GST on Third-Country Trade: Kerala Authority for Advance Ruling CT/2275/18-C3
Goods bought and sold outside India without entering the country are not subject to Goods and Services Tax (GST).
- Ruling
- ORDER No. CT/2275/18-C3 DATED 26/03/2018
- Dated
- 26 Mar 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 GST applies to goods shipped directly between foreign countries.
- The Authority ruled that no GST is payable on these offshore transactions.
- The ruling confirms that the taxable event of import does not occur.
In short
The company asked the Kerala Authority for Advance Ruling (AAR) if they must pay GST on goods they buy in one foreign country and sell in another, without the goods ever entering India. The Authority examined whether these 'third-country' trades qualify as imports under the Integrated Goods and Services Tax (IGST) Act.
What has changed
How it worked before
Businesses were often uncertain whether offshore trading or merchanting trade transactions fell under the scope of Indian GST laws.
What has changed
The Authority decided that because the goods never cross Indian customs frontiers, they are not 'imported' under the law. In practice, this means businesses do not need to pay IGST on these specific international transactions.
Who this affects
Traders and businesses that buy goods from one foreign country and sell them to another without bringing the items into India.
An example
A textile trader in Mumbai buys fabric from Vietnam and sells it directly to a buyer in Germany. The fabric is shipped from Vietnam to Germany and never touches an Indian port. Based on this ruling, the trader is not required to pay GST on this transaction because the goods were never imported into India.
What you should do
If you engage in similar offshore trade, you may use this ruling as a reference for your tax position. However, remember that an Advance Ruling is only legally binding for the company that requested it and their specific tax office; it is not a general law that applies to all businesses.
If you do nothing
If you incorrectly assume this ruling covers your specific business model, you risk underpaying taxes or failing to file required disclosures. A tax officer may disagree with your interpretation, leading to audits, penalties, and interest charges on unpaid tax amounts.
The terms explained
- Third-country trade
- A business transaction where goods are bought in one foreign country and sold to another, without the goods ever entering the home country.
- Import of goods
- Under GST law, this specifically refers to bringing goods into India from a place outside the country.
- Customs frontiers
- The boundary that separates India from the rest of the world; goods must cross this line to be considered imported.
The ruling in detail
Authority for Advance Ruling
M/s Synthite Industries Ltd
ORDER No. CT/2275/18-C3 DATED 26/03/2018 · Keralam
Questions before the authority
- Whether on procuring goods from China, in a context where the goods purchased are not brought into India, is GST payable by them?
- On the sale of goods to the company in USA, where goods sold are shipped directly from China to USA without entering India, is GST payable by them?
- On procuring goods from China not against specific export order, in a context when the goods purchased are not brought into India, is GST payable by them?
- On the sale of goods from Netherlands warehouse to their end customers in and around Netherlands, without entering India, is GST payable by them?
Facts
The applicant is engaged in trading spice products and operates two specific business models involving third-country trade. In the first, they procure goods from China and ship them directly to customers in the USA without the goods entering India. In the second, they procure goods from China and store them in a warehouse in the Netherlands for subsequent delivery to customers in and around the Netherlands, again without the goods entering India.
Ruling
| Question | What the authority ruled |
|---|---|
| Procurement from China (not brought into India) | Not liable to GST Goods are not imported into India |
| Sale to USA (shipped directly from China) | Not liable to GST Goods are not imported into India |
| Procurement from China (not against specific export order) | Not liable to GST Goods are not imported into India |
| Sale from Netherlands warehouse | Not liable to GST Goods are not imported into India |
The Authority ruled that the applicant is not liable to pay GST on either the sale of goods procured from China and shipped directly to the USA or on the sale of goods stored in the Netherlands warehouse. The ruling is based on the fact that the goods are not imported into India at any point in these transactions. Consequently, the taxable event of import does not occur.
Reasoning
The Authority relied on the definition of 'import of goods' under Section 2(10) of the IGST Act, which requires goods to be brought into India from a place outside India. Since the goods in the described transactions never enter the Indian territory, they do not cross the customs frontiers of India and thus do not attract IGST. The ruling also references CBEC Circular No. 33/2017-Customs, which clarifies that IGST on imported goods is collected at the time of importation, a condition not met here.
Provisions relied on
- Section 2(10) of the Integrated Goods and Services Tax Act, 2017
- Section 7(2) of the Integrated Goods and Services Tax Act, 2017
- Section 5(1) of the Integrated Goods and Services Tax Act, 2017
- Section 3 of the Customs Tariff Act, 1975
- Section 12 of the Customs Act, 1962
- Circular No. 33/2017-Customs dated 01.08.2017
For the practitioner
This ruling confirms that **third-country trade transactions** where goods are neither brought into nor cleared for home consumption in India are outside the scope of GST. It provides clarity for traders engaged in **merchanting trade** or offshore warehousing. However, it does not address transactions where goods might be temporarily brought into India or cleared for home consumption.
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/kerala-ct_2275-18-c3-sil_1.pdf
Legibility of the scan, as read: high.
Prepared 16-10-2026.
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