Andhra Pradesh's Authority of Advance Ruling (AAR) has said the goods and services tax (GST) will be levied on the goods supplied from Customs warehouse to merchant vessels on a foreign run, triggering sharp views from experts.
The Bench said the petitioner, Fairmacs Ship Stores, holder of a special warehouse licence, was liable to pay GST on outward supply made to these vessels.
The AAR treated these as inter-state supply. However, it also allowed the petitioner to collect GST from the clients.
Experts argue GST is a consumption-based tax and these supplies are consumed outside India. Abhishek Rastogi, partner at Khaitan & Co, says provisions on inter-state supply have been a matter of dispute.
Earlier, the AAR had ruled GST would be charged on goods sold at duty-free shops on the basis of inter-state provisions only.
"The constitutional validity and arbitrariness of these provisions come into play for various transactions such as duty-free shops and supplies made to the outgoing foreign vessels," Rastogi said.
The government should consider issuing a GST exemption on these supplies to mitigate additional tax costs, said Abhishek Jain, tax partner with consultant EY India.