Imports to India jumped 33.09 percent year-on-year to USD 37.86 billion in May of 2017, boosted by a 236.69 percent increase in gold imports and a 29.54 percent rise in oil. Imports in India averaged 7090.77 USD Million from 1957 until 2017, reaching an all-time high of 45281.90 USD Million in May of 2011 and a record low of 117.40 USD Million in August of 1958.
Having such huge volume of trade, it may be most interesting to analyze the impact of GST on Imports. Let us now study how Imports are effected by implementation of GST.
Imports under Customs Act, 1962
Sec (23) of Customs Act 1962 : “import”, with its grammatical variations and cognate expressions, means bringing into India from a place outside India;
Sec (27) “India” includes the territorial waters of India;
THE TERRITORIAL WATERS, CONTINENTAL SHELF, EXCLUSIVE ECONOMIC ZONE AND OTHER MARITIME ZONES ACT, 1976
5. (1) The contiguous zone of India (hereinafter referred to as the contiguous zone) is and area beyond and adjacent to the territorial waters and the limit of the contiguous zone is the line every point of which is at a distance of twenty-four nautical miles from the nearest point of the baseline.
Section 2 (56) of CGST Act, 2017 defines “ nd a“, which means the territory of India as referred to in article 1 of the Constitution, its territorial waters, seabed and sub-soil underlying such waters, continental shelf, exclusive economic zone or any other maritime zone as referred to in the Territorial Waters, Continental Shelf, Exclusive Economic Zone and other Maritime Zones Act, 1976 (80 of 1976), and the air space above its territory and territorial waters.
Import Treated as Inter-State Supply:
Section 2 (10) of IGST Act, 2017 defines ± 3LPSRrtIofI RIL Js” with its grammatical variations and cognate expressions, means bringing goods into India from a place outside India.
Under the GST regime, Article 269 A constitutionally mandates that the supply of goods, or of services, or both in the course of import into the territory of India shall be deemed to be supply of goods, or of services, or both in the course of inter-State trade or commerce for levy of integrated tax. So import of goods or services will be treated as deemed inter-State supplies and would be subject to Integrated tax (IGST).
We shall discuss Import of Goods and Import of Services separately as treatment for determining place of supply, time of supply and levy of tax different for goods and services. In this article we shall confine the discussions to Import of Goods only.
Import of Goods :
As per Sec (25) of Customs act, 1962 : “imported goods” means any goods brought into India from a place outside India but does not include goods which have been cleared for home consumption.
The import of goods has been defined in the IGST Act, 2017 as bringing goods into India from a place outside India. 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. (Sec 11(2) of the Goods and Services Tax (Compensation to States) Act, 2017
Customs Duty calculation is illustrated below:
Let us see in the below table how Import Duties are worked out.
Customs Warehouse Provisions under GST
The Customs Act, 1962 provides for removal of goods from a customs station to a warehouse without payment of duty. The said Act has been amended to include ‘warehouse’ in the definition of “customs area” (section 2 of the Customs Act, 1962) in order to ensure that an importer would not be required to pay the Integrated tax (IGST) at the time of removal of goods from a customs station to a warehouse.
That means if goods are taken to warehouse from port or customs station – no IGST is applicable
Goods cleared from warehouse, IGST and GST Compensation Cess will payable at the time of removal from warehouse
Other Customs Levies Shall Continue
Other Customs levies as per customs act shall continue. Following duties may continue to be levied as at present:
Basic Customs Duty Levied under Sec 12 of Customs Act 1962
Anti-Dumping Duty Levied under Sec 9A of Customs Tariff Act 1975
Safeguard Duty Levied under Sec 8B of Customs Tariff Act 1975
Classification of Goods:
HSN (Harmonized System Nomenclature) is a multipurpose international product nomenclature developed by the World Customs Organization (WCO).
WCO has 181 members, three-quarters of which are developing countries that are responsible for managing more than 98 percent of world trade. India, a member of WCO since 1971, has been using HSN codes since 1986 to classify commodities for Customs and Central Excise.
HSN standardizes the classification of merchandise under sections, chapters, headings, and subheadings. This results in a six-digit code for a commodity (two digits each representing the chapter, heading, and subheading).
Indian Customs and Central Excise added two more digits to make the codes more precise, resulting in an eight-digit classification.
For the purpose of Imports & Exports, HSN code at 8 digit level would continue under the GST regime.
Input Tax Credit of Integrated Tax:
The definition of “input tax”in relation to a registered person also includes the integrated tax charged on import of goods. Thus, input tax credit of the integrated tax paid at the time of import shall be available to the importer and the same can be utilized by him as Input Tax credit for payment of taxes on his outward supplies. The integrated tax shall, in essence, be a pass-through to that extent. The Basic Customs Duty (BCD), shall however, not be available as input tax credit.
The Input Tax Credit in respect of Compensation Cess on supply of goods and services leviable under Sec 8 shall be utilized only towards payments of said cess on supply and services leviable under the said section (Sec 11(2) of the Goods and Services Tax (Compensation to States) Act, 2017.
As per section 11 of the IGST Act, 2017 the place of supply of goods, imported into India shall be the location of the importer. Thus, if an importer, say is located in Rajasthan, the state tax component of the integrated tax shall accrue to the State of Rajasthan.
At present traders (not registered with Excise) who sells imported goods in India are not eligible to take credit of CVD & SAD (if paid), which is being absorbed as cost. Similarly output service providers importing goods are eligible to take credit of CVD only and not SAD.
However under GST regime, traders will also be able to claim input tax credit of IGST, reducing costs for them further. Output service providers are also can take IGST credit.
GSTIN Replacing IEC
As per Trade Notice No : 9 dated 1 2th June’20 17, of DGFTImporters and Exporters need to declare only GSTIN wherever registered with GSTN (Instead of IEC). This is to facilitate Credit flow of IGST, on imports and refund or rebate of IGST related to Exports. However, those who are not registered with GSTN (Turnover is less than threshold limit of Rs 20 Lakhs (Rs 10 Lakhs for Special Category States) and not falling under compulsory registration under Sec 24 of CGST Act. 2017), PAN of the entity shall be used. Further, for the existing IEC holders, necessary changes in the system are being carried out in the DGFT so that their PAN becomes their IEC. DGFT System will undertake this migration, and the existing IEC holders are not required to undertake any additional exercise in this regard.
IEC holders are required to quote their PAN (in place of existing IEC) in all their future documentation w.e.f. the notified date. The legacy data which is based on IEC would be converted into PAN based in due course of time.
Declaration of valid GSTIN in Customs Documents (BE/SB)
Declaration of valid GSTIN in Customs documents (BE/SB) would be mandatory w.e.f. 0000 hrs of 01-07-2017, the likely implementation date of GST, to avail IGST credit on Imports or GST refund on exports. The declared GSTIN would be validated for correct IEC/ PAN linkage.
Accordingly, during GSTIN registration, please ensure declaration of correct IEC and the same PAN [earlier registered with DGFT for getting IEC]. In case of any difference in PAN declared for GSTIN vis-à-vis the PAN declared for IEC registration, amendment of PAN in IEC may be undertaken immediately.