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<p style="text-align:justify"><span style="font-size:14px">Chamunda Traders in Maharashtra receives an order from Queens Associates in London to deliver 100 cell phones at Maheshwari Dealers in Maharashtra. On application of section 10(1)(b) place of supply will be London. The question arises will this transaction be taxed even if the place of supply is London?</span></p>
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<p style="text-align:justify"><span style="font-size:14px">There will be two parts to this transaction as well-</span></p>

<p style="text-align:justify"><span style="font-size:14px">Between Chamunda Traders and Queens Associates:</span></p>

<p style="text-align:justify"><span style="font-size:14px">First, we need to understand whether the transaction between Chamunda Traders and Queens Associates will be considered as Export? As per section 16, export of goods is a &ldquo;Zero Rated Supply&rdquo; and tax need not be levied on the same.</span></p>

<p style="text-align:justify">&nbsp;</p>

<p style="text-align:justify"><span style="font-size:14px">As per section 2(5), &ldquo;export of goods&rdquo; means taking goods out of India to a place outside India. In our case, as goods are not moving out of India hence it cannot be termed as exports.</span></p>

<p style="text-align:justify">&nbsp;</p>

<p style="text-align:justify"><span style="font-size:14px">Section 7(5)(a) states that supply of goods or services or both when the <strong>supplier is located in India </strong>and the <strong>place of supply is outside India </strong>shall be treated to be a supply of goods or services or both in the course of <strong>inter-state trade </strong>or commerce.</span></p>

<p style="text-align:justify">&nbsp;</p>

<p style="text-align:justify"><span style="font-size:14px">Above section applies to the present case, supplier (Chamunda Traders) is located in India and place of supply (London) is outside India. Hence, the transaction between Chamunda Traders and Queens Associates will be considered as an inter-state supply, and IGST shall be levied on it.</span></p>

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<p style="text-align:justify"><span style="font-size:14px">Between Queens Associates and Maheshwari Dealers:&rsquo;</span></p>

<p style="text-align:justify"><span style="font-size:14px">The transaction between Queens Associates and Maheshwari Dealers cannot be considered as the import of goods as according to Section 2(11) &ldquo;import of goods&rdquo; means bringing goods into India from a place outside India.</span></p>

<p style="text-align:justify">&nbsp;</p>

<p style="text-align:justify"><span style="font-size:14px">This transaction will be covered under section 7(5)(c) which states that <strong>supply of goods </strong>or services or both in the <strong>taxable territory</strong>, not being an <strong>intra-state supply </strong>and not covered elsewhere in section 7 shall be treated to be a supply of goods or services or both in the course of <strong>inter-state trade </strong>or commerce.</span></p>

<p style="text-align:justify">&nbsp;</p>

<p style="text-align:justify"><span style="font-size:14px">In the present case, the supply of goods is in the taxable territory (Maharashtra), it is not an intra-state supply as a supplier (Queens Associate) is located outside the taxable territory and such a situation is not covered elsewhere in section 7. Hence, transaction between Queens Associates and Maheshwari Dealers is also an Inter-state transaction and IGST will have to be paid by Maheshwari Dealers under reverse charge mechanism (Section 5(4))</span></p>