High Seas Supply under GST

June 02,2017
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Akella A S Prakasa Rao, Tax Professional

India is witnessing a historic event in Indirect Tax arena and we are at the cusp of transition into GST era. The persons who have toiled hard to put in place the necessary legislation have done fabulous job in bringing into shape the draft legislation. This effort can best be described to be next only to drafting of the Constitution of India. India being a federal republic, the powers to levy indirect taxes were there for both central government and the respective state governments also. Hence the GST is a concurrent levy by both the authorities. Let us take up one transaction for a detailed analysis, which has become unviable under GST law. We are referring to High seas supply.

High Sea sale is a transaction, wherein there is transfer of ownership, when the goods are on high seas. The taxable event is transfer of ownership and hence the tax to be levied will be either VAT/CST. Since the transaction is happening on the high seas, where the state governments do not have jurisdiction it cannot attract VAT and since the transaction is not between two states in India, it neither attracts CST. The CST Act is a central act, but the power to levy and collect the taxes is with the state governments. According to Sec 5(2) of CST Act, 1956:

(2) A sale or purchase of good shall be deemed to take place in the course of the import of the goods into the territory of India only if the sale or purchase either occasions such import or is effected by a transfer of documents of title to the goods before the goods have crossed the customs frontiers of India.

The first limb of the above Sec 5(2) talks about the sale in the course of import and the second limb is for high sea sales, where the sale is effected by transfer of documents before the goods cross the customs frontiers of India.


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Excellent article