ABC India will physically export goods to ABC Korea (related party) for repair purposes. ABC Korea will perform the repair and upgrade the software. After the repair, ABC India will re-import the goods.
What are the implications regarding export and import, including the time frame? Additionally, what are the GST and customs implications in this scenario
Since this export is not for any supply, it will not be regarded as a zero-rated supply.
At the time of import benefit of notification 45/2017 can be taken whereby no further liability of IGST or BCD will arise.
In this scenario, where ABC India exports goods to ABC Korea (a related party) for repair and software upgrade purposes, and then re-imports them after the repair, there are several key implications regarding export and import, GST, and customs. Here's a breakdown:
1. Export Implications (from India to Korea):
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Nature of Export: The export of goods from India to Korea is considered an export for repair or temporary export. As per customs and GST laws, goods exported temporarily for repair or modification can be re-imported after repair without attracting full customs duties, provided certain conditions are met.
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Customs Export Declaration: The goods must be properly declared under an Export Declaration to the Indian customs authorities. This should specify that the goods are being exported for repair and will be re-imported.
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Zero-rated GST on Export: Under the Goods and Services Tax (GST) Act, export of goods is zero-rated, meaning ABC India would not charge GST on the export transaction. Additionally, ABC India can claim a refund of input tax credits (ITC) on any GST paid on inputs used in the manufacturing of the goods being exported.
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Conditions for Export: If the goods are being exported for repair or modification, the goods should be identifiable and the repairs should be done within the stipulated time period (usually 6 months or as per agreement with customs authorities) to avoid complications.
2. Import Implications (Re-importation to India after Repair):
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Customs Re-importation Process: When the goods are re-imported after repair, duty exemption may apply, based on the condition that the goods were exported for repairs or modification. This is often referred to as a temporary export and re-import under Section 74 of the Customs Act.
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Customs Duty on Re-import: No customs duty is levied on re-imported goods if they meet the necessary conditions (like being identifiable as the same goods exported for repair). However, the importer must provide evidence that the goods were exported for repair and that the value of repairs/upgrade is separate from the goods' value.
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Time Limit: The goods should be re-imported within six months from the date of export, though an extension can be requested in some cases. If the goods are not re-imported within this time frame, customs duties may be levied.
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GST on Re-import: Re-importation of goods is not subject to GST if the customs duty is exempted. However, if any GST was paid on the repair or upgrade services in Korea, ABC India can claim input tax credit (ITC) on that amount, provided they meet the necessary conditions.
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Value of Repairs: If there is a cost involved in the repairs (such as software upgrade fees), this cost may need to be declared separately and could potentially be subject to GST or customs duties if applicable. The value of repairs and the goods themselves should be documented to ensure clarity regarding which charges are exempt.
3. GST and Customs Specific Implications:
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GST Implications on Services:
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If any service (like software upgrades) is provided in Korea, ABC India will need to determine if GST is applicable on the repair services. If the services are provided outside India (in Korea), they would typically be considered export of services and would be zero-rated under GST.
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ABC India may be eligible to claim input tax credit (ITC) for any GST paid on services like repairs or software upgrades in Korea, provided the service is related to business use.
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Customs Implications on the Re-import:
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Upon re-import, ABC India will need to provide details regarding the repair costs, the duration for which the goods were exported, and the fact that they are the same goods. If the repair cost is minimal and can be separated, then only the value of the goods (not the repair cost) should be subject to customs duty.
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Documentation: Ensure proper documentation to show that the export is temporary and for repair purposes. This includes the export invoice, repair agreement, customs declarations, and evidence of re-importation. These documents help in availing duty exemptions or reductions.
4. Time Frame:
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Export Time Frame: The goods should be exported for repairs within the time stipulated by customs, and re-importation must occur within 6 months of the export (though extensions may be requested if needed).
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Repair Duration: The time taken for repairs or software upgrades in Korea will depend on the nature of the repairs, but the clock for re-importation starts when the goods leave India.
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Re-import Time Frame: After the repairs, ABC India must re-import the goods within the prescribed time frame (usually 6 months) to avoid paying full customs duties on the goods.
5. Conclusion:
To summarize, ABC India can export goods to ABC Korea for repair and software upgrade without paying GST on the export, and they can potentially re-import the goods without customs duty if the goods are re-imported within 6 months. However, documentation and adherence to specific customs procedures are critical to avoid complications. Proper declaration of the export as temporary and for repair purposes is essential, and the input credit for any GST paid on repairs in Korea should be claimed appropriately.
In addition to above reply, You need to apply for GR Waiver/EDF Waiver if no foreign payment/remittance is involved. GR Waiver Sr. No. must be mentioned on the S/B and S/B reference no. must be mentioned on the B/E. S/B and B/E need to be cleared from EDPMS and IDPMS, accordingly.
Hi YAGAY ANDSUN- Where is the time limit of 6 months come from for export and re-import.
CBIC Circular No. 14/97-Customs dated 03-06-1997.
Many thanks for promot and detailed reply- but what is your view on availing benefit under import benefit of notification 45/2017 also this NN provides different time period.
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