This circular provides clarification on the tax treatment of supplies of goods made while such goods were deposited in a customs bonded warehouse during the period from July 2017 to March 2018.

The circular explains that supplies of warehoused goods before their clearance from a customs bonded warehouse are in the nature of inter-State supplies and are liable to Integrated GST. However, during the period from 1 July 2017 to 31 March 2018, the GST common portal did not have the functionality to correctly report such transactions as inter-State supplies in FORM GSTR-1, particularly where the supplier and recipient were located in the same State or Union Territory.

Due to this technical limitation, many taxpayers reported such supplies as intra-State supplies and discharged Central GST and State GST instead of Integrated GST. Representations were received seeking clarification on the validity of such tax payments.

Considering that the situation was revenue neutral and arose due to system constraints, it has been clarified as a one-time measure that taxpayers who paid CGST and SGST on such supplies during the said period shall be deemed to have correctly discharged their tax liability, provided the total amount of CGST and SGST paid is equal to the IGST that was otherwise payable.

This clarification aims to provide relief to taxpayers and avoid unnecessary disputes for the specified period.