Case-Chowgule & Co (P.) Ltd. [2019] 107 taxmann.com 294 (AAR – GOA)
Query-1-Whether IGST at 5% of assessable value is applicable on import of iron ore for conversion into pellets and export the resultant product (Iron ore pellets) back to the same supplier in view of the fact that import duty is not applicable in view of the exemption under General Exemption No. 66 (Exemption Notification No. 32/97-Cus dated 01st April, 1997) for job work.”.
Query-2-If answer to question 1 is yes, whether the applicant as recipient of the imported iron ore will be liable to pay the IGST under applicant GSTIN as the applicant in any case is the consignee of the imported iron ore.
Query-3-If answer to question 2 is yes, whether the applicant can avail the input Tax Credit for the IGST so paid as per section 16 of the CGST Act, 2017.
Query-4-Whether the applicant can claim refund of unutilized input tax credit on export of services as per section 16(3)(a) of IGST Act and 54(3) of CGST Act.
Facts-
The applicant intended to enter into a contract with a non-resident party for rending service of conversion of iron ore into pellets. The non-resident was to arrange for iron ore from abroad and the same was to be imported in India by the applicant using its own GSTIN, though the iron ore shall always remain the property of the non-resident.
The applicant will carry out the job work of conversion of the iron ore into pellets at their plant in Shiroda Goa by adding necessary condiments such as lime stone, Bentonite, coke breeze etc. All these items will be purchased by the applicant locally on their own account. The applicant will export the pellets to the non-resident or to any other non-resident parties as nominated by the non-resident. The applicant will raise the invoice for the conversion charges from the non-resident at the agreed rate in Foreign Exchange. The applicant will be receiving the proceeds for conversion of iron ore fines into iron ore pellets in foreign exchange.
Observation-
Query-1 and Query-2-Theapplicant is liable to pay IGST on iron ore imported into India in accordance with the provisions of Section 3 of the Customs Tariff Act, 1975 on the value as determined under the Customs Act, 1962 at the point when duties of customs are levied on the goods under section 12 of the Customs Act, 1962 read with Section 5(1) of IGST Act, 2017.
Regarding applicability of Exemption Notification no. 32/97-Cost dated 1st April 1997 referred by the applicant which is not issued under the Goa Goods and Service Tax Act 2017 or under the Central Goods and Service Tax Act 2017 or under the Integrated Goods and Service Tax Act 2017, hence this Authority has no jurisdiction.
Query-3-It was observed by AAR that imported goods are used in the furtherance of business, the applicant is eligible to take input tax credit of IGST paid on import of the iron ore.
Query 4-: AAR observed that goods are temporarily imported into India for the process of conversion into pellets and are exported after such process, therefore the exclusion clause provided under Section 13(3) of the IGST Act, 2017 is applicable. Hence the place of supply of service is determined as per Section 13(2) of the IGST Act, 2017 which is the location of the recipient of the service i.e. outside India. Since the place of supply of service is outside India, condition (iii) under Section 2(6) of the IGST Act, 2017 is also fulfilled. Hence the service provided by the applicant falls within the definition of export of service as defined under Section 2(6) of the IGST Act, 2017.
However, Government of India vide Notification No. 1-2016/Customs dated 04th Jan 2016 reduced the rate of export duty on Iron Ore Pellets from 5% to Nil. It is a settled law that NIL rate of tax is also a rate of tax. Since the goods exported are covered under Second Schedule of the Export Tariff appended to the Customs Tariff Act, 1975 the same goods are to be considered as subjected to tax. In view of the above, the exclusion clause provided under Section 54(3)(ii) is applicable in the instant case. Hence, the applicant is not eligible for the refund of unutilized input tax credit.
Held-:
Query 1 & Query 2- The applicant is liable to pay IGST on import of iron ore.
Query 3-The applicant is eligible to avail the input tax credit towards payment of IGST under Section 16 of the IGST Act.
Query 4-The applicant is not eligible for refund of unutilized input tax credit on export of goods or services as per the second proviso to Sub Section 3 of Section 54 of the CGST Act.
Comment:
The case presents a very interesting fact wherein IGST being paid on Iron Ore at the time of Import of Goods but which are property of the principle. The services rendered by the applicant is in the nature of Job Work. Therefore, even though he has not exported goods but provided services, his refund has been held to be ineligible since the goods on which the job work was undertaken were subjected to export duty. Whether applicant is eligible for refund in case of Job Work falling under export of service wherein goods which are sent outside India after Job Work are subjected to export duty. The restriction for claim of refund is pertaining to refund of unutilised input tax credit where the goods exported out of India are subjected to export duty and applicant did not exported goods but was engaged in export of services.