The Ministry of Finance, Central Board of Indirect Taxes and Customs, has published a circular, clarifying regarding goods sent/taken out of India for exhibition or on consignment basis for export promotion.
This clarification comes as a response to the representations of the trade industry regarding what procedure is to be followed while exporting such goods as they do not fall into the definition of ‘supply’ under the Central Goods and Services Act, 2017 or the Integrated Goods and Services Act, 2017.
The definition of supply as per the Act must follow two conditions i.e. i) it should be for a consideration of a person and ii) it should be in the course of furtherance of business. “Zero rated supply” means export or supply of goods or services or both, to a Special Economic Zone developer or a Special Economic Zone unit.
It has been clarified that since the activity of export for exhibition is on consignment basis and there is no consideration received at the time, therefore it cannot be considered as supply under the CGST or zero rated supply under the IGST.
Following instructions have been issued for such activities:
- Format: Format for maintenance of records has been given by this notification to record description of goods, shipping date, invoice date, details of goods brought back, etc.
- Documentation: The said activity will be covered under the provisions of sub-section (7) of section 31 of the CGST Act, which deals with goods being sent or taken on approval for sale or return are removed before the supply takes place. The specified goods shall be accompanied with a delivery challan issued in accordance with the provisions contained in rule 55 of the CGST Rules. Execution of a bond or LUT, as required under section 16 of the IGST Act, is not required.
- The goods thus sent are to be sold or brought back to the country within the stipulated period of six months from the date of approval. If the goods are sold within six months in whole or part, the supply is effected on the date of sale for the quantity sold. However, if the goods are not sold nor brought back to the country within six months, supply would be deemed to have taken place.
- Invoice: If the goods are sold within six months, in part or whole, the sender should issue an invoice for the quantity sold as per the provisions in the CGST Act and Rules. If the goods are not sold or brought back to India, the sender has to issue invoice at the expiry of the period of six month, for the goods that have not been sold nor brought back.
- Refund Claim: Since the activity is not a zero rated supply and hence the sender cannot prefer any refund claim for the good sent/taken out of India. Where supply is deemed to have taken place, the sender can prefer a refund after he has issued the tax invoice, even without the execution of bond or LUT, if he is otherwise eligible for a refund as per section 54(3) of the CGST Act. However, refund cannot be claimed under Section 96 of the CGST Act as the goods were not supplied on the date that they were sent/ taken out of India.
Click here to see circular.
