GST on Ship Stores Supplied from Bonded Warehouses
Supplies of ship stores from a bonded warehouse to vessels are taxable as inter-state supplies under GST.
- Ruling
- Ruling No. AAR/AP/01(GST)/2017 dated 25th January 2018
- Dated
- 25 Jan 2018
- Authority
- 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
- The company asked if supplies to merchant and naval vessels are tax-exempt.
- The authority ruled these supplies are not exempt from GST.
- The company may collect GST from recipients unless the transaction qualifies as an export.
In short
The company asked the Authority for Advance Ruling (AAR) if supplying duty-free goods from a bonded warehouse to ships is exempt from Goods and Services Tax (GST). The authority decided that these supplies are taxable as inter-state transactions because they occur before the goods cross the customs frontier of India.
What has changed
How it worked before
Businesses often assumed that supplying goods from a customs-bonded warehouse to ocean-going vessels was automatically exempt from tax.
What has changed
The authority clarified that these supplies are taxable under the Integrated Goods and Services Tax (IGST) Act. In practice, this means businesses must charge GST on these supplies unless they can prove the transaction qualifies as a zero-rated export under specific legal procedures.
Who this affects
Businesses that hold a Special Warehouse License and supply goods to merchant vessels, Indian Naval ships, or the Indian Coast Guard.
An example
A ship chandler supplies food and fuel to a merchant vessel from a bonded warehouse. They wonder if they should charge GST on the invoice. Based on this ruling, they must charge GST unless they follow the specific procedures to treat the supply as a zero-rated export.
What you should do
If you operate a similar business, do not assume this ruling applies to you. An advance ruling is only binding on the company that requested it and its specific tax officer. Consult with a tax professional to determine if your specific supply chain qualifies for zero-rated export status.
If you do nothing
If you incorrectly assume your supplies are exempt, you may fail to collect and pay the required GST. This can lead to tax demands, interest, and penalties from your local tax officer. Relying on a ruling that does not apply to your specific business is a significant compliance risk.
The terms explained
- Bonded warehouse
- A secure area where imported goods can be stored without paying customs duty until they are removed for use or export.
- Customs frontier
- The boundary of India where goods are officially considered to have entered or left the country for tax purposes.
- Zero-rated export
- A supply of goods or services that is taxed at a rate of zero percent, allowing the business to claim back the tax paid on their own purchases.
The ruling in detail
Authority for Advance Ruling
M/s. FAIRMACS SHIP STORES PRIVATE LIMITED
Ruling No. AAR/AP/01(GST)/2017 dated 25th January 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 following: Ocean going merchant vessels on foreign run, Indian Naval Ships, Indian Coast Guard Ships or from their authorized agents.
Facts
The applicant holds a Special Warehouse License under the Customs Act, 1962, for storing duty-free ship stores. They supply these imported goods to Indian Naval ships, Coast Guard ships, and ocean-going merchant vessels. The applicant sought a ruling on whether these supplies are exempt from GST and if they are entitled to collect GST from the recipients.
Ruling
| Question | What the authority ruled |
|---|---|
| Exemption on supplies to vessels | Not exempt Supplies are treated as inter-State supply |
| Collection of GST | Permissible Subject to export status and payment options |
The authority ruled that the applicant is not exempt from GST on these outward supplies. Regarding the collection of tax, the authority held that the applicant can collect applicable GST from customers, provided the transaction does not qualify as an export. If the transaction qualifies as an export, the applicant may choose to export under bond or upon payment of tax.
Reasoning
The authority determined that goods supplied from a customs warehouse before crossing the customs frontiers of India constitute an inter-State supply under Section 7(2) of the IGST Act. Since the goods are neither nil-rated nor exempt by notification, they do not meet the definition of exempt supply under Section 2(47) of the CGST Act. The ruling relies on Circular No 46/2017-Customs, which clarifies that such transactions are taxable as supplies under the CGST and IGST Acts. Consequently, the **taxable event** occurs before the goods cross the customs frontier.
Provisions relied on
- Section 2(11) of the Customs Act, 1962
- Section 88(a) of the Customs Act, 1962
- Section 2(5) of the Integrated Goods and Service Tax Act, 2017
- Section 2(56) of the Central Goods and Service Tax Act, 2017
- Section 2(47) of the Central Goods and Service Tax Act, 2017
- Section 7(2) of the Integrated Goods and Service Tax Act, 2017
- Circular No 46/2017-Customs
For the practitioner
This ruling clarifies that ship stores supplied from a bonded warehouse to vessels are **taxable as inter-State supplies** under GST. It confirms that such supplies do not automatically qualify for exemption. Practitioners should note that the ruling explicitly leaves open the possibility of treating specific transactions as zero-rated exports, provided the applicant complies with the relevant procedures.
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/AAR/ap_01-2017_25-01-18_fairmacs_ship_stores.pdf
Legibility of the scan, as read: high.
Prepared 13-10-2026.
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