As per provisions of the GST law import of goods into India shall be deemed to be a supply in the course of inter-State trade or commerce. It has also been provided that Integrated Tax on goods imported into India shall be levied and collected in accordance with the provisions of Section 3 of the Customs Tariff Act, 1975 at the point when duties of Customs are levied on the said goods under the Customs Act, 1962, on a value as determined under the Customs Tariff Act, 1975
The Taxation Laws (Amendment) Act, 2017 provides that IGST on imports will be levied at value of imported article as determined under the Customs Act plus duty of customs and any other sum chargeable in addition to customs duty (excluding GST and GST Cess). This in effect makes levy of IGST at par with present levy of CVD which is on basic value plus customs duty.
As per the definition of ‘supply’ under CGST law, import of services for a consideration whether or not in the course or furtherance of business is deemed to be supply and as per the IGST law, supply of services in the course of import into the territory of India, shall be deemed as supply of services in the course of inter- State trade or commerce. Accordingly, Integrated Tax would be levied on import of services. Although the provisions are yet to be notified, the Integrated Tax on import of services would be payable by the recipient under reverse charge.
Further, there would be no change in applicability of countervailing duty levied under section 9BB of the Customs Tariff Act, 1975 (and different from the additional duty of Customs levied under section 3, ibid., also known as CVD), anti-dumping or safeguard duties, where ever imposed by the Government.
As per the provisions of IGST law, export of goods and/or services are to be treated as “zero rated supplies” and a registered taxable person exporting goods or services shall be eligible to claim refund under one of the following two options:
Export under bond or letter of undertaking without payment of Integrated Tax and claim refund of unutilized input tax credit.
Export on payment of Integrated Tax and claim refund of the tax so paid on goods and services exported. The aforesaid refunds will be subject to rules, safeguards and procedures as may be prescribed.
No exemptions have been specified in the draft law for STP and SEZ units. Upfront exemption from customs duty/ excise duty for STP units and SEZ units (including service tax and CST exemption for SEZs) may not continue as GST will be payable on imports or procurements as per the draft law.
The GST paid on such procurements will be eligible as refund and therefore, will impact the working capital requirements of such units.
The efficacy of the STP scheme therefore seems doubtful upon transition to the GST regime, as the benefit may be restricted only to BCD paid on import of non-IT products.
Upfront exemption of service tax for SEZ units (by way of Form A1/ A2) is also likely to be converted to refund.
Even after introduction of GST following duties may not be subsumed under GST regime and they may continue to be levied as usual. These duties are:
Basic Customs Duty
After the introduction of full and complete GST major import gaining sectors include leather and leather products; furniture and fixtures; agricultural sectors; coal and lignite; agricultural machinery; industrial machinery; other machinery; iron and steel; railway transport equipment; printing and publishing; and tobacco products. The moderate gainers include metal products; non-ferrous metals; and transport equipment other than railways. Imports are expected to decline in textiles and readymade garments; minerals other than coal, crude petroleum, gas and iron ore; and beverages.
In relation to GST, following are the concessions / incentives for exports : (1) Exemption from GST on final products or (2) Refund of GST paid on inputs.
Export of goods or services or both and supplies of goods or services or both to SEZ unit or SEZ developer will be zero rated supply – section 16 (1) of IGST Act.
Credit of input tax may be availed for making zero-rated supplies, even if such supply is exempted supply – section 16(2) of IGST Act.
Refund of unutilized input tax credit shall not be allowed in cases where the goods exported out of India are subjected to export duty.
Refund of input tax credit shall not be allowed if the supplier of goods or services avails duty drawback of CGST / SGST / UTGST or claims refund of IGST paid on such supplies [Thus, duty drawback of customs portion can be availed].
Benefits will be available to ‘ deemed exports’ also. Mostly, the benefit will be through refund route and not direct exemption.
If goods are imported, IGST and GST Compensation Cess will be payable.
If goods are taken to warehouse and then cleared from warehouse, IGST and GST Compensation Cess will payable at the time of removal of warehouse.
IGST Act or CGST Act make no provision in respect of high seas sale i.e. sale in course of imports. In absence of such specific provision, it seems IGST will be payable if sale takes place within Exclusive Economic Zone i.e. within 200 nautical miles inside sea.