The Gujarat Authority of Advance Ruling (AAR) has ruled that no goods and Service Tax (GST) is payable on the goods lost in transit.
The bench of P.B. Meena and Kamal Shukla has observed that Unlike for the legacy period wherein Central Excise duty was to be discharged on the loss in terms, as far as GST is concerned, levy is on supply. The loss nomenclatured as ‘transit loss’, which occurs during the course of transportation and during the course of delivery at buyers premises, as is evident from the paras above, is on account of the low boiling point and volatility of the goods. It happens before the supply takes place i.e. during the course of transportation from applicant’s premises to the buyer’s premises.
The applicant, Inox Air Products is engaged in the manufacture & supply of industrial gasses including Oxygen, Nitrogen, Argon etc., both in liquid and gaseous form, which are removed in special vacuum insulated cryogenic transport tanks. At times, the delivery vehicle may contain goods to be delivered to more than one customer, which according to the applicant is termed as a milk run.
Since a portion of the liquid gas may evaporate during transit from the factory to the customer’s premises, the exact quantity of liquid gases received by the customer is unascertainable at the time of removal. It can only be ascertained after the goods are actually decanted from the tanker into the special storage tank (installed at the buyer’s premises) & quantity accepted by the buyer. During transit, a certain quantity of the liquid gas is converted to gaseous form and evaporates thereby leading to transit loss.
The applicant sought the advance ruling on the issue whether GST is payable on goods lost in transit.
The AAR ruled that no GST is payable on the goods lost in transit. The applicant is not eligible for the ITC in respect of inputs used in the goods lost in transit & hence is required to reverse the ITC in terms of section 17(5)(h) of the CGST Act, 2017.
Ruling Details
Applicant Name: M/s. Inox Air Products P. Ltd.
Date: 25/03/2025
