GST Ruling on Supplies to Foreign Ships Sent Back for Review
The Andhra Pradesh GST appeals authority sent a ruling back to the original officer because export status was not properly decided.
- Ruling
- Order /AAR/AP/ 01(GST)/2018 dated 31st May 2018
- Dated
- 31 May 2018
- Authority
- Appellate Authority for Advance Ruling
This page was written by Patron Accounting’s AI from the official release and reviewed before publishing. It explains the document in plain language. It is not the document itself. Where this page and the original differ, the original governs.
The short version
- Fairmacs asked if supplies to foreign ships are GST exempt or exports.
- The original authority said supplies were not exempt but skipped export status.
- The higher appeals authority refused to decide new questions directly.
- The case was sent back to the original authority for fresh review.
In short
A ship store supplier wanted to know if selling goods to foreign-going ships, the Indian Navy, and Coast Guard vessels counts as a tax-free export under GST. The initial GST advance ruling authority said the sales were not exempt, but skipped deciding whether they qualified as zero-rated exports. The company appealed order AAAR/AP/01(GST)/2018, asking the higher appellate authority to clarify the export status directly.
What has changed
How it worked before
Many port suppliers assumed that delivering imported bonded goods directly to foreign-bound vessels counted as exports, making them zero-rated under GST. However, tax officers often treated these local sales as standard taxable transactions, leaving businesses confused about whether to charge GST.
What has changed
The Appellate Authority for Advance Ruling (AAAR) did not decide whether ship supplies are tax-free exports. Instead, it ruled that an appeal authority cannot decide a main legal question for the first time if the lower authority failed to address it properly. The tribunal sent the case back to the original bench to re-examine the issue and issue a complete ruling within 90 days.
Who this affects
Indian ship chandlers, port suppliers, and businesses selling food, cosmetics, or stores to foreign-going vessels, Indian Naval Ships, or Coast Guard vessels.
An example
A marine supply firm in Visakhapatnam stores imported goods in a customs-bonded warehouse to sell to foreign cargo ships. They ask the GST advance ruling authority whether these sales are zero-rated exports, but the ruling ignores that specific question. The firm appeals, expecting the higher authority to declare the sales tax-free. Under this ruling, the appellate court will not decide the issue directly; it will order the lower tax office to hear the case again and give a clear answer.
What you should do
Do not stop collecting GST on sales to foreign-bound ships based on this decision, as no final tax rate or exemption was granted. An advance ruling binds only the specific business that asked for it and its tax office. If your business has the same setup, submit a fresh application for an advance ruling to get legal clarity for your own operations.
If you do nothing
If you treat sales to foreign-bound ships as tax-free exports without a specific ruling or clear law, your tax officer can reject your claim during an audit. You may be forced to pay the full GST amount out of pocket. In addition, tax authorities can impose heavy interest charges and late penalties for failing to collect tax.
The terms explained
- input tax credit
- The GST a business pays on its purchases, which it can deduct from the GST it collects on its sales.
- zero-rated export
- A sale of goods or services sent out of India where no GST is charged, and the seller can claim a refund on taxes paid for inputs.
- advance ruling
- An official decision by tax authorities given to a specific applicant explaining how GST rules apply to their business transaction.
- remand
- An order by a higher court or tribunal sending a case back to a lower authority to be decided again.
The ruling in detail
Appellate Authority for Advance Ruling
M/s Fairmacs Ship Stores Private Limited
Order /AAR/AP/ 01(GST)/2018 dated 31st May 2018 · Andhra Pradesh
Questions before the authority
- Whether they are exempted from tax under GST on their outward supplies made to ocean going merchant vessels on foreign run, Indian Naval Ships and Indian Coast Guard Ships or not?
- If at all they are liable for GST on their outward supplies whether they can collect the GST from the recipient for the goods namely: Ocean going merchant vessels on foreign run, Indian Naval Ships, Indian Coast Guard Ships or from their authorized agents?
- Whether the transactions made by the appellant fall under export (zero rated) or not?
Facts
The appellant is engaged in warehousing customs-bonded goods like cosmetics, toiletries, and foodstuffs imported or sourced from SEZs to supply ocean-going merchant vessels, Indian Naval Ships, and Coast Guard Ships. The Advance Ruling Authority (AAR) held that supplies were not exempt and declined to rule on whether the transactions constituted zero-rated exports. Aggrieved by this, the appellant filed an appeal before the Appellate Authority requesting a clear determination on export status.
Ruling
The Appellate Authority **remanded the matter back to the Advance Ruling Authority** to decide the issue afresh within 90 days after hearing the applicant. The appellate authority observed that whether the transactions constitute zero-rated exports was a **new issue raised for clarification** that needed to be decided holistically by the original authority.
Reasoning
The Appellate Authority noted that the original AAR observed that some supplies might fall under exports but held it outside the prerogative of the application. During the appeal, the appellant formally requested a determination on whether the transactions constitute zero-rated exports, which was a new issue not placed before the original AAR. To ensure a complete and holistic view of the applicant's plea, the Appellate Authority directed the original AAR to hear the applicant afresh and issue a necessary ruling within 90 days.
Provisions relied on
- Circular No. 21/31/63-Cus.IV dated 17th August 1966
For the practitioner
This order confirms that **new issues not formally adjudicated by the Advance Ruling Authority cannot be determined for the first time at the appellate stage**. In such cases, the AAAR will **remand the matter back to the original authority** for a fresh hearing. It does not decide the substantive issue of whether supplies to foreign-going vessels from bonded warehouses qualify as zero-rated exports.
Source
This is a summary prepared from the published order, which is a scanned document. It is a reading aid and not the authority: where the two differ, the order governs. Verify every provision against the original before relying on it.
Original order: https://www.gstcouncil.gov.in/sites/default/files/2024-02/ap_aaar_01_2018_31.05.2018_fsspl.pdf
Legibility of the scan, as read: high.
Prepared 18-10-2026.
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