The AAR clarified that, where imported goods stored in a third-party FTWZ are moved to a bonded warehouse (MOOWR) upon sale to an OEM’s MOOWR unit, GST is not applicable.
The Tamil Nadu Authority for Advance Rulings (AAR) has ruled that Goods and Services Tax (GST) is exempt on the sale of goods stored in third-party Free Trade Warehousing Zones (FTWZ) and sold on an “as is where is” basis to customers who subsequently transfer these goods to a bonded warehouse under the Merchandise Warehouse and Withdrawal for Re-export (MOOWR) Scheme.
Case Background
M/s. Sunwoda Electronic India (P) Ltd, a company involved in importing and trading Portable Lithium System Batteries, entered into a contract with an Original Equipment Manufacturer (OEM) for the supply of these batteries. The goods were imported from abroad and stored in a third-party FTWZ in India. They were then sold to the OEM’s MOOWR unit, which is also located within a separate FTWZ. The OEM’s MOOWR unit clears the goods under bond based on their requirements. The key question raised was whether GST applies to this specific sale transaction.
Petitioner’s Argument
Representatives Sahana and Pavan Varshiney argued on behalf of the petitioner, asserting that their sale is exempt from GST based on provisions outlined in Schedule III of the CGST Act. They pointed to Para 7, which exempts supplies from a non-taxable territory, noting that an FTWZ is considered outside the customs territory under the Special Economic Zone (SEZ) Act. Additionally, they referenced Para 8(a) of Schedule III, which exempts the “supply of warehoused goods before clearance for home consumption.” The petitioner argued this exemption applies as the goods are ultimately re-exported under the MOOWR Scheme.
AAR Ruling
The AAR clarified that in the case presented by the applicant, where imported goods stored in a third-party FTWZ are moved to a bonded warehouse (MOOWR) upon sale to an OEM’s MOOWR unit, GST is not applicable. This transaction is covered under clause 8(a) of Schedule III of the CGST Act, 2017, which states, “Supply of warehoused goods to any person before clearance for home consumption.”
Conclusion
The AAR bench, comprising D. Jayapriya and A. Valli, concluded that GST is not levied on the sale of goods warehoused in a third-party FTWZ and sold on an ‘as is where is’ basis to customers who clear it to a bonded warehouse under the MOOWR Scheme. This ruling provides significant clarity for businesses engaged in similar transactions, reinforcing that such sales are exempt from GST as per the stipulated provisions in the CGST Act.
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