance, taxes, SME financing for globally recognized banking and financial organizations including ICICI, Aditya Birla Group, News Corp. With a Masters in Business Administration from Symbiosis International University, she currently owns a small business in Mumbai.

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