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GST on Import

Article 269A of constitution mandates that import of goods or services in India is considered as Inter-state trade. Therefore, import of goods or services is considered as interstate supply and is liable for payment of IGST.

IGST on the import of services would be leviable under the IGST Act, the levy of the IGST on the import of goods would be levied under the Customs Act, 1962 read with the Customs Tariff Act, 1975. The importer of goods has to pay tax on reverse charge at the same time when the goods are subjected to customs duties.

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 (IGST).

Basic custom duty is also applicable and is in addition to the integrated tax. GST compensation cess may also be levied additionally on luxury and demerit goods.

Calculation of IGST and Compensation Cess

The value of the goods for the purpose of levying Integrated tax shall be assessable value plus Customs Duty levied under the Act. The value of the imported article for the purpose of levying cess shall be assessable value plus Basic Customs Duty and integrated tax paid shall not be included.

In cases where imported goods are liable to Anti-Dumping Duty or Safeguard Duty, value for calculation of IGST as well as Compensation Cess shall also include Anti-Dumping Duty amount and Safeguard duty amount.

Example

PARTICULARS AMOUNT
Assessable Value 500.00
Basic Customs Duty@30% 150.00
Education Cess @3% 4.50
Value for Integrated Tax 654.50
Integrated Tax @18% 117.81
Value for Compensation Cess 654.45
Compensation Cess @ 10% 65.45
Cost to importer 837.76

Input Tax Credit of IGST Paid

IGST and compensation paid by an importer is allowed as input tax credit to such importer. However, as per normal rules ITC of compensation cess can be used for payment of compensation cess only. Basic Customs Duty (BCD) and education cess, shall, not be available as input tax credit.

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.

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

EOUs are allowed duty-free import of goods (exempt from Customs duties, IGST & Compensation Cess) under the said notifications. However, exemption from IGST is only available till 31.03.2018.

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

Import of Services

A supply of service is considered as an import of service when it fulfils following three conditions: –

  • Supplier is located outside India
  • Recipient is located in India
  • Place of supply of service is in India

Import of services for a consideration whether or not in the course or furtherance of business shall be considered as a supply. Business test is not required to be fulfilled forthe import of service to be considered as supply.

Import of services by a taxable person from a related person or distinct person as defined in Section 25 of CGST act will be considered as a supply even if it without any consideration.

Provisions relating to the determination of place of supply is given in section 13 of IGST Act as under: –

S.NO SITUATION PLACE OF SUPPLY
1 Default Rule other than specific situations mentioned below Location 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 available Location 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 services
3 Services are provided on goods but from a remote location by way of electronic means Location where goods are situated at the time of supply of services
Above provisions is not applicable in respect of goods which are temporarily imported into India for repairs and are exported after repairs
4 Services supplied directly in relation to an immovable property Place where the immovable property is located or intended to be located
5 Admission to, or organisation of an event Place where the event is actually held
6 Above Services provided in more than one country including India India
7 Above Services provided in more than one state Proportionate Basis
8 Services supplied by a banking company, or a financial institution, or a non-banking financial company, to account holders Location of the supplier of services
9 Intermediary services Location of the supplier of services
10 Services consisting of hiring of means of transport, including yachts but excluding aircrafts and vessels, up to a period of one month Location of the supplier of services
11 Transportation of goods, other than by way of mail or courier Place of destination of such goods
12 Passenger transportation services Place where the passenger embarks on the conveyance for a continuous journey
13 Services provided on board a conveyance First scheduled point of departure of that conveyance for the journey
14 Online information and database access or retrieval (OIDAR) services Location of the recipient of services

About Prateek Agarwal

Prateek Agarwal is a Practicing Chartered Accountant from Jaipur and been in practice for more than 7 years. He writes mainly about GST and Finance.

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