New Delhi (IANS) A ruling by the Gujarat bench of the Authority for Advance Ruling (AAR) has said that Goods and Services Tax (GST) will be levied on Merchant Trade Transactions (MTT) where goods are not entering India but the transaction is in overseas locations.
A domestic company buying goods from abroad and selling to another country will have to pay GST on such transactions even if the said products are not entering the Indian territory, the Authority for Advance Ruling (AAR) has said.
On an application by Sterlite Technologies, the Gujarat-Bench of AAR ruling says that GST is payable on goods sold to customer located outside India, where goods are shipped directly from the vendor's premises (located outside India) to the customer's premises.
The applicant had sought to know whether the goods and services tax (GST) would be levied on merchant trade transactions (MTT).
"It appears that the transaction is covered under the ambit of inter-State supply and is neither exempted nor covered under export of services. Thus, the theory of elimination takes us to the conclusion that such supplies will be subject to levy of IGST (integrated GST)," the AAR has ruled.
The verdict implies GST would be levied on MTT where applicant will receive an order from the customer located outside India and as per their instruction, the vendor would directly ship the goods to customer located outside India.
The vendor would issue an invoice to the applicant against which payment would be made in foreign currency and applicant would raise invoice on customer and would receive consideration in foreign currency.
In these transactions, goods would not physically enter India but would move from a location outside India to another overseas place.