AAR ruling: GST will apply to goods carried by foreign-bound ships

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.