The Gujarat Bench of Authority of Advance Ruling (AAR) has ruled that there is no additional GST on High Seas Sales (HSS) but work contract valuation includes sales.
The bench of P.B. Meena and Kamal Shukla have observed that the contract between the Applicant and IOCL is not a divisible contract but a single and composite contract. The component of imported goods will form part of the transaction value for computation of value of works contract service. The value of imported goods will form the part of transaction value for computation of value of works contract service. The value of goods sold on a HSS basis will have to be added to the transaction value for computation of the value of a works contract.
Indian Oil Corporation Limited (IOCL) invited bids for execution of EPC package (EPCC-09) for Catalytic De-Waxing Unit (CDEU) for its Petrochemical and Lube Integration project (LuPech) on open tender basis. The successful bidder is contractually obligated to execute the work on a lump sum turnkey basis with single point responsibility. The applicant submitted a bid for the project, which after evaluation was accepted by IOCL and they were issued a letter of acceptance.
The applicant, Tecnimont Pvt. Ltd. entered into a contract with Indian Oil Corporation Ltd. (IOCL) for the supply of imported materials. The goods were sold on an HSS basis by endorsing the bill of lading in favor of IOCL, who then filed the bill of entry for warehousing or home consumption, paying the necessary customs duty and IGST. Tecnimont Pvt. Ltd. treated this transaction as distinct from the works contract supplies, raising a customs invoice without charging GST.
The applicant sought the advance ruling on the issue whether the contract between the Applicant and IOCL is a divisible contract or a single and composite contract.
If the contract between the Applicant and IOCL is treated as an indivisible and a single composite contact whether the component imported goods will be taxable as a supply of goods at the time of importation or as a service at the time of incorporation in the works contract i,e. when the erection, commission and installation of goods takes place.
Yet the another issue raised was when imported goods are sold by the supplier to a recipient on a high seas sale basis and such goods are cleared from customs by the recipient (as the importer on record) on payment of duty & Integrated Goods and Service Tax (under Section 5(1) of the Integrated Goods and Services Tax Act, 2017 read with Section 12 of the Customs Act and Section 3 of the Customs Tariff Act, and later such imported & duty paid goods are erected, commissioned and installed by the same supplier.
The AAR held that the sale of goods by Tecnimont Pvt. Ltd. to IOCL on an HSS basis falls under Entry 8(b) of Schedule III of the CGST Act, 2017. This categorization means such transactions are treated as neither a supply of goods nor a supply of services. Consequently, there is no GST applicable on these HSS transactions.
Ruling Details
Applicant’s Name: Thyssenkrupp Industrial Solutions (India) Private Limited
Date: 29/01/2025
