Imports under GST

[Kishan Barai]

In the GST regime, IGST and GST Compensation cess will be levied on imports by virtue of sub-sections (7) & (9) of Section 3 of the Customs Tariff Act, 1975. Barring a few commodities such as pan masala, certain petroleum products which attractlevy of CVD, majority of imports would attract levy of IGST. Further, a few products such as aerated waters, tobacco products, motor vehicles etc, would also attract levy of GST Compensation Cess, over and above IGST. IGST andGST Compensation cess, wherever applicable, would be levied on cargo that would arrive on or after 1st July, 2017. It may also be noted that IGST would also be levied on cargo which has arrived prior to 1st July but a bill of entry is filed on or after 1st July 2017.Similarly ex-bond bill of entry filed on or after 1st July 2017 would attract IGST and GST Compensation cess, as applicable.In the case where cargo arrival is after 1st July and an advance bill of entry was filed before 1st July along with the payment of duty, the bill of entry may be recalled and reassessed by the proper officer for levy of IGST and GST compensation Cess, as applicable.

III. Duty Calculation:

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. The Customs duty calculator would be made available on CBEC and ICEGATE website.There are seven rates prescribed for IGST- Nil, 0.25%, 3% 5%, 12%, 18% and 28%. The actual rate applicable to an item would depend on its classification and would be specified in Schedules notified under section 5 of the IGST Act, 2017. The rates applicable to goods of Chapter 98 are as under:
• 9801- Project Imports- 18%
• 9802- Laboratory Chemicals- 18%
• 9803- Passenger baggage – Nil Rate
• 9804- Specified Drugs and medicines for personal use- 5%
• 9804- Other drugs and medicines for personal use- 12%
• 9804- All other dutiable goods for personal use- 28%
Likewise, different rates of tax have been notified for goods attracting Compensation Cess which is leviable on 55 item descriptions (of supply). These rates are mostly ad valorem. But some also attract either specific rates (e.g. coal) or mixed rates (ad valorem + specific) as for cigarettes. The coverage of the goods under GST compensation cess isavailable on CBEC website along with their HSN codes and applicable cess rates.The IGST Rates of Goods, Chapter wise IGST rate, GST Compensation Cess rates, IGST Exemption/Concession are available on CBEC website for trade and departmental officers as well.

Valuation and method of calculation: IGST is leviable on the value of imported goods and for calculating integrated tax on any imported article, the value of such imported goods would be the aggregate of -

(i) the value of imported article determined under sub-section (1) of section 14 of the Customs Act, 1962 or the tariff value fixed under sub-section (2) of the that section and
(ii) any duty of Customs chargeable on that article under section 12 of the Customs Act, 1962 and any sum chargeable on that article under any law for the time being in force as an addition to, or as duty of Customs but does not include to the tax referred in the sub-section 7 (IGST) and sub-section 9 (Compensation Cess).

The value of the imported article for the purpose of levying GST Compensation 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. These would include education cess or higher education cess as well as anti-dumping and safeguard duties.The inclusion of anti-dumping duties and safeguard duty

in the value for levy of IGST and Compensation Cess is an important change. These were not hitherto included in the value for the levy of additional duty of customs (CVD) or Special Additional Duty (SAD).The IGST paid shall not be added to the value for the purpose of calculating Compensation Cess.
Although BCD, Education Cesses and IGST would be applicable in majority of cases, however, for some products CVD, SAD or GST Compensation cess may also be applicable. For different scenarios the duty calculation process has been illustrated in Annexure - I of this document.

IV. Changes in import procedures:

Importer Exporter Code (IEC): In GST regime, GSTIN would be used for credit flow of IGST paid on import of goods. Therefore, GSTIN would be the key identifier. DGFT in its Trade Notice No. 09 dated 12.06.2017 has stated that PAN would be the Import Export code (IEC). However, while PAN is identifier at the entity level, GSTIN would be used as identifier at the transaction level for every import and export. Further, in scenarios where GSTIN is not applicable, UIN or PAN would be accepted as IEC. It is advised that all importers need to quote GSTIN in their Bills of Entry in addition to IEC. In due course of time IEC would be replaced by PAN / GSTIN.

Bill of Entry Regulations and Format: To capture additional details in the Bill of entry such as GSTIN, IGST rate and amount, GST Compensation Cess and amount, the electronic as well as manual formats of Bill of entry including Courier Bill of entry are being amended. For the benefit of the trade, modified Forms have been hosted on the departmental website, www.cbec.gov.in. Further, suitable notifications shall be issued to amend the relevant regulations and introduce modified Forms.

V. Import under Export Promotion Schemes and duty payment through EXIM scrips:

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.

VI. EOUs and SEZ:

EOUs/EHTPs/STPs will be allowed to import goods without payment of basic customs duty (BCD) as well additional duties leviable under Section 3 (1) and 3(5) of the Customs Tariff Act. 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). This 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. In the GST regime, clearance of goods in DTA will attract GST besides payment of amount equal to BCD exemption availed on inputs used in such finished goods. DTA clearances of goods, which are not under GST,would attract Central Excise duties as before.

VII. Imports / Procurement by SEZs

Authorised operations in connection with SEZs shall be exempted from payment of IGST. Hence, there is no change in operation of the SEZ scheme.

VIII. Project Import:

Currently for items imported under project import scheme (i.e. CTH 9801), unique heading under the Central Excise Tariff, for the purposes of levy of CVD does not exist. Therefore, under the Central Excise Tariff, each item is getting classified in a heading as per its description and duty is paid on merit. In the 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%.

IX. Baggage:

Full exemption from IGST has been provided on passenger baggage. However, basic customs duty shall be leviable at the rate of 35% and education cess as applicable on the value which is in excess of the duty free allowances provided under the Baggage Rules, 2016.

X. Refunds of SAD paid on imports:

The need for SAD refunds arose mainly on account of the fact that traders or dealers of imported goods were unable to take credit of this duty (which was a Central tax) while discharging their VAT or Sales tax liability (which was State levy) on subsequent sale of the goods. Unless corrected through a mechanism such as refund (of one of the taxes) this would have resulted in “double” payment of tax.

With the introduction of GST on 01.07.2017, credit of “eligible duties” in respect of inputs held in stock and inputs contained in semi-finished or finished goods held in stock, is permissible to registered persons not liable to be registered under the existing law (for instance, VAT dealers) under transitional provisions (Section 140(3) of the CGST Act). Further, eligible duties as defined in sub-section (10) include SAD. In other words, dealers/ traders can take ITC of SAD paid on goods imported prior to 1st July 2017. Sub-section (5) of section 140 also allows a registered person to take credit of eligible duties in respect of inputs received on or after 1 July 2017 but the duty on which has been paid under the existing law. These provisions taken together ensure that SAD paid by dealers/ traders can be set-off against their GST liability as and when imported goods are supplied by them in the domestic market.However, certain items which are out of the GST net would be eligible for SAD refunds as earlier.

XI. Imports and Input Tax Credit (ITC):

In GST regime, input tax credit of the integrated tax (IGST) and GST Compensation Cess shall be available to the importer and later to the recipients in the supply chain, however the credit of basic customs duty (BCD) would not be available. In order to avail ITC of IGST and GST Compensation Cess, an importer has to mandatorily declare GST Registration number (GSTIN) in the Bill of Entry. Provisional IDs issued by GSTN can be declared during the transition period. However, importers are advised to complete their registration process for GSTIN as ITC of IGST would be available based on GSTIN declared in the Bill of Entry. Input tax credit shall be availed by a registered person only if all the applicable particulars as prescribed in the Invoice Rules are contained in the said document, and the relevant information, as contained in the said document, is furnished in FORM GSTR-2 by such person.
Customs EDI system would be interconnected with GSTN for validation of ITC. Further, Bill of Entry data in non-EDI locations would be digitized and used for validation of input tax credit provided by GSTN.

Discussions to this article

[KASTURI SETHI]

Dear Sir,

By entering into Article Section, you have proved that you have zeal and passion to serve Trade and Industry selflessly. Very happy to read your article. I have observed that there rare youngsters who are workaholic and have passion for working selflessly in the interest of people of India.

I got inspiration from Sh.M. Govindarajan, Sir.

[Kishan Barai]

Thank You Very Much Kasturi Shethi Sir & Narendra Seksaria Sir for your wonderful Comments.

I will try my best to make this Export Import Cup of Tea available for everyone.

[Kishan Barai]

Thank You Very Much Kasturi Shethi Sir , you are my true source of inspiration in TMI, the way you help people is most admirable & praiseworthy. When I have problem, I send you personal message & you always replied my message, sometime I feel its silly but you really helped me a lot, which inspires me to help all. You are really a true gem in TMI

[Sekhar Narasimha]

Dear Kishan,

Very delighted with this article. Very useful. Thanks for all your efforts!!.

I have a query. EOU plans to import capital goods (machinery) for manufacture. What is the import duties applicable? If IGST is applicable, how we can get refund? There is no DTA sales. In pre-GST scenerio, all import duties on capital goods are exempted to the unit.

Please clarify.

Thanks and regards,

CA Sekhar PN

[JAIPRAKASH RUIA]

May be import under notification 52/2003-Custom and IGST refund through export under rebate in place of BOND/LUT.

[Kishan Barai]

An EOU will have to pay the applicable GST on the import or domestic sourcing of inputs (goods or services).

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 used 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.

Suppliers to EOU will pay normal GST as they would pay while supplying to a domestic unit. An EOU can take Input Tax Credit (ITC) of the GST paid while taking domestic supplies and same can be used for payment of GST on finished goods cleared in DTA.

DTA sale shall be subject to fulfillment of the following conditions:
• fulfillment of positive NFE
• payment of applicable GST on product under DTA sale
• Reversal of the BCD exemption availed on the inputs used in the manufacture of products under DTA sale. The reversal of BCD would be as per Standard Input Output norms published by the DGFT or norms fixed by Norms Committee of DGFT (where no SION is fixed).
• Refund of any benefits taken on procurement of inputs from DTA under Chapter 7 of FTP and used in the manufacture of products under DTA sale.

Supply of goods from one EOU to another EOU (inter-unit transfer) will require payment of applicable GST. The BCD exemption availed on inputs from the  supplier EOU, used in such transferred goods would have to be reversed by the recipient EOU at the time clearance of such goods in DTA. Same provisions apply on sending of Goods for Job work.

For GST exempt Goods like Petroleum products, the existing provisions provided under notification no. 52/2003-Cus, notification no. 22/2003-CE and Notification no. 23/2003-CE will continue to apply for import, domestic procurement and domestic clearance.

[JAIPRAKASH RUIA]

Dear Sir,

Whether 52/2003-Custom is not available to EOU for duty free Import of input and capital goods subject to condition of said notification.

[Kishan Barai]

No, IGST has to be paid post GST

[JAIPRAKASH RUIA]

Dear Sir,

Thank you for reply. IGST is payable but what about BCD ?

[Kishan Barai]

Enjoy the exemption of BCD 

[Yatin Bhopi]

Great article. Thanks for sharing information

My query is

1. Is that means input tax credit in case of imported goods, ITC will be directly available for credit in GSTR-2A like local procurements? or Are we need to take it manually?

2. In excise regime we are eligible to avail CENVAT credit of imported gods when we receives such goods in the factory. Even though we received bill of entry of full material but we received goods partially (e.g. bulk chemical bill of entry for 1000MT and goods received till last day of month say 500MT we used to take credit proportionately to 500MT)

Under GST what will be the scenario. Duty paid goods laying at port will be considered as a receipt of goods? or it has to receive in the factory only.

Please share your view.

[Kishan Barai]

Kindly connect with me via Whatsapp (+91) 8128111191 I will try my best to help you in Export Import Business.

[Ganeshan Kalyani]

Nice article. Thanks

[raghunandhaanan r vi]

Sir,

One of our clients in Delhi had imported materials from overseas.

The GSTIN erroneously declared in the bill of entry was of Chennai unit instead of Delhi [Same IEC]

The consignee address in documents and bill of entry is of Delhi and duty paid by Delhi

Goods cleared from port on payment of applicable customs duties including IGST

My question is :

1. Whether we can amend the bill of entry now to change the IGSTIN of Delhiin place of Chennai already declared.
2. If not, can Chennai office claim the ITC and transfer it to Delhi account through IBT?

Request valuable advice from experts at the earliest. …… Thanks