The Karnataka Authority of Advance Ruling (KAAR) in the case of M/s Marubeni India Pvt. Ltd. vide Advance Ruling No. KAR ADRG 14/2023 dated 20.03.2023, ruled that the supply of goods to an overseas customer is treated neither as a supply of goods nor as a supply of services.

In this case, the applicant is in the business of trading finished goods and also providing support services to customers located outside India. The applicant intends to enter into a new business transaction in which the applicant would be engaged in supplying domestically procured goods to customers outside India. The applicant submitted that, as per the agreement with the applicant, the Indian manufacturer undertakes to supply the goods and complete all the export compliances, including the filing of the shipping bill as an exporter and also receiving the bill of lading from the shipper. Further, two invoices are raised in this transaction i.e. one invoice issued by the Indian manufacturer on the applicant and the other by the applicant on the overseas customer. 

The applicant sought an advance ruling on the issue of whether the supply of goods from the applicant to the overseas customer is taxable under GST as a zero-rated supply or not.

The KAAR has observed that there are two transactions involving the applicant. The first transaction is the supply of goods by the manufacturer to the applicant, and the second transaction is the supply of the same goods by the applicant to an overseas customer.

In respect to the first transaction i.e. supply of goods by the manufacturer to the applicant, the AAR refers to the definition of term exporter as defined under Section 2(20) of the Customs Act, 1962 and stated that the person claiming ‘exporter’ is the owner of the goods, and also that the bill of lading is proof of title to goods when the goods are handed over to the shipper. Since the manufacturer files the shipping bill as an exporter and also gets the bill of lading issued to him, he is the owner of the goods and holds the title to them till they cross the customs frontiers of India. In effect, the manufacturer takes the goods out of India to a place outside India while he is holding ownership and title to the goods, i.e., he exports the goods in terms of Section 2(5) of the IGST Act, 2017. Thus, the manufacturer is the exporter of goods. Therefore, for the supply of goods by the manufacturer to the applicant, the place of supply of goods shall be the location outside India in terms of Section 11(b) of the IGST Act, 2017.

Further, in respect of the second transaction involving the supply of the same goods by the applicant to overseas customers, it is observed that the goods are supplied from a location outside India to a location outside India i.e. the supply of goods from a place in the non-taxable territory to another place in the non-taxable territory without such goods entering into India. The said transaction is covered under Entry 7 of Schedule III of the CGST Act, 2017 as a transaction or supply that shall be treated neither as a supply of goods nor a supply of services.