Import of Goods and Services under GST

Import of Goods and Services under GST

Import under GST: Import of goods means bringing goods into India from a place outside India and Import of Services means supply of a service by a supplier who is based outside the India, but the recipient of the services is based in India.  Further, these supplies are considered as deemed inter-state supplies and IGST (Integrated Goods & Service Tax) Act, 2017 is levied along with custom duty. Importer is supposed to pay GST under reverse charge basis, except in case of OIDAR services (Online Information Data Access and Retrieval). In Case of OIDAR, the supplier has to seek registration or will have to appoint a person in India for payment of taxes. Lets understand these things in detail.

Import of Goods

The IGST Act, 2017 states that the integrated tax on goods imported into India shall be levied and collected accordingly with the provisions of Customs Tariff Act, 1975. The Custom Duty is levied on the goods imported and in addition to it IGST is levied. Further in case of certain luxury items & de-merit goods GST Compensation Cess is also. The Customs Tariff Act, 1975 has accordingly been amended to provide for levy of integrated tax and the compensation cess on imported goods. Accordingly, any 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.

Value of Imported Goods for purpose of GST

The value of imported goods is computed by adding the Custom Duty & Value of the goods, plus any other sum chargeable on the goods under any other law for the time being in force like, Education Cess, Anti-Dumping Duty, and Ad-Valorem etc.

On the other hand, for leving any Cess the value takes of imported good is Value of goods plus Custom Duty and any other sum chargeable on the goods under any other law for the time being in force. Whereas the IGST paid is not included in the value of goods for the purpose of calculating Cess.

Calculation of Imported Goods

Suppose the assessable value of an article imported into India is Rs. 1000/-. Basic Customs Duty is 15%. Education Cess is 2%; integrated tax rate is 18% and Compensation Cess is 10%.

Assessable Value1000
Basic Custom Duty @15%150
Education Cess @ 2% (on Basic Custom Duty)3
Value for Integrated Tax1153
Integrated Tax @18%207.584
Value for Compensation Cess  1153
Compensation Cess @ 10%115.3
Total Duty (150+3+207.58+115.3)475.884

Payment of GST on Import of Goods

As per the Customs Act, 1962 the custom duty should be paid after the removal of goods from the custom station and IGST should be paid at the time of removal of goods from the custom station to a warehouse.

Exempted Goods from GST

The following imported goods are exempted from GST

  1. Specialized Economic Zone
  2. Goods imported from Nepal & Bhutan
  3. Research Equipments, Scientific & technical instruments
  4.   Goods for India’s defense & Internal security forces

Import as Baggage

Passenger Baggage is exempted from IGST as well as compensation cess. The basic customs duty at the rate of 35% and the applicable education cess shall be leviable on the value which is in excess of the duty free allowances provided under the Baggage Rules, 2016.

When the goods are imported in India and deposited in warehouse and sold while in warehouse before clearance from Customs (Circular No. 46/2017 dated 24th November, 2017):

The transaction or sale between the supplier and other person that take place when the goods are in warehouse falls into the category of supply as per sub-section (2) of section 7 of IGST Act, 2017. The value of such good is calculated as per section 20 of the IGST Act, 2017.

High Seas Sales Transactions Circular No. 33/2017-Customs dated 1 st August, 2017:

High Seas Sales means when the importer sells good to other person before the goods entered for the customs clearance. The customs declaration of Bill of Entry is supposed to file by the person who buys the goods from the importer. The value is determined by adding the purchase value plus the surplus or addition earned on such high sea sales transaction. The IGST is levied and collected when such declaration is filed for the custom clearance purpose for the first time.

Import of goods by 100% EOU’s and SEZ’s

As per Notification No. 52/2003- Customs as amended by Notification No. 78/2017-Customs dated 13.10.2017, EOU (Export Oriented Units) are exempt from Custom Duties, IGST, GST Compensation Cess). Further IGST is exempted on such supplies till 31.03.2018.

Goods imported by a unit or a developer in the Special Economic Zone for authorized operations are exempted from the whole of integrated tax under section 3(7) of the Customs Tariff Act, 1975 vide Notification No. 64/2017Customs dated 05.07.2017.

Import of Services

As per the provision of Section 7(1) (b) of the CGST Act, 2017, import of services for a consideration whether or not in the course or furtherance of business shall be considered as a supply. Thus, in general, import of services without consideration shall not be considered as supply. Further Schedule I of the CGST Act, 2017 states that the import of services by a taxable person from a related person or from a distinct person (Section 25 of the CGST Act, 2017), in the course or furtherance of business shall be treated as supply even if it is made without any consideration.

For Example, An Indian branch importing some services to its subsidiaries located outside, in the course of business without consideration, will be deemed as supply. Import of free services from Google and Facebook by individuals without any consideration are not considered as supply. Import (Downloading) of a song for consideration for personal use would be a service, even though the same are not in the course or furtherance of business.

The GST department has shared a list of services situation for better understanding when to consider supply as supply of service under the Act, whether with consideration or without or whether in the course or furtherance of business or not.  The same is given below:

S. No.SituationPlace of Supply
1.Default Rule other than specific situations mentioned belowLocation of the recipient of services; If not available, location of the supplier of services.
2.Services supplied in respect of goods which are required to be made physically availableLocation where the services are actually performed
 Services which require the physical presence of the recipient or the person acting on his behalf with the supplier of servicesLocation where the services are actually performed
2.1Services are provided on goods but from a remote location by way of electronic meansLocation where goods are situated at the time of supply of services
2.2Above provisions is not applicable in respect of goods which are temporarily imported into India for repairs and are exported after repairs 
3Above provisions is not applicable in respect of goods which are temporarily imported into India for repairs and are exported after repairsPlace where the immovable property is located or intended to be located
4Admission to, or organisation of an eventPlace where the event is actually held
4.1Above Services provided in more than one country including IndiaIndia
4.2Above Services provided in more than one stateProportionate Basis
5Services supplied by a banking company, or a financial institution, or a non-banking financial company, to account holdersLocation of the supplier of services
5.1Intermediary servicesLocation of the supplier of services
5.2Services consisting of hiring of means of transport, including yachts but excluding aircrafts and vessels, up to a period of one monthLocation of the supplier of services
6Transportation of goods, other than by way of mail or courier.Place of destination of such goods
7Passenger transportation servicesPlace where the passenger embarks on the conveyance for a continuous journey
8Services provided on board a conveyanceFirst scheduled point of departure of that conveyance for the journey
9Online information and database access or retrieval (OIDAR) servicesLocation of the recipient of services

Input Tax Credit

The input tax credit is available on Integrated Tax & Compensation Cess, if paid at the time of import and the same can be utilized by the importer against the respective heads i.e., the Integrated Tax against the Integrated Tax & Compensation Cess against the Compensation Cess. The Input Tax Credit against Basic Customs Duty & Education Cess cannot be availed by the importer.

HSN (Harmonized 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 Delhi, the state tax component of the integrated tax shall accrue to the State of Delhi.

Disclaimer:The article or blog or post (by whatever name) in this website is based on the writer’s personal views and interpretation of Act. The writer does not accept any liabilities for any loss or damage of any kind arising out of information and for any actions taken in reliance thereon. 
Also, and its members do not accept any liability, obligation or responsibility for author’s article and understanding of user.

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