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Question ID : 27357

LUT on High sea sales

As per section 16 of the IGST Act, 2017 export of goods or services or both, or supply of goods or services or both to a Special Economic Zone (SEZ) developer or a Special Economic Zone (SEZ) unit are considered as “zero rated supply”. A registered person making zero rated supply shall be eligible to claim refund under either of the following options, namely–– (a) He may supply goods or services or both under bond or Letter of Undertaking, subject to such conditions, safeguards and procedure as may be prescribed, without payment of integrated tax and claim refund of unutilized input tax credit, or (b) He may supply goods or services or both, subject to such conditions, safeguards and procedure as may be prescribed, on payment of integrated tax and claim refund of such tax paid on goods or services or both supplied, In a particular case, “A” is a registered supplier in Karnataka importing good from Japan makes High Sea sales to an SEZ unit (“B”) before the goods entered into the custom frontier of India. As per the Circular No. 332017-Custom, High sea sales of imported goods are akin to inter-state transactions. All inter-state transactions are subject to IGST. GST council has deliberated the levy of Integrated Goods and Services Tax on high sea sales in the case of imported goods. The council has decided that IGST on high sea sale (s) transactions of imported goods, whether one or multiple, shall be levied and collected only at the time of importation from the last importer (the person who buys the goods from the original importer during the said sale) i.e. when the import declarations are filed before the Customs authorities for the customs clearance purposes for the first time. In this case, is “A” liable to obtain Letter of Undertaking from the GST commissioner for the High Sea Sales made to an SEZ unit “B”?

Posted by Prashanth Karanth on Dec 20, 2017

Filed Under GST