In a recent ruling of Authority for Advance Ruling ( AAR ) the Panasonic Life Solutions India Pvt. Ltd. was held liable to reverse GST ITC on Supply of Goods before Clearance for Home Consumption.
The Applicant M/s Panasonic Life Solutions India Pvt Ltd. as part of their trading business had executed an agreement with a logistics and service provider for clearance and handling of goods from customs, storage of imported goods in the warehouse unit of the Logistics Service Provider ( LSP ) situated in the Free Trade Warehousing Zone ( FTWZ ) unit in Chennai.
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Upon finalization by the customer the applicant transfer the goods to customer, which are then either cleared by such customer from FTWZ unit or transferred further without clearing the same.
The Finance Act of 2023 had amended the section 17(3) of the Central Goods and Service Tax
( CGST ) Act, 2017. And as per the amended section, common input tax credit on account of supplies covered under paragraph 8(a) of Schedule III (Supply of warehouse goods to any person before clearance for home consumption) of the CGST Act should be reversed.
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The applicant requested AAR to decide on the applicability of GST on the apply and implications on reversal of input tax credit.
The applicant’s counsel reiterated that FTWZ should be considered as customs ports and not as warehouses, as per the extant legal provisions. It was also explained that the applicant transfers only title of goods to customer, and it is for the customer to make further transfers.
Even before the amendment to Schedule III of CGST Act, 2017, the legal position was that the supply of goods before clearance from warehouse wont be subject to levy of customs duty or integrated tax. Warehouse goods covers warehouse goods in respect FTWZ.
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Prior to the amendment of section 17 of CGST Act, 2017, carried out under the Finance Act, the activities listed in schedule III were excluded for the purpose apportionment of credit. Accordingly, proportionate reversal of ITC of common inputs/ capital goods/services availed, if any was required to be made by the applicant in terms of the amended the CGST Act.
The quasi judicial body comprising Smt. D. Jayapriya and Smt. A.Vali observed that according to the amended section 17(3) of the CGST Act, 2017 and the rules, the applicant should reverse the proportionate ITC of common inputs/capital goods/ services availed.
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