Applicability of GST on Import Clearances other than Port of Importation

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applicability of gst

GST on Import Clearances

Applicability of GST on Import Clearances
other than Port of Importation

Goods are imported in India and normally Bill of Entry for home consumption is filed. However, there will be a cases, where one needs to study the applicability of duty.

Type of Sale Documents Applicable Rate of Duty
Importation Bill of Entry Basic Customs Duty + IGST
Sale from SEZ & FTWZ Bill of Entry Seller will file the Bill of Entry on behalf of Buyer and pay Basic Customs Duty + IGST
High Sea Sale
  • Commercial Invoice
  • High Sea Sale Agreement
Buyer will file the Bill of Entry and pay Basic Customs Duty + IGST
Sale from Public Bonded Warehouse or Private Bonded Warehouse
  • Commercial Invoice from Seller to Buyer
Buyer will file the Bill of Entry for Home Consumption and pay Basic Customs Duty + IGST

 

And also Seller will charge the IGST to the Buyer over & above IGST charged on Commercial Invoice in accordance with Board Circular No. 46/2017-Customs dated 24-11-2017

 

Let us analyze the legal provisions for applicability of GST in each case of sale.

  • Importation : “India” has been defined u/s 2(56) of CGST Act 2017 as :
    • Section 2(56) “India” means the territory of India as referred to in article 1 of the Constitution, its territorial waters, seabed and sub-soil underlying such waters, continental shelf, exclusive economic zone or any other maritime zone as referred to in the Territorial Waters, Continental Shelf, Exclusive Economic Zone and other Maritime Zones Act, 1976, and the air space above its territory and territorial waters.
    • As per Section 7 (2), Supply of goods imported into India, till they cross customs frontier of India, shall be treated to be supply of goods in course of inter-State trade or commerce. Further as per Section 8 (1) (ii), goods imported into the territory of India till they cross the customs frontiers of India will not be treated as Intra State supply of goods.

 Further, Section 3(7) of Customs Tariff Act 1975 which is reproduced below:

 Any article which is imported into India shall, in addition, be liable to Integrated Tax at such rate, not exceeding forty percent. As is leviable under section 5 of the Integrated Goods & Services Tax Act 2017, on a like article on its supply in India, on the value of the imported article as determined under section (8).

In view of the above, on importation of goods and clearance from the port of importation will attract IGST over & above Basic Custom Duty.

  • Sale from SEZ and FTWZ :

In accordance with Rule 11(11) of SEZ Rules 2006, SEZs are deemed to be Port and they are included in Section 7 of the Customs Act 1962 in accordance with the provisions of Section 53 of the Customs Act 1962. The said Rule is reproduced below:

“The Special Economic Zone shall be deemed to be a port, airport, inland container depot, land customs station under section 7 of the Customs Act in accordance with the provisions of section 53 from the date notified in this behalf:

Provided that Specified Officer may designate any area or area(s) in the Special Economic Zone as an area for loading and unloading of import or export cargo:

 Provide further that in case the said port, airport, inland container depot, land customs station area is to be used for loading and unloading of import or export cargo meant for Domestic Tariff Area importers and exporters also, storage for such cargo shall be in a separate enclosure and deliveries for such cargo shall be allowed by the Authorized Officer of the Special Economic Zone based on Bill of Entry, assessed by the Assistant or Deputy Commissioner of Customs having jurisdiction over the said Customs Station.

Provided also that addition or inclusion of any land to an existing Special Economic Zone, where such land contains a port Manufacturing unit, or structures in which no commercial, industrial or economic activity is in progress, then such Special Economic Zone shall not be eligible for any duty benefits  in respect of the pre-existing structures but any additions or up-gradations to such existing ports manufacturing units, or structures after their addition or inclusion in a Special Economic Zone shall be eligible for the fiscal incentives as applicable for a new infrastructure in a Spcial Economic Zone and also the authorized operations being carried on in such infrastructure shall be eligible for benefits as provided for under the Special Economic Zone Act and Rules.”

In view of the above, any sale from Port of Importation, airport, inland container depot, land customs station & SEZ will be required to file Bill of Entry for home consumption and pay Basic Customs Duty and IGST.

  • High Sea Sale:

 Let us understand important relevant definition for the purpose :

  • Important Definitions as per IGST
    • Section 2(4), “customs frontiers of India” means the limits of a customs area as defined in section 2. Of the Customs Act, 1962
    • Section 2(10) ‘‘import of goods” with its grammatical variations and cognate expressions, means bringing goods into India from a place outside India

 

  • Important Definitions as per CGST Act:
    • Section 2(56) “India” means the territory of India as referred to in article 1 of the Constitution, its territorial waters, seabed and sub-soil underlying such waters, continental shelf, exclusive economic zone or any other maritime zone as referred to in the Territorial Waters, Continental Shelf, Exclusive Economic Zone and other Maritime Zones Act, 1976, and the air space above its territory and territorial waters

 

  • Important Definitions as per Customs Act:
    • Section 2(11) “customs area”. Means the area of a customs station and includes any area in which import goods or export goods are ordinarily kept before clearance by Customs Authorities
    • 2(13) “customs station” means any customs port, customs airport or land customs station;Though GST Act does not define “crossing the customs frontiers”, Section 2(ab) of CST Act, 1956 defines it as: “crossing the customs frontiers of India” means crossing the limits of the area of a customs station in which imported goods or export goods are ordinarily kept before clearance by customs authorities.

 

-CMA Ashok Nawal (Guest Article)

Bizsolindia Services Pvt. Ltd. (Pune)

GST on Import Clearances


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