IMPORT OF GOODS UNDER GST ALONG WITH FAQs

Under GST, there is no drastic change in case of imports. There is no major impact on imports with respect to levy of Custom duty, Education cess, Anti-dumping duty, safeguard duty and the like. Let’s discuss the changes in import under GST.

Replacement of CVD and SAD with IGST

Under GST, countervailing duty and Special additional duty of customs (SAD) are replaced with the levy of Integrated Godds and Services Tax, except few exceptions.

Duties levied during import

Under GST regime, at the time of import, IGST and GST Compensation cess will be levied as per Section 3(7)&(9) of the Customs Tariff Act, 1975.

Levy of GST Compensation Cess, over and above IGST

Few products such as aerated waters, tobacco products, motor vehicles etc, would also attract levy of GST Compensation Cess, over and above IGST.

What would be the IGST Rate?

 IGST rates have been notified through notification 01/2017-Integrated Tax (Rate), dated 28-06-2017.

 IGST rate on any product can be ascertained by selecting the correct Sl. No. as per description of goods and tariff headings in the relevant schedules of the notification. Importers are advised to familiarize themselves with IGST and GST compensation cess rates, schedule and exemptions which are available on CBEC website.

Import of Goods

All imports shall be deemed as inter-State supplies and accordingly Integrated tax shall be levied in addition to the applicable Custom duties. The IGST Act, 2017 provides that the integrated tax on goods imported into India shall be levied and collected in accordance with the provisions of the Customs Tariff Act, 1975 on the value as determined under the said Act at the point when duties of customs are levied on the said goods under the Customs Act, 1962. The integrated tax on goods shall be in addition to the applicable Basic Customs Duty (BCD) which is levied as per the Customs Tariff Act. In addition, GST compensation cess, may also be leviable on certain luxury and demerit goods under the Goods and Services Tax (Compensation to States) Cess Act, 2017.

 The Customs Tariff Act, 1975 has accordingly been amended to provide for levy of integrated tax and the compensation cess on imported goods. Accordingly, goods which are imported into India shall, in addition to the Basic Customs duty, be liable to integrated tax at such rate as is leviable under the IGST Act, 2017 on a similar article on its supply in India. Further, the value of the goods for the purpose of levying integrated tax shall be, assessable value plus Customs Duty levied under the Act, and any other duty chargeable on the said goods under any law for the time being in force as an addition to, and in the same manner as, a duty of customs.

The value of the imported article for the purpose of levying cess shall be, assessable value plus Basic Customs Duty levied under the Act, and any sum chargeable on the goods under any law for the time being, in force as an addition to, and in the same manner as, a duty of customs. The integrated tax paid shall not be added to the value for the purpose of calculating cess.

Suppose the assessable value of an article imported into India is Rs. 100/-. Basic Customs Duty is 10% ad-valorem. Integrated tax rate is 18%. The taxes will be calculated as under:

• Assessable Value= Rs. 100/-

• Basic Customs Duty (BCD) = Rs. 10/-

• Value for the purpose of levying integrated tax= Rs. 100/- + Rs.10/-= Rs. 110/-

• Integrated Tax = 18% of Rs.110/- =Rs. 19.80

• Total taxes = Rs. 29.80 On the top of it, in case the goods are also leviable to cess under the Goods and Services Tax (Compensation to States) Cess Act, 2017, the same will be collected on the value taken for levying integrated tax. Thus, in the above example, in case, cess is leviable, the same would be levied on Rs. 110/-.

Major changes in import after GST

There is change in procedure in import under GST. Let’s discuss how:

Obtaining GSTIN becomes mandatory

Under GST regime, GSTIN would be used for credit flow of IGST paid on import of goods.

In scenarios where GSTIN is not applicable, UIN or PAN would be accepted as IEC.

PAN would be the IEC 

 DGFT in its Trade Notice No. 09 dated 12.06.2017 has stated that PAN would be the Import Export code (IEC).

In nutshell, PAN is identifier at the entity level, GSTIN would be used as identifier at the transaction level for every import and export

 Change in Bill of entry format 

Under GST, due to additional details such as GSTIN, IGST rate and amount, GST compensation rate and amount, the electronic as well as manual formats of Bill of entry including Courier Bill of entry are being amended.

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Bill of Entry Format:  https://taxguru.in/wp-content/uploads/2017/07/Bill-of-Entry-Home-Consumption.pdf

Exemption on imports made under export promotion schemes 

Under the GST regime, Customs duties will be exempted on imports made under export promotion schemes namely EPCG, DEEC (Advance License) and DFIA. IGST and Compensation Cess will have to be paid on such imports.

The EXIM scrips under the export incentive schemes of chapter 3 of FTP (for example MEIS and SEIS) can be utilised only for payment of Customs duties or additional duties of Customs, on items not covered by GST, at the time of import. The scrips cannot be utilized for payment of Integrated Tax and Compensation Cess. Similarly, scrips cannot be used for payment of CGST, SGST or IGST for domestic procurements.

Impact on EOU/SEZ 

Applicability of GST & availment of ITC 

GST would be leviable on the import of input goods or services or both used in the manufacture by EOUs which can be taken as input tax credit (ITC).

Utilisation of ITC 

The above ITC can be utilized for payment of GST taxes payable on the goods cleared in the DTA or refund of unutilized ITC can be claimed under Section 54(3) of CGST Act.

No change in operation of SEZ scheme 

Under GST, Authorised operations in connection with SEZs shall be exempted from payment of IGST. Hence, no change in case of SEZ

Project Import 

Unlike earlier, under GST regime, for the purpose of levying IGST all the imports under the project import scheme will be classified under heading 9801 and duty shall be levied @ 18%.

Practical isssues: 

Based on above discussion, let’s go through the practical issues.

Ques 1. Will the exemptions, available to 100% EOUs & SEZs in the pre GST regime would continue ?

Ans. In case of SEZ

No change in the operation of the SEZ scheme.

SEZs can continue to import raw materials without payment of any duty. Supplies to SEZs would also be trated as Zero rated supplies.

In case of EOUs

The EOUs will continue to get exemption from payment of the basic Customs Duty, however they will have to pay IGST on imports.

 On the IGST paid on import of inputs, ITC would be available which can be utilized for payment of GST payable on the goods cleared in the DTA. Refund of the unutilized ITC can also be claimed under Section 54(3) of CGST Act.·

 The facility of duty free import of capital goods under the Procurement Certificate procedure will not be available. To import capital goods at zero duty, EOUs will have to follow procedure under of the Customs (Import of Goods at Concessional Rate of Duty) Rules, 2017.

Ques.2 Under GST regime, can we get duty free benefit (all duties exempted) if we import using Advance authorization or EPCG?

Ans. Under GST regime, both the Advance Authorization and EPCG holders would continue to get the exemption from payment of the Basic Customs Duty, Safeguard Duty, Transitional Product Specific Safeguard Duty, and Antidumping Duty. And for items specified in Fourth Schedule to Central Excise Act 1944 (specified petroleum products, tobacco etc.) exemption from Additional C Duty leviable under Sections 3(1), 3(3) and 3(5) of the Customs Tariff Act, 1975 will also be available.

However there is one major change. Now an Advance Authorisation holder will have to pay IGST at the time of imports. He can take input Tax Credit (ITC), and after export, claim refund of any unutilized input tax credit at the end of tax period.

The EPCG holder also will have to pay IGST at the time of imports and take input Tax Credit (ITC) on the duty paid. He cannot claim refund of any unutilized input tax credit after the exports.

Ques.3 Is cess on customs duty to be paid on imports under GST regime?

Ans. Education cess and Compensation cess would be applicable on imports

Ques. 4 In the IGST regime, whether a separate IEC number would be allotted to each regional office?

Ans. No

Ques.5 What duties will be levied on import of goods?

Ans. Customs duty and cess as applicable + IGST+ GST compensation cess. IGST and GST compensation cess shall be paid after adding all customs duty and customs cess to the value of imports.

Ques 6 How would the sale and purchase of goods to and from SEZ will be treated? Will it be export / input?

Ans. Supply to SEZs is zero rated supplies and supplies by SEZs are treated as imports.

Ques.7 Who will pay IGST when goods are procured from SEZ? Today importer is paying both BCD and CVD.

Ans. Such supply is treated as import and present procedure of payment continues with the variation that IGST is levied in place of CVD.

References:

Hope this information will help you in your Professional endeavors. For further assistance/query, feel free to write to us.

Author: C S Ekta Maheshwari is the Author of this article and is Company Secretary by profession. The Author can be reached at csektamaheshwari14@gmail.com

Disclaimer:

The entire contents of this article is solely for information purpose and have been prepared on the basis of relevant provisions and as per the information existing at the time of the preparation.. It doesn’t constitute professional advice or a formal recommendation. The author has undertook utmost care to disseminate the true and correct view and doesn’t accept liability for any errors or omissions. You are kindly requested to verify & confirm the updates from the genuine sources before acting on any of the information’s provided herein above.

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