GST Status of Bonded Warehouse Supplies to Ships
Supplies of warehoused goods to ships within Indian territory are not exports and fall outside the scope of GST.
- Ruling
- Order No. GST-ARA-09/2021-22/B-52, dated 30.03.2026
- Dated
- 30 Mar 2026
- 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 ship supplies qualify as zero-rated exports.
- The Authority ruled these are not exports as goods remain in India.
- Transactions are classified under Schedule III as non-taxable supplies.
- No IGST is payable, but no input tax credit can be claimed.
In short
Sanctum Trading Corporation asked the Maharashtra Authority for Advance Ruling (AAR) if supplying imported goods from a bonded warehouse to ships counts as a zero-rated export under the Goods and Services Tax (GST) law. The company wanted to know if they could use a Letter of Undertaking (LUT) to supply these goods without paying Integrated GST (IGST).
What has changed
How it worked before
Businesses were often uncertain whether these ship-store supplies should be treated as exports or as local transactions, leading to confusion regarding tax liability and input tax credit eligibility.
What has changed
The Authority decided these supplies are neither a supply of goods nor services under Schedule III of the Central GST Act. Because the goods do not leave India, they are not exports. Practically, this means you do not pay GST on these sales, but you also cannot claim input tax credit on the costs associated with these specific goods.
Who this affects
Businesses operating bonded warehouses that supply goods to foreign-going vessels, Indian Navy ships, or Indian Coast Guard ships.
An example
Imagine a company, 'SeaSupply India', that stocks electronics in a bonded warehouse. They supply these to a merchant vessel docked in Mumbai. Under this ruling, SeaSupply India does not charge GST on the sale because it is a Schedule III transaction. However, they must ensure they do not claim any input tax credit for the GST paid on the purchase of those electronics.
What you should do
This ruling only applies to the company that asked for it. If you operate a similar business, you should consult your tax advisor to see if your specific supply chain matches these facts. Do not assume this ruling automatically exempts your business from GST without a professional review of your specific contracts and shipping documents.
If you do nothing
If you incorrectly treat these transactions as zero-rated exports, you might wrongly claim input tax credit or fail to report the transaction correctly. A tax officer could later demand the reversal of that credit along with interest and penalties. Relying on a ruling that does not apply to your specific facts can lead to significant tax disputes.
The terms explained
- Bonded warehouse
- A secure area where imported goods are stored without paying customs duty until they are cleared for use in India or exported.
- Zero-rated supply
- A supply of goods or services that is taxed at a zero percent rate, allowing the business to claim back the tax paid on their own purchases.
- Schedule III
- A list in the GST law of activities that are considered neither a supply of goods nor a supply of services, meaning they are outside the GST net.
The ruling in detail
Authority for Advance Ruling
M/s. Sanctum Trading Corporation Private Limited
Order No. GST-ARA-09/2021-22/B-52, dated 30.03.2026 · Maharashtra
Questions before the authority
- The Applicant supplies imported goods stored in his bonded warehouse to foreign-going vessels, Indian Navy Ships and Indian Coast Guard Ships. Will these outward supplies be treated as Export Sales (Zero-rated Supply) under GST?
- If these outward supplies are treated as Export Sales, then under LUT, can these items be exported without payment of IGST?
Facts
The applicant operates a bonded warehouse and supplies imported goods, such as cosmetics and food products, to foreign-going merchant vessels, Indian Navy ships, and Indian Coast Guard ships. These supplies are made against an Intent to Purchase or Purchase Order and a Duty-Free Shipping Bill, without payment of customs duty. The applicant sought to classify these transactions as zero-rated exports under the GST regime.
Ruling
| Question | What the authority ruled |
|---|---|
| Treatment of supplies to vessels as Export Sales | Not treated as Export Sales or zero-rated supply Treated as neither a supply of goods nor a supply of services under Schedule III |
| Export without payment of IGST | Not answered Withdrawn by the applicant |
The Authority ruled that the supplies do not qualify as exports or zero-rated supplies under the GST Act. Instead, the transactions fall under paragraph 8(a) of Schedule III to the CGST Act, 2017, and are treated as neither a supply of goods nor a supply of services. Consequently, these transactions are outside the scope of the GST levy.
Reasoning
The Authority reasoned that for a supply to be an export of goods under Section 2(5) of the IGST Act, the goods must be taken out of India to a place outside India. Since the supplies are made to vessels located within Indian territory, the destination-based test is not satisfied. The Authority relied on paragraph 8(a) of Schedule III to the CGST Act, which excludes the supply of warehoused goods to any person before clearance for home consumption from the definition of supply. Therefore, the transactions are **outside the scope of GST** and do not qualify for zero-rating.
Provisions relied on
- Section 97(2) of the CGST Act, 2017
- Section 2(5) of the IGST Act, 2017
- Section 16 of the IGST Act, 2017
- Section 2(44) of the Customs Act, 1962
- Section 69 of the Customs Act, 1962
- Paragraph 8(a) of Schedule III to the CGST Act, 2017
For the practitioner
This ruling clarifies that supplies of warehoused goods to vessels within Indian territory are **not zero-rated exports** but are instead non-taxable transactions under Schedule III. It settles the classification for ship-store suppliers operating under similar bonded warehouse conditions. Practitioners should note that this excludes such transactions from the GST net, meaning no input tax credit can be claimed on related inputs.
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/5-sanctum_trading_corporation_pvt_ltd_ara_order_compress.pdf
Legibility of the scan, as read: high.
Prepared 11-10-2026.
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