GST Registration and Tax for Foreign Suppliers Using FTWZ
Foreign suppliers storing goods in a Free Trade Warehousing Zone do not need GST registration if the Indian buyer handles customs clearance.
- Ruling
- ORDER No.24/AAR/2018 DATED : 31.12.2018
- 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
- Foreign supplier stores leather in a Free Trade Warehousing Zone (FTWZ).
- Indian customer pays customs duty and IGST upon home consumption clearance.
- Foreign supplier is not required to register for GST in India.
In short
The company asked if they needed to register for Goods and Services Tax (GST) or pay Integrated GST (IGST) when selling goods stored in a Free Trade Warehousing Zone (FTWZ) to Indian customers. The authority decided that because the Indian buyer pays the taxes when clearing the goods for home use, the foreign seller has no tax or registration obligation.
What has changed
How it worked before
Businesses were often uncertain if storing goods in an FTWZ and selling them to Indian customers created a taxable supply that required the foreign seller to register for GST.
What has changed
The authority confirmed that the tax point is the moment the Indian buyer clears the goods for home consumption. This means foreign suppliers do not trigger GST registration requirements simply by using an FTWZ as a storage hub for Indian sales.
Who this affects
Foreign companies that store goods in Indian Free Trade Warehousing Zones and sell them to customers in the Domestic Tariff Area.
An example
A foreign electronics manufacturer stores components in an FTWZ in Chennai. When an Indian factory buys these components, the factory files the Bill of Entry and pays the customs duty and IGST. Based on this ruling, the foreign manufacturer does not need to register for GST in India for these transactions.
What you should do
If you are a foreign supplier, you may not need to register for GST if your Indian customers handle the import clearance. Remember that an Advance Ruling only binds the company that asked and its specific tax office; it is not a general law that applies to every business automatically.
If you do nothing
If you assume this ruling applies to you and choose not to register, you risk penalties if your specific business model differs from the one described here. A tax officer may view your activities as a taxable supply, leading to demands for unpaid tax, interest, and potential legal disputes. Always consult a professional to see if your specific facts match this ruling.
The terms explained
- Free Trade Warehousing Zone (FTWZ)
- A special zone in India where goods can be stored and handled without paying customs duties until they are moved into the regular Indian market.
- Domestic Tariff Area (DTA)
- The regular part of India where standard customs and tax laws apply, outside of special zones like FTWZs.
- Integrated GST (IGST)
- The tax applied to the movement of goods and services between states or when importing goods into India.
The ruling in detail
Authority for Advance Ruling
M/s. Sadesa Commercial Offshore De Macau Limited
ORDER No.24/AAR/2018 DATED : 31.12.2018 · Tamil Nadu
Questions before the authority
- Whether sale of tanned bovine leather stored in Free Trade Warehousing Zone (FTWZ) by a foreign supplier which is cleared to Domestic Tariff Area (DTA) customer in India would result in supply subject to levy under sub section 1 of section 5 of the IGST Act 2017 or under the provisions of CGST Act, 2017 or Tamil Nadu GST Act, 2017 and the rules made there under.
- Whether the foreign supplier being the applicant, located outside the taxable territory and supplying goods to DTA customers on the goods stored in third party FTWZ unit is required to get registered under the IGST ACT 2017 or under the provisions or CGST ACT 2017 or the Tamil Nadu Goods and Service Tax Act, 2017 and the rules made thereunder.
Facts
The applicant is a foreign entity that imports tanned bovine leather into India and stores it in a third-party Free Trade Warehousing Zone (FTWZ) unit. The title to the goods remains with the applicant until they are sold to Indian customers. Upon sale, the Indian customer files a Bill of Entry for home consumption and pays the applicable customs duties and IGST.
Ruling
| Question | What the authority ruled |
|---|---|
| Liability to pay IGST on removal from FTWZ to DTA | Not liable IGST is collected at the time of clearance for home consumption under the Customs Tariff Act |
| Requirement for GST registration | Not required Applicable if the applicant is exclusively conducting the described activity |
The authority ruled that the applicant is not liable to pay IGST at the time of removal of goods from the FTWZ to the DTA, as the tax is collected at the time of clearance for home consumption under the Customs Tariff Act. Furthermore, the applicant is not required to obtain GST registration if they are exclusively conducting this activity of exporting goods to the FTWZ which are subsequently sold to Indian customers who clear the goods on payment of appropriate customs duties.
Reasoning
The authority relied on Circular No. 3/1/2018-IGST dated 25th May 2018, which clarifies that the supply of goods while deposited in a customs bonded warehouse is not subject to IGST until the goods are cleared for home consumption. The removal from the FTWZ to the DTA constitutes the point of deferred levy of customs duty. Consequently, the applicant does not trigger the registration requirements under Section 23(1) of the CGST Act and TNGST Act, as the tax liability is discharged by the DTA customer at the time of import clearance.
Provisions relied on
- Section 5(1) of the IGST Act 2017
- Section 7(2) of the IGST Act 2017
- Section 23(1) of the CGST Act 2017
- Section 23(1) of the TNGST Act 2017
- Circular No. 3/1/2018-IGST dated 25th May 2018
- Customs Tariff Act, 1975
For the practitioner
This ruling provides **certainty for foreign suppliers** using FTWZ facilities in India, confirming that they are not liable for IGST or registration if they do not clear the goods themselves. It settles that the tax point is the **clearance for home consumption** by the DTA buyer. It does not apply to scenarios where the foreign supplier might be involved in other taxable activities within the taxable territory.
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/tn-24-aar-2018.pdf
Legibility of the scan, as read: high.
Prepared 20-10-2026.
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