Goods/Assets procured by Foreign Company from Liquidating Company not Export or Zero-Rated Supply: AAR [Read Order]

The Andhra Pradesh Authority for Advance Ruling ( AAR ) ruled that outward supply of goods or assets procured by a foreign company from a company undergoing liquidation in India cannot be classified as an ‘Export’ or a ‘Zero-Rated Supply’ under Goods and Services Tax ( GST ) Provisions.

The Application for Advance Ruling was filed by MCM Pacific PTE Ltd. ( MCM ), a Singaporean company involved in the business of power generation and distribution. The Applicant does not have any physical place of business in India and has not undertaken any statutory registrations to conduct business in India.

Complete Supreme Court Judgment on GST from 2017 to 2024 with Free E-Book Access, Click here

The Applicant entered into an Agreement with Lanco Kondapalli Power Limited ( Lanco ), a liquidating company to receive goods/assets which are sought to be dismantled and transferred to the Applicant’s own establishment in Myanmar.

MCM Pacific, through the present Application seeks to receive a ruling on whether the outward Supply of the aforementioned Goods may be considered a Zero-Rated Export under Section 16 of the Integrated Goods and Services Tax Act, 2017 ( IGST Act ), provided that a Letter of Undertaking ( Letter of Undertaking ) issued by the Liquidating Company is adduced by the Applicant.

Section 16 of the IGST Act permits a registered person to make a zero-rated supply and claim refund of unutilized input tax credit provided that a Letter of Undertaking underlining specific conditions and prescribed safeguarding procedures is provided in lieu thereof.

Complete Supreme Court Judgment on GST from 2017 to 2024 with Free E-Book Access, Click here

In order to effectuate MCM’s outward supply of goods, a representation letter was produced by Lanco stating that liquidator had been appointed and liquidation proceedings had been initiated by way of the NCLT’s Order dated 16.04.2021 passed as per the provisions of Insolvency and Bankruptcy Code, 2016 and the Insolvency and Bankruptcy Board of India ( Liquidation Process ) Regulations, 2016.

Further, it was clarified by Lanco that MCM, emerging as the successful bidder shall be issued the sale certificate upon payment of all applicable taxes and sale consideration; no other tax or similar rates shall be borne by the Corporate Debtor or Liquidator in this regard.

The key point raised in Lanco’s Letter of Undertaking is that the export of the assets by MCM has not materialized as the Sale Certificate has not yet been issued to MCM by the Liquidator citing unpaid Tax liabilities in lieu of the Export of Goods to Myanmar.

Complete Supreme Court Judgment on GST from 2017 to 2024 with Free E-Book Access, Click here

The two Member Bench of the Andhra Pradesh Authority for Advance Ruling comprising members K. Ravi Sankar, Commissioner of State Tax and B. Lakshmi Narayana, IRS, Joint Commissioner of Central Tax observed that the Sale Process between MCM and Lanco shall conclude in India itself and MCM shall be liable to dismantle and transport the assets to Myanmar; in this effect, neither party can be deemed to be an exporter.

The AAR further referred to Section 2(6)(v) of the IGST Act, 2017 to reiterate that MCM, being a foreign company with no presence in India is transferring the goods/assets received by it in India, to its own establishment in Myanmar and the same is not classifiable as an ‘export of service’.

Additionally, the AAR further clarified that the Applicant’s lack of GST Registration in India transaction disqualifies the international transfer of goods/assets as an ‘export’ and in effect, disqualifies it from being considered a Zero-Rated Supply under the GST Act, 2017.

Complete Supreme Court Judgment on GST from 2017 to 2024 with Free E-Book Access, Click here

In light of the above observation, the question of export without payment of tax against a “Letter of Undertaking” for the transaction was deemed to ‘not even arise’.

It is to be noted that the Andhra Pradesh AAR in its ruling abstained from apprising the Applicant on the percentage of GST applicable on the said transaction.

To Read the full text of the Order CLICK HERE

Support our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates