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Home Articles Goods and Services Tax - GST Mr. M. GOVINDARAJAN Experts This |
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APPLICABILITY OF IGST/GST ON GOODS TRANSFERRED/SOLD WHILE BEING DEPOSITED IN WAREHOUSE |
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APPLICABILITY OF IGST/GST ON GOODS TRANSFERRED/SOLD WHILE BEING DEPOSITED IN WAREHOUSE |
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Depositing of goods in warehouses Chapter IX of the Customs Act, 1962 (‘Act’ for short) provides for warehousing. This chapter provides for deposit of goods into a customs bonded warehouse. A warehouse is licensed under section 57of the Act as a public warehouse; under section 58 of the Act as a private warehouse; under section 58A of the Act as a special warehouses. The goods may be deposited in such warehouses without payment of duty. Section 59(5) provides that where the whole of the goods or any part thereof are transferred to another person. For this, the transferee shall execute a bond in a sum equal to thrice the amount of duty assessed on such goods. The Assistant Commissioner of Customs or Deputy Commissioner of Customs may permit an importer to execute a general bond in such amount as the Assistant Commissioner of Customs or Deputy Commissioner of Customs may approve in respect of the warehousing of goods to be imported by him within a specified period. The importer shall, in addition to the execution of a bond furnish such security as may be prescribed. Value of imported goods Section 14 of the Act provides that the value of imported goods for charging customs duty is determined at the time of import i.e., at the time filing of the into-bond Bill of Entry. The expenses, such as-
cannot be added to the value of the goods for the levy of customs duty at the stage of ex-bonding. Section 15 of the Act provides that the rate of duty and tariff valuation, if any, applicable to any imported goods, shall be the rate and valuation in force, -
There is no provision to vary the assessable value of the goods at ex-bond stage unless they are such goods on which tariff valuation applies. Hence, basic customs duty and IGST shall be paid on the imported goods at the stage of exbonding on the value determined under Section 14 of the Act. Sale/transfer of goods Vide Circular No.46/2017-Customs, dated 24.11.2017 the Board provides for the levy of IGST/GST. 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. These transactions falls within the definition of the term ‘supply’ under section 7 of the CGST Act, 2017. The same shall be taxable under section 9 of the CGST Act read with section 20 of IGST Act, 2017. Section 7(2) of the IGST Act provides that any supply of imported goods which takes place before they cross the customs frontiers of India, shall be treated as inter-state supply. Therefore a transaction of sale/transfer will be subject to integrated tax under IGST Act. The value of such supply is to be determined under section 15 of the CGST Act read with section 20 of the IGST Act and the rules made there under. This is without prejudice to the fact the customs duty will be levied and collected at ex-bond stage. Additional taxable event The circular indicated that in respect of goods stored in a customs bonded warehouse, there is a possibility that certain cases may involve an additional taxable event, if a transfer of ownership of warehoused goods takes place between the importer and another person, before clearance of goods, whether for home consumption or export. Deferment of customs duty The circular clarified that so long as the goods remain deposited in the warehouse the customs duty to be collected shall remain deferred. It is only when such goods are ex-bonded under section 68 of the Act, shall the deferred duty be collected at the value as had been determined under section 14 of the Act in addition to the integrated tax leviable. Example The circular gives on example in bond sales and clearance thereof.
By: Mr. M. GOVINDARAJAN - December 8, 2017
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