Imports in GST

Imports subject to GST

Article 269A of the Indian Constitution stipulates that under the products and Services Tax (GST) regime, supply of products , services, or both within the course of import into the territory of India shall be deemed to be a supply of goods, services, or both within the course of inter-State trade or commerce. Therefore, imports of products or services will be considered interstate sales and subject to Integrated tax.

The IGST would be levied on imports of services under the IGST Act, while the IGST would be levied on imports of products under the Customs Act, 1962 read with the Customs Tariff Act, 1975.

On a reverse charge basis, the importer of services is required to pay tax. Regarding imports of online information and database access or retrieval services (OIDAR) by non-registered, non-taxable recipients, however, the supplier located outside of India is liable for tax payment (IGST). Either the supplier must register or appoint a representative in India liable for tax payment.

Import of Goods:

All imports of products into India from outside India will be considered inter-state supplies, and Integrated taxes are going to be imposed in addition to the applicable Customs duties. The IGST Act, 2017 stipulates that the integrated tax on goods imported into India shall be levied and picked up in accordance with the provisions of the Customs Tariff Act, 1975 on the worth, as determined under, said Act at the time customs duties are levied on said goods under the Customs Act, 1962. In accordance with the Customs Tariff Act, the integrated tax on goods is added to the applicable Basic Customs Duty (BCD). Moreover, under the products and Services Tax (Compensation to States Cess) Act of 2017, GST compensation cess can also be imposed on certain luxury and de-merit goods.

The percentage of the imported article for the purpose of levying cess is the assessable value plus the Basic Customs Duty put under the Act and any sum chargeable on those goods under any law in force as an addition to and in the same manner as a customs duty. The paid integrated tax shall not be added to the worth when calculating the cess. The calculation of taxes is illustrated in the following example:

The assessable value of an item imported into India is 100 rupees. the essential customs duty rate is 10% ad valorem. The Education Cess is 3%, the Integrated rate is 18%, and therefore the Compensation Cess is 15%.

The taxes are going to be computed as follows:

Particulars Duty
(A) Assessable Value Rs. 100/-
(B) Basic Customs Duty@10% Rs.10/-
(C) Education Cess @3% Rs.0.30
(D) Value for Integrated Tax Rs.110.30
Supplier of OIDAR Services 20th of the next month
(E) Integrated Tax @18% Rs.19.85
(F) Value for Compensation Cess Rs.110.30
(G) Compensation Cess @ 15% Rs. 16.55
(H) Total Duty ( B+C +E+G) Rs.46.70

In cases where imported goods are subject to Anti-Dumping or Safeguard Duties, the worth used to calculate IGST and Compensation Cess must also include the Anti-Dumping and Safeguard duty amounts.

The Customs Act of 1962 allows for the duty-free removal of products from a customs station to a warehouse. The aforementioned Act has been amended to incorporate “warehouse” in the definition of “customs area” so that an importer does not necessarily have to pay the Integrated tax when moving goods from a customs station to a warehouse.

However, the transaction price for the sale, transfer, etc. of warehoused goods between the importer and the other person may exceed the goods’ assessed value. This transaction falls squarely within the definition of “supply” and is subject to taxation under the IGST Act of 2017. It should be noted that per subsection (2) of section 7 of the IGST Act, any supply of imported goods that happens before they cross India’s customs borders shall be treated as an inter-state supply. Consequently, such a purchase or transfer will be subject to IGST under the IGST Act of 2017.

High Sea Sales is a common commercial practice in which the original importer sells the goods to a third party prior to customs clearance. The customs declarations, like the Bill of Entry, are filed by the one that purchases the goods from the original importer during the high seas sale. IGST on international waters sale (s) transactions of imported goods, whether one or multiple, shall be levied and picked up only at the time of importation, i.e., when the import declarations are filed for the primary time before the Customs authorities for the purposes of customs clearance. additionally, the worth addition accrued in each of these high seas sales shall be included in the value on which IGST is collected at the time of clearance.

Imports as Baggage:

Passenger baggage is exempt from both the IGST and compensation cess on imports. the essential customs duty at a rate of 35% and the applicable education cess shall be levied on the excess value over the duty-free allowances specified in the Baggage Rules, 2016.

Import of Services:

Import of Services refers to the supply of any service when the supplier is located outside of India, the recipient is found in India, and therefore the place of service provision is in India.

In accordance with Section 7(1)(b) of the CGST Act, 2017, the importation of services for a consideration, whether or not within the course of or furtherance of business, shall be considered a supply. Therefore, generally, the import of services without payment shall not be considered a supply. However, the business test isn’t necessary for a service import to be considered a supply.

Moreover, in accordance with the provisions of Schedule, I of the CGST Act, 2017, the import of services by a taxable entity from a related entity or from a definite person, as explained in Section 25 of the CGST Act, 2017, within the course or furtherance of business shall be treated as a supply, whether or not no consideration is exchanged.

In accordance with the provisions of Section 14 of the IGST Act of 2017, the importation of gratis services from Google and Facebook by individuals isn’t considered a supply. The import (download) of a song for private use would be considered a service, despite not being within the course or furtherance of business. whether or not uncompensated, the import of certain services by an Indian branch from its parent company within the course or furtherance of business will constitute a supply.

Consequently, the importation of services is often considered a supply depending on whether or not a consideration is exchanged and whether the service is provided in the course of or furtherance of business. the identical is described in the following table:

Nature of Service Consideration Business Test
Import of services Necessarily Required Not required
Import of services by a taxable person from a related person or from a distinct person Not required Necessarily Required

Tax credit for inputs:

The input decrease of the integrated tax and the compensation cess, if any, paid at the time important shall be available to the importer, and he may use it to pay taxes on his outward supplies. thereto extent, the integrated tax and compensation cess paid at the time important shall be a pass-through. However, the compensation cess input decrease can only be used to pay the compensation cess. additionally , neither the essential Customs Duty (BCD) nor the education cess shall be eligible for the input tax credit.

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