The AAR’s ruling underlines that GST is not applicable to the sale of imported goods stored in a third-party Free Trade Warehousing Zone before being re-exported under MOOWR
The Tamil Nadu Authority for Advance Rulings ( AAR ) held that the Goods and Services Tax ( GST ) is not leviable on the sale of goods warehoused in third-party Free Trade Warehousing Zone ( FTWZ ) on an “as is where is” basis to customers who clear the same to a bonded warehouse under the Merchandise Warehouse and Withdrawal for Re-export ( MOOWR ) Scheme. M/s. Sunwoda Electronic India (P) Ltd., a company engaged in importing and trading Portable Lithium System Batteries, entered into a contract with an Original Equipment Manufacturer ( OEM ) for the supply of these batteries. The goods were imported from abroad and stored in a third-party FTWZ in India before being sold to the OEM’s MOOWR unit located within a separate FTWZ. The OEM’s MOOWR unit clears the goods under bond on a need basis. The applicant sought an advance ruling on the GST liability of this sale. The applicant, represented by Sahana and Pavan Varshiney, argued that their sale was exempt from GST due to provisions in Schedule III of the CGST Act. They claimed the transaction fell under Para 7, which exempts supplies from a non-taxable territory, as an FTWZ is deemed to be outside the customs territory under the Special Economic Zone ( SEZ ) Act. Additionally, they argued that Para 8(a) of Schedule III, exempting “supply of warehoused goods before clearance for home consumption,” applied since the goods were ultimately re-exported under MOOWR. The AAR observed that “the instant case of the applicant, where the imported goods stored in a third-party FTWZ warehouse, is being moved to the Bonded Warehouse ( MOOWR ) on effecting a sale to an OEM’s MOOWR unit, taxes under GST are not leviable, as the transaction gets covered under clause 8(a) of the Schedule III of the CGST Act, 2017, which reads as “Supply of warehoused goods to any person before clearance for home consumption”. The bench, comprising D. Jayapriya and A. Valli, ruled that GST is not leviable on the sale of goods warehoused in a third party FTWZ on an ‘as is where is’ basis to customers who clear the same to a bonded warehouse under the MOOWR Scheme.