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Input tax credit will have to be reversed, to the extent of inputs, input services and common input services used by the Applicant in case of exempt supply

Shanti Prime Publication Pvt. Ltd.

Levy of IGST—High sea sale—1) Whether IGST will be leviable on sale effected by the Applicant to customers who are known to them at the time of placing order on the overseas party?
2) Whether input tax credit will have to be reversed, to the extent of inputs, input services and common input services used by the Applicant, in case the above transaction is not subjected to the levy of IGST by treating the same as an exempt supply for the purpose of Section 17 of the CGST Act?
Held that—The applicant would be importing the goods and would be selling the goods on high seas sale basis to another buyer - It is very clear that supply of goods imported into the territory of India till they cross the customs frontier shall be treated as supply of goods in the course of inter-state trade or commerce - From the proposed transactions placed by the applicant before us there is not an iota of doubt that the goods of the applicant are imported goods and when the applicant is selling these goods on high seas sale basis, these goods have not crossed the customs frontiers of India, Thus clearly the transaction in these goods are in the nature of inter-state supply as per Section 7(2) of the IGST Act.
As per Section 12 of the Customs Act, 1962 and Section 3 of the Customs Tariff act, 1975 it is very clear that the goods which are sold on high seas sale basis are non-taxable supply as no tax is leviable on them till the time of customs clearance .
The input tax credit to the extent of inputs, input services and common input services would be required to be reversed by the applicant as per Section 17 of the CGST Act.
Ruling—No IGST will be leviable on such sale effected by the Applicant to customers who are known to them at the time of placing order on the overseas party.
The input tax credit to the extent of inputs, input services and common input services would be required to be reversed by the applicant as per Section 17 of the CGST Act. — BASF India Limited - In Re - [2018] 2 TAXLOK.COM 037 (AAR-Maharashtra)