CHAPTER XXIII
Imports in GST Regime
Introduction
Under the GST regime, Article 269A constitutionally mandates that 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. So import of goods or services
will be treated as deemed inter-State supplies and would be subject to
Integrated tax. While IGST on import of services would be leviable under
the IGST Act, the levy of the IGST on import of goods would be levied under
the Customs Act, 1962 read with the Custom Tariff Act, 1975. The importer
of services will have to pay tax on reverse charge basis. However, in
respect of import of online information and database access or retrieval
services (OIDAR) by unregistered, non-taxable recipients, the supplier
located outside India shall be responsible for payment of taxes (IGST).
Either the supplier will have to take registration or will have to appoint
a person in India for payment of taxes.
Supply of goods or services or both to a Special Economic Zone developer or
a unit shall be treated as inter-State supply and shall be subject to levy
of integrated tax.
Importer Exporter Code (IEC): As per DGFT’s Trade Notice No. 09 dated
12.06.2017, the PAN of an entity would be used as the Import Export code
(IEC). Wherever an applicant applies for IEC, the PAN of the applicant will
be authorized as an IEC. The importer would only be required to declare
only GSTIN (where registered under GST).
Import of Goods
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
de-merit 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, any 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 like 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 that 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.
Let’s take an example:
Suppose the assessable value of an article imported into India is Rs.
100/-. Basic Customs Duty is 10% ad-valorem. Education Cess is 3%;
Integrated tax rate is 18% and Compensation Cess is 15%
The taxes will be calculated as under:
Particulars Duty (A) Assessable Value Rs. 100/- (B) Basic Customs Duty @10% Rs.10/- (C) Education Cess @3% Rs.0.30 (D) Value for Integrated Tax Rs.110.30 (E) Integrated Tax @18% Rs.19.85 (E) Integrated Tax @18% Rs.19.85 (F) Value for Compensation Cess Rs.110.30 (G) Compensation Cess @ 15% Rs. 16.55 (H) Total Duty ( B+C +E+G) Rs.46.70
Wherever 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. 110.30/-.
In cases where imported goods are liable to Anti-Dumping Duty or Safeguard
Duty, value for calculation of IGST as well as Compensation Cess shall also
include Anti- Dumping Duty amount and Safeguard duty amount.
Import as Baggage
Passenger Baggage are exempted from IGST as well as compensation cess. The
basic customs duty at the rate of 35% and the applicable education cess
shall be leviable on the value which is in excess of the duty free
allowances provided under the Baggage Rules, 2016.
Tax Treatment of Goods imported into India and deposited in a
warehouse and sold while in warehouse before clearance from Customs
(Circular No. 46/2017 dated 24 th November, 2017):
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” in order to ensure
that an importer would not be required to pay the Integrated tax at the
time of removal of goods from a customs station to a warehouse.
However, the transaction of sale / transfer etc. of the warehoused goods
between the importer and any other person may be at a price higher than the
assessable value of such goods. Such a transaction squarely falls within
the definition of “supply” and shall be taxable under the IGST Act, 2017.
It may be noted that as per sub-section (2) of section 7 of the IGST
Act, any supply of imported goods which takes place before they
cross the customs frontiers of India, shall be treated as an inter-State
supply. Thus, such a transaction of sale/transfer will be subject to IGST
under the IGST Act, 2017. The value of such supply shall be
determined in terms of section 15 of the CGST Act, 2017 read
with section 20 of the IGST Act, 2017 and the rules made
thereunder, without prejudice to the fact that customs duty (which includes
BCD and applicable IGST payable under the Customs Tariff Act) will be
levied and collected at the ex-bond stage.
Leviability of Integrated Tax on High Seas Sales Transactions Circular
No. 33/2017-Customs dated 1 st August, 2017:
‘High Sea Sales’ is a common trade practice whereby the original importer
sells the goods to a third person before the goods are entered for customs
clearance. After the High sea sale of the goods, the Customs declarations
i.e. Bill of Entry etc. is filed by the person who buys the goods from the
original importer during the said sale. IGST on high sea sale (s)
transactions of imported goods, whether one or multiple, shall be levied
and collected only at the time of importation i.e. when the import
declarations are filed before the Customs authorities for the customs
clearance purposes for the first time. Further, value addition accruing in
each such high sea sale shall form part of the value on which IGST is
collected at the time of clearance.
Import of goods by 100% EOU’s and SEZs
Import of goods by 100% EOU’s would be governed by Notification no. 52/2003
– Customs as amended by Notification no. 78/2017-Customs dated 13.10.2017.
EOUs are allowed duty free import of goods (exempt from Customs duties,
IGST & Compensation Cess) under the said notifications. However,
exemption from IGST is only available till 31.03.2018.
Goods imported by a unit or a developer in the Special Economic Zone for
authorised operations are exempted from the whole of integrated tax under
section 3(7) of the Customs Tariff Act, 1975 vide Notification
No. 64/2017Customs dated 05.07.2017
Input tax credit of integrated tax
The definition of “input tax” in relation to a registered person also
includes the integrated tax and compensation cess charged on import of
goods. Thus, input tax credit of the integrated tax and the compensation
cess, if any, 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 and compensation cess
paid at the time of import shall in essence be a pass through to that
extent. The input tax credit of compensation cess, however, can only be
used for payment of compensation cess. Furthermore, the Basic Customs Duty
(BCD) and education cess, shall, not be available as input tax credit.
HSN (Harmonised System of Nomenclature) code would be used for the purpose
of classification of goods under the GST regime.
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.
Import of services
Import of services has specifically been defined under IGST Act, 2017 and
refers to supply of any service where the supplier is located outside
India,
the recipient is located in India and the place of supply of service is in
India. As per the provisions contained in Section 7(1) (b) of the CGST
Act, 2017, import of services for a consideration
whether or not in the course or furtherance of business shall be considered
as a supply. Thus, in general, import of services without consideration
shall not be considered as supply. However, business test is not required
to be fulfilled for import of service to be considered as supply.
Furthermore, in view of the provisions contained in Schedule I of the CGST
Act, 2017, the import of services by a taxable person from a related person
or from a distinct person as defined in Section 25 of the CGST Act,
2017, in the course or furtherance of business shall be treated
as supply even if it is made without any consideration.
In view of the provisions contained in Section 14 of the IGST Act,
2017, import of free services from Google and Facebook by
individuals without any consideration are not considered as supply. Import
(Downloading) of a song for consideration for personal use would be a
service, even though the same are not in the course or furtherance of
business. Import of some services by an Indian branch from their parent
company, in the course or furtherance of business, even if without
consideration will be a supply.
Thus, import of services can be considered as supply based on whether there
is consideration or not and whether the service is supplied in the course
or furtherance of business. The same has been explained in the table
below:
Nature of Service Consideration Business Test Import of services Necessarily Required Not Required Import of services by a taxable person from a related
person or from a distinct personNot Required Necessarily Required
As per the provisions contained in Section 21 of the IGST Act,
2017, all import of services made on or after the appointed day
i.e 1 st July, 2017 will be liable to integrated tax regardless of whether
the transactions for such import of services had been initiated before the
appointed day. However, if the tax on such import of services had been paid
in full under the existing law, no tax shall be payable on such import
under the IGST Act. In case the tax on such import of services had been
paid in part under the existing law, the balance amount of tax shall be
payable on such import under the IGST Act, 2017. For instance,
suppose a supply of service for Rs. One crore was initiated prior to the
introduction of GST, a payment of Rs. 20 lacs has already been made to the
supplier and service tax has also been paid on the same, the integrated tax
shall have to be paid on the balance Rs. 80 lacs.
Section 13 of the IGST Act, 2017 provides for determination of
place of supply in cases wherein the location of the supplier of services
or the recipient of services is outside India. Thus, this section provides
the place of supply in relation to international or cross-border supply of
services. Place of supply of a service shall determine as to whether a
service can be termed as import or export of service. The specific
provisions relating to place of supply for international supply of services
are as below:
Sl. No. Situation Place of Supply 1 Default Rule other than specific situa- tions mentioned
be- lowLocation of the recipient of services;
If not
available, location of the supplier of services2 Services supplied
in respect of goods
which are required
to be made physical- ly availableLocation where the services
are actually performedServices which re- quire the physical
presence of the re- cipient or the person
acting on his behalf
with the supplier of
services2.1 Services are provided on goods but from a remote
location by way of electronic meansLocation where goods are situated at the time of sup-
ply of services2.2 Above provisions is not applicable in respect of goods
which are temporarily imported into India for repairs
and are exported after repairs3 Services supplied di- rectly in relation to
an immovable propertyPlace where the immovable property is located or
intended to be located4 Admission to, or organisation of an event Place where the event is ac- tually held 4.1 Above Services pro- vided in more than one country
includ- ing IndiaIndia 4.2 Above Services pro- vided in more than
one stateProportionate Basis 5 Services supplied by a banking company, or a financial
institution, or a non-banking fi- nancial company, to
account holdersLocation of the supplier of
services5.1 Intermediary services 5.2 Services consisting of hiring of means of transport,
including yachts but excluding aircrafts and vessels,
up to a period of one month6 Transportation of goods, other than by way of mail or
courierPlace of destination of such goods 7 Passenger transpor- tation services Place where the passenger
embarks on the conveyance
for a continuous journey8 Services provided on
board a conveyanceFirst scheduled point of de- parture of that conveyance
for the journey9 Online information and database access or retrieval
(OI- DAR) servicesLocation of the recipient of services