In Advance Ruling No. 23 /ARA/2023 -AAR- AAR (Tamil Nadu) rules that Free Trade Warehousing Zone is distinct from Warehouse licensed under Customs Act
Members N. Usha (SGST) & R. Gopalsamy (CGST)

Read Order: In Re: M/s Haworth India Private Limited

Chahat Varma

New Delhi, September 1, 2023: The Tamil Nadu bench of the Authority for Advance Rulings has ruled that the transfer of title of goods by M/s Haworth India Private Limited (applicant) to its customers or multiple transfers within the Free Trade Warehousing Zone (FTWZ), would not be considered as bonded warehouse transactions covered under Schedule III of the Central Goods and Services Tax Act (CGST Act), as they fall under the purview of FTWZ governed by the provisions of the Special Economic Zones Act (SEZ Act).

Top of Form

The applicant, a wholly owned subsidiary of Haworth, Inc. in the United States, was engaged in manufacturing and selling office furniture under the 'Haworth' brand. The applicant was considering operating import and re-sale transactions from a FTWZ for operational convenience. They had sought an advance ruling on two key aspects. Firstly, they sought clarification on whether the transfer of title of goods to customers or multiple transfers within the FTWZ would be considered as bonded warehouse transactions, falling under Schedule III of the CGST Act, read along with the CGST Amendment Act, 2018. Secondly, they inquired whether the IGST Circular No. 3/1/2018 dated 25.05.2018 was applicable to their current situation.

The bench of N. Usha (SGST) & R. Gopalsamy (CGST) noted that a FTWZ was a SEZ, designed primarily for trading, warehousing, and related activities. It held the status of a deemed foreign territory within the geographical boundaries of India concerning tariffs and trade. The legal framework governing FTWZ operations were established by the SEZ Act, and the SEZ Rules.

The bench further observed that while Customs officials stationed in the FTWZ oversaw day-to-day activities such as warehousing and clearing of goods for domestic consumption upon payment of applicable customs duties, the administration, licensing, and control of FTWZ were entirely regulated by the provisions of the SEZ Act. Consequently, it was held that an FTWZ was distinct from a warehouse licensed under the Customs Act.

Thus, the bench concluded that the transactions described in the application pertained to FTWZ, which were subject to the provisions of the SEZ Act, rather than being licensed warehouses under the Customs Act. As a result, the transactions taking place within the FTWZ, as outlined in the advance ruling application, will not fall under the purview of Schedule II of the CGST Act, read with the CGST Amendment Act, 2018.

Furthermore, the bench pointed out that Circular No. 03/01/2018 - IGST, dated May 25, 2018, had been rescinded vide Circular No. 04/01/2019 - IGST, dated February 1, 2019, so as to provide that the supply of warehoused goods to any entity prior to their clearance for home consumption would not be classified as either a supply of goods or a supply of service.