IGST on goods re-imported after being exported for repairs

(Circular No. 16/2021–Customsdated 19thJuly 2021; Notification Nos. 45/2017–Customs and 46/2017–Customs, both dated 30thJune 2017; Notifications No. 36 & 37–Customs dated 19thJuly  2021)

IGST on repair cost, insurance and freight, on goods re-imported after being exported for repairs

• The GST Council, at the time of roll out of GST decided to continue the concession as were available under the said notification No. 94/96-Cus, with only consequential amendment, i.e, replacing additional duties of customs with IGST and Compensation cess, as discussed in the 14th Meeting of the GST Council.
• Accordingly, under GST, IGST and Compensation cess were made applicable on the value of repairs, plus insurance and freight on re-import of goods sent abroad for repair.
• Thus, Integrated tax and Compensation cess shall be leviable on goods re-imported after being exported for repairs at a value‑
• The fair cost of repairs carried out including cost of materials used in repairs (whether such costs are actually incurred or not), insurance and freight charges, both ways

CESTAT Order

• Recently, in the matter of M/s Interglobe Aviation Limited versus Commissioner of Customs, in its Final Order Nos. 51226-51571/2020 dated the 2nd November 2020 {2020 (43) G.S.T.L. 410 (Tri. – Del.)}, the Hon’ble CESTAT Principal Bench, New Delhi on analysis of Notification Nos. 45/2017–Customs, has interpreted that intention of legislation was only to impose basic customs duty on the fair cost of repair charges, freight and insurance charges on such imports of goods after repair. The Hon’ble CESTAT has thus concluded that integrated tax and compensation cess on such goods would be wholly exempt.

• An appeal has been preferred by the Department before the Hon’ble Supreme Court against the said Order.

• Accordingly, as recommended by the GST Council, in its 43^rd meeting, it is clarified that Notification Nos. 45/2017–Customs and 46/2017–Customs, both dated the 30^th June 2017 were issued to implement the decision of the GST Council taken earlier, that re-import of goods sent abroad for repair attracts IGST on a value equal to the repair value, insurance and freight.

• Further, in the light of the recommendations of the GST Council in its 43rd Meeting, a clarificatory amendment has been made in the said notifications, vide Notifications No. 36-Customs and 37–Customs, both dated 19th July 2021, without prejudice to the leviability of IGST, as above, on such imports as it stood before the amendment.

Clarificatory amendment

• Notifications No. 36-Customs and 37–Customs, both dated 19th July 2021

• Following clause (d) inserted in Notifications No. 45 & 46 –Customs

• (d) on the recommendation of the GST Council, for removal of doubt, it is clarified that the goods mentioned at serial number 2 & 3 of the table, are leviable to Integrated tax and cess, as leviable under the Customs Tariff Act, besides the Customs duty as specified in the said First schedule, calculated on the value as specified in column (3), and the exemption, under said serial numbers, is only from the amount of said tax, cess and duty over and above the amount so calculated.

IGST on repair cost, insurance and freight, on goods re-imported after being exported for repairs

• Thus, Integrated tax and Compensation cess shall be leviable on goods re-imported after being exported for repairs at a value‑

• The fair cost of repairs carried out including cost of materials used in repairs (whether such costs are actually incurred or not), insurance and freight charges, both ways