Imports in GST Regime
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.
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.
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.
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 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.
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.
Integrated tax rate is 18%.
The taxes will be calculated as under:
• Assessable Value= Rs. 100/-
• Basic Customs Duty (BCD) = Rs. 10/-
• Value for the purpose of levying integrated tax= Rs. 100/- + Rs.10/-= Rs. 110/-
• Integrated Tax = 18% of Rs.110/- =Rs. 19.80
• Total taxes = Rs. 29.80
On the top of it, in case 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/-.
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.
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.
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.
source: Central Board of Excise and Customs, Department of Revenue, Ministry of Finance, Government of 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.
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.
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.
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 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.
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.
Integrated tax rate is 18%.
The taxes will be calculated as under:
• Assessable Value= Rs. 100/-
• Basic Customs Duty (BCD) = Rs. 10/-
• Value for the purpose of levying integrated tax= Rs. 100/- + Rs.10/-= Rs. 110/-
• Integrated Tax = 18% of Rs.110/- =Rs. 19.80
• Total taxes = Rs. 29.80
On the top of it, in case 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/-.
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.
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.
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.
source: Central Board of Excise and Customs, Department of Revenue, Ministry of Finance, Government of India
