GST on Cross border supplies Optitax’s GST on Cross border supplies 10 May 2017

Content Place of supply of Goods & Services – Cross Border Optitax’s 1 Place of supply of Goods & Services – Cross Border 2 Import, Export including High Seas, Deemed Export, etc. Implications in transition to GST 3

“passing, occurring, or performed Background Optitax’s Cross border? Oxford dictionary “passing, occurring, or performed across a border between two countries” Common parlance “Import and Export” © 2016 Optitax’s, an Indian Limited Liability Partnership Firm. All rights reserved.

Before understanding the implications of GST and place of supply w. r Before understanding the implications of GST and place of supply w.r.t. cross border transactions, we need to consider the legal framework of GST Supply of goods or services or both would be governed by the SGST/UTGST/CGST/IGST Act In terms of Section 2(109) of the CGST Act, 2017 (CGST Act), taxable territory means the territory to which the provisions of this Act apply In terms of Section 1(2) of the CGST Act & IGST Act, this Act extends to the whole of India except the State of Jammu and Kashmir Background Optitax’s Term Meaning Territory of India, Its territorial waters (up to 12 nautical miles), Seabed & sub-soil underlying such waters, Continental shelf, Exclusive economic zone (up to 200 nautical miles) or any other maritime zone – Territorial Waters, Continental Shelf, Exclusive Economic Zone and other Maritime Zones Act, 1976, and Air space above its territory and territorial waters India 12 nm Land/Baseline 200 nm India © 2016 Optitax’s, an Indian Limited Liability Partnership Firm. All rights reserved.

Location of the importer Location outside India In terms of provisio (ii) to Section 8 of IGST Act, the supply of imported goods till they cross customs frontiers of India shall not be treated as intra State supply of goods In terms of provisio to Section 5 of the IGST Act: goods imported into India shall be subject to IGST in accordance to Section 3 of Customs Tariff Act, 1975 goods cleared from Customs bonded warehouse shall be subject to IGST Cross border transactions - Goods Optitax’s In terms of Section 16 of the IGST Act, exports shall be zero-rated including supplies to SEZ Import Bringing goods into India from a place outside India Export Taking goods out of India to a place outside India Location of the importer Location outside India Place of Supply Import Export © 2016 Optitax’s, an Indian Limited Liability Partnership Firm. All rights reserved.

Implications under GST HSS is a sale carried out while the goods are yet on high seas or after their dispatch from the port of origin and before it crosses the customs frontier High Seas Sale shall be treated as an inter-State supply and thus, IGST payable IGST paid by the tourist leaving India on any supply of goods taken out of India by him shall be refunded to him subject to conditions & safeguards as may be prescribed Terrorist means a person not normally resident in India who enters Cross border transactions - Goods (High Seas, Outbound tourists) Optitax’s Implications under GST High Seas Sale (HSS) Outbound tourists © 2016 Optitax’s, an Indian Limited Liability Partnership Firm. All rights reserved.

In terms of Section 2(39) & 147 of the CGST Act, certain supplies of goods will be deemed exports where goods (manufactured in India) do not leave India & the payment for such supplies is received either in Indian rupees or in convertible foreign exchange. However, deemed exports have not been notified by the Government yet Manufacture is defined under Section 2(72) of CGST Act, means processing of raw material or inputs in any manner that results in emergence of new product having a distinct name, character and use Thus, we look into Chapter 7 of the FTP where provisions w.r.t. deemed exports are explained Deemed exports - Goods Optitax’s Deemed exports Sl. No. Categories Benefits available under the present FTP regime Implications under GST regime 1 Supply of goods by a manufacturer to: EOU STP Exemption from Terminal Excise Duty if goods procured by a unit in DTA (basis supplies shall be made directly) What exactly will be notified is pursued by Ministry of Commerce 2 Supply of goods by a manufacturer against Advance Authorisation/DFIA Duty free procurement 3 Supply of capital goods against EPCG Authorisation © 2016 Optitax’s, an Indian Limited Liability Partnership Firm. All rights reserved.

Import of services Location of Supplier Outside India Cross border transactions - Services Optitax’s Import of services Location of Supplier Outside India Location of recipient In India Place of supply In India © 2016 Optitax’s, an Indian Limited Liability Partnership Firm. All rights reserved.

Not merely establishment of distinct person Cross border transactions - Services Optitax’s Export of services Location of Supplier In India Location of recipient Outside India Place of supply Outside India Payment In convertible FE Supplier & recipient Not merely establishment of distinct person © 2016 Optitax’s, an Indian Limited Liability Partnership Firm. All rights reserved.

Location of recipient of services Location of recipient of services Place of supply – Cross border (1/2) Location of recipient of services Location of recipient of services Optitax’s Import Export Services (Default/Residuary) Place of supply of services where location of supplier or location of recipient is outside India w.r.t. specific events is explained in the subsequent slide © 2016 Optitax’s, an Indian Limited Liability Partnership Firm. All rights reserved.

Place of supply – Cross border (2/2) Optitax’s Place of supply of services where location of supplier or location of recipient is outside India – Section 13 of the IGST Act 2017 Sl. No. Service Place of supply 1 Services provided in respect of goods that are required to be made physically available by recipient to the supplier in order to provide the service Location where the services are actually performed 2 Place of supply of services provided to an individual either as recipient of service or person acting on behalf of the recipient of service requiring physical presence of the receiver or person acting on behalf of the recipient 3 Directly in relation to immovable property including services supplied by experts, supply of accommodation by a hotel, inn, etc. location at which immovable property is located or intended to be located 4 Admission to, or organisation of a cultural, artistic, sporting, scientific, educational or entertainment event, or a celebration, conference, fair, exhibition, or similar events and services ancillary to such event Place where the event is actually held 5 Services supplied by banking company or a FI or NBFI to account holders Intermediary services Services consisting of hiring of means of transport, including yachts but excluding aircrafts and vessels, up to a period of one month Location of the supplier of services 6 Transportation of goods other than by way of mail or courier Place of destination of goods 7 Passenger transportation service Place where the passenger embarks on a conveyance for a continuous journey 8 Services on board a conveyance during the course of passenger transportation including services consumed wholly or substantially on board First scheduled point of departure of that conveyance for the journey 9 Online information and data access and retrieval services Location of the recipient of services © 2016 Optitax’s, an Indian Limited Liability Partnership Firm. All rights reserved.

Implications on transition to GST Optitax’s Advance received prior to 1 July 2017 but invoice to be raised post 1 July 2017 Determination of Place of Supply ? Advance received for goods Determination of Place of Supply whether relevant ? Advance paid for import of goods Under the present Indirect tax regime, considered as Works contract services What under the GS regime – Composite supply or not ? Taxability of composite supply is basis the determination of principal supply Determine the principal supply in respect of goods or services & accordingly, determine the place of supply Works Contract Services © 2016 Optitax’s, an Indian Limited Liability Partnership Firm. All rights reserved.

Any questions ? Questions Optitax’s © 2016 Optitax’s, an Indian Limited Liability Partnership Firm. All rights reserved.

CA Raveendra Pethe 9823010562 Thank You Thank you Optitax’s Thank You CA Raveendra Pethe 9823010562 Office address: C-26/11, Ketan Heights, Near Rahul Nagar, Kothrud, Pune 411038. Ph. No.: 020-25421898/ 020-25421012 Website: www.optitaxsconsulting.com © 2016 Optitax’s, an Indian Limited Liability Partnership Firm. All rights reserved.