Goods Sent For Exhibition - GST Implications

The company usually sends the goods manufactured by it in the exhibitions, events, trade fair etc. where such goods are to be kept in display for the attracting the customers. The main purpose behind this is to promote the business. Some times such goods are sent for exhibition to be held in India or sometimes outside India. In this respect there are some common questions/doubts arise among the taxpayers, such as what documents should be made for movement of goods from the premises of the company to the place of exhibition? Whether GST would be applicable on such movement? Is there is any time limit when such goods should be received back from the place of exhibition? How to maintain the records of goods sent for exhibition purpose and others GST implications. In this article we will discuss about all these points in detail.

To answer all these questions, first of all it is necessary to understand whether the activity of sending the goods from the company to the place of exhibition or event would be considered as supply or not. As we know that as per section 7 of CGST Act 2017 for a transaction to be a treated as supply the following two conditions must be satisfied:
(i) There must be consideration (except for the activities mentioned in schedule I) and
(ii) Such transaction should be in the course of business.

However, when the goods are being sent for the purpose of display in the exhibition, there is no consideration involved at this stage. Accordingly, such activity would not be considered as supply for the purpose of GST.  Similarly, if the goods are being sent outside India for the purpose of display in the exhibition, the same would not be considered as zero rated supply of goods. Since this activity is not a supply for the purpose of GST, hence the movement of goods should be done on the basis of delivery challan as per the clause (c) of rule 55 of CGST Rules 2017 which states that for the purpose of transportation of goods for reasons other than by way of supply, the consignor may issue a delivery challan.

The said activity of sending the goods for exhibition purpose should be considered as “sale on approval basis”. Hence the goods sent for the purpose of display in the exhibition are required to be either sold or brought back within the period of six months from the date of removal. If the said goods are not received back within such time, it shall be deemed that such goods are sold and the consignor has to issue a tax invoice on the date of expiry of six months from the date of removal, in respect of such quantity of goods which are neither been sold nor brought back.

Sometimes the company directly sold the goods from the place of exhibition, in such situation if the company (who is sending the goods) is located in the same state in which the exhibition or event is held, then the company has to add such address as an additional place of business.
However, if the company (who is sending the goods) is located in the different state in which the exhibition or event is held, in such situation for sending the goods directly from the place of the event, the company has to obtain registration in such state.

The CBIC vide Circular No.108/27/2019 dated 18.07.2019 has also issued clarification in respect of goods sent/taken out of India for exhibition or on consignment basis for export promotion.
The key points clarified in the Circular are as follows:
1. The activity of sending goods out of India for exhibition is not a supply, as there is no consideration received at this time. Similarly, it is also not a zero-rated supply. Therefore, execution of a bond or LUT, as required under section 16 of the IGST Act, is not required.

2. A delivery challan should be prepared for causing the movement of these goods out of India, in accordance with the provisions contained in rule 55 of the CGST Rules 2017.

3. The goods taken out of India for the purpose of exhibition should be either sold or brought back within a period of six months from the date of removal.

4. The supply would be deemed to have taken place if the goods are neither sold nor brought back within the period of six months. In this case, the sender shall issue a tax invoice on the date of expiry of six months from the date of removal. The benefit of zero-rated supply, including refund, shall not be available in respect of such supplies.

5. However, if the specified goods are sold either fully or partially, within the period of six months. In this case, the sender shall issue a tax invoice in respect of such quantity of goods which has been sold. These supplies shall become zero-rated supplies at the time of issuance of invoice. The refund in relation to such supplies shall be available only as refund of unutilized ITC and not as refund of IGST. In other words such goods must be sold on LUT not on payment of IGST otherwise the refund of such IGST would not be available.

6. No tax invoice is required to be issued in respect of goods which are brought back to India within the period of six months.

Records to be maintained in respect of goods sent and received back:
The company who sends the goods for exhibition, has to maintain the records of goods sent in exhibition, received back from the exhibition and the goods which are not received back. For the purpose of maintaining the records, the CBIC has also prescribed the specific format in the Annexure of the Circular No.108/27/2019 dated 18.07.2019. Which is as follows;

In respect of the goods which were earlier sent outside India for exhibition purpose and now re-imported into India, the common doubt that usually arises is whether IGST would be required to be paid on re-import which were earlier not paid when the goods sent outside India for exhibition.  In this respect the clarification was provided in the Circular No. 21/2019–Customs dated 24.07.2019, wherein it was clarified that since no IGST was required to be paid at the time of taking these out of India because such activity was not a supply, hence the condition requiring payment of IGST (given under Notification No. 45/2017-Customs dated 30.06.2017) at the time of re-import of such goods is not applicable.

It is also clarified that, even in cases where exports have been made to related or distinct persons or to principals or agents, as the case may be, for participation in exhibition or on consignment basis, but, such goods exported are returned after participation in exhibition or the goods are returned by such consignees without approval or acceptance, as the case may be, the basic requirement of "supply" as defined cannot be said to be met as there has been no acceptance of the goods by the consignees. Hence it can not be said that such goods were being exported without payment of tax and accordingly, there is no need for payment of IGST when such goods are re-imported in India within six months from the date of removal.

Conclusion: The goods sent in the exhibition would not be considered as supply since there is no consideration received that time. Such goods can be sent on the basis of delivery challan. However, such goods should be received back within 6 months from the date of removal, otherwise it shall be considered as deemed supply and tax invoice is required to be issued in such situation.

Disclaimer: The information given in this article is solely for purpose of understanding the law. It is completely based on the interpretation of the author and cannot be constituted as a legal advise, the author of this article and Lawcrux team is not responsible for any legal issues if arises on the basis of the interpretation given above.