Imports under GST
GST on Import of Goods and Services - detailed analysis
IMPORTS UNDER GST - DETAILED ANALYSIS
Imports of Goods and Services into India are liable to IGST as such supply of goods and services is deemed to be in the course of interstate trade or commerce.
In the case of the Import of Goods, the importer will be liable to IGST and in the case of Importer of Services, the recipient of Services will be liable to pay IGST on a reverse charge.
First, we will look at the Import of Goods and then we will discuss the import of Services under GST.
1. Import of Goods
Import of goods means bringing the goods into Indian territory from a place outside India. As discussed earlier, the import of goods is liable to IGST as they are treated to be supplied in the course of inter-state trade or commerce. The recipient of goods will have to pay the IGST on Imports at the time of clearance at the customs station. The IGST will be collected by the Customs Department unlike in other cases where the GST department does the same.
The place of supply in the case of importer will be the location of the importer i.e. if a person belonging to Maharashtra imports some goods, the place of supply will be Maharashtra and the state portion of the tax collected in IGST will accrue to Maharashtra.
IGST levied on the import of goods will be in addition to the customs duty levied on those goods.
Point of Taxation of Imported Goods:
The point of levy of IGST on the import of goods will be the point when the bill of entry of home consumption is filed i.e. when the import is complete and the bill of entry is filed.
Value of imported goods for IGST levy
The value of goods for levy of IGST on import of goods will be the assessable value as determined under section 14 of the Customs Act, 1962 plus the customs duty chargeable on the goods and any other tax/levy chargeable on the goods.
Thus the value of goods for levying IGST = Assessable value as determined under the customs act
+
Basic Custom Duty
+
any other tax/duty/levy that is leviable on the goods but excluding IGST on the goods supplied while being deposited in a customs warehouse
There are occasions when the goods are deposited in the customs warehouse by the importer without payment of duty. The importer can sell such goods while they are deposited in the warehouse. Such supply is not treated as supply till the bill of entry for home consumption is made. However, the customs duty is levied on those goods at the time of filing into-bound bill of entry.
But the value of goods for levy of IGST of the warehoused goods is calculated as under :
Value of warehoused goods
for levy of IGST =
(a) Transaction value i.e. sale value
or
(b) value determined at the time of filing of the into-bond bill of entry
+ basic custom duty + any other tax/levy excluding IGST whichever is higher
If the goods are sold many times before being cleared for home consumption, the last transaction value will be taken to determine the value for IGST purposes.
Taxability of Transactions between non-taxable countries without actual receipts in India
There are transactions in which the goods do not come to India i.e. touch the Indian territory and move from one country to another but invoicing is done by a registered person in India.
For example, X is a registered person in India and he gets an order from Y of the UK for the sale of some goods. X, in turn, finds a supplier from Australia i.e. Z. Now Z supplies the goods directly from Australia to the UK and the goods do not come to India. In this case, two bills are made i.e. by Z to X and by X to Y.
As per CGST Act, these types of transactions are outside the purview of GST as the goods are supplied from a non-taxable territory to another non-taxable territory and hence they do not come under the purview of GST as they are treated neither supply of goods nor supply of services.
Taxability of High Sea Sales
It is a common practice in international trade that the original importer sells goods to a third party before the goods reach the customs port. These types of transactions are termed high sea sales. There can be multiple sales before the goods touch the customs barrier of India. All such sales are neither treated as a supply of goods nor a supply of services as per Schedule III of the CGST Act.
In the above case, the value of goods will be taken as the assessable value which is there at the time of filing of bill of entry for home consumption. Also, the last buyer who files the bill of entry will be required to pay the IGST at the time of filing the bill of entry for home consumption.
Imports by Sez Developer
Goods that are imported by SEZ developers are exempt from the whole of IGST leviable under the Customs Tariff Act vide notification no. 64/2017 dtd.05/07/2017.
Imports by EOU
Goods imported by 100% Export-oriented Units are exempt from IGST as well as customs duty as per the notification issued on this behalf. However, the IGST is exempt till 31st March 2021 only.
Imports as Baggage
Passenger baggage is exempt from IGST. However, customs duty is payable on the same after the duty-free baggage allowances as notified.
2. Taxability of Import of Services
As per the IGST Act, import of service is a supply of service where the supplier is located outside India, the recipient is located in India and the place of supply is in India.
There are two main tests for the taxability of the import of Services :
(a) Consideration Test
(b) Furtherance of Business Test
(a) Consideration Test
With respect to the import of services, there must be a consideration. Even if it is not for business purposes, the same is taxable. i.e. Any import of services for personal use, if it is for consideration is taxable under GST.
E.g. A downloaded online movie for personal entertainment from a foreign supplier is required to pay GST even if the same is not for business purposes.
(b) Furtherance of Business Test
Quite reverse to above, if the import of service is between two related persons or from an establishment outside India for the furtherance of business, even if it is without consideration is taxable.
Who is required to pay tax on the import of Services?
In the case of import of Service, the recipient of Service is the person who is liable to pay IGST under the reverse charge mechanism. In case of services supplied by a person located outside India by way of transportation of goods in a ship or vessel up to the customs barrier in India, the importer is liable to pay IGST under the Reverse charge mechanism.
OIDAR Services [Online Information database access and retrieval services]
OIDAR services are online services provided by way of the internet and received by the recipient online without any physical intervention from the supplier. In our daily lives, we use many such services online such as downloading of songs, movies, e-books, etc. by way of the Internet.
In case the services provider is outside India i.e. in a non-taxable territory, what will be the GST implications for these services and who will be liable to pay the tax?
We will discuss these under two categories :
1. Import of OIDAR services by business entity :
In the case of OIDAR services availed by a business entity, the recipient will be the business entity and the services are being received in India hence the business entity will be liable to pay IGST on these services under the reverse charge mechanism.
2. Import of OIDAR services by non-taxable online recipient other than business entity :
In this case, the recipient of service is a normal customer who is not a business entity. If we apply a reverse charge in this case each individual customer will be required to register and complete the formalities relating to reverse charge which is practically impossible. Hence in this case the foreign service provider has been made liable to pay IGST on services provided to the Indian consumers.
For this purpose, the supplier of services (i.e. foreign supplier) is required to take a single registration under a simplified registration scheme. If the foreign supplier has a representative in India, he will be required to get registered on their behalf and pay tax.
In case the supplier neither has a physical presence nor any representative in India, he will have to appoint some person in India to pay IGST.
Registration of Importer :
In the case of Import of Goods :
For imports of goods, registration is not mandatory as per section 24 of the CGST Act. Also, the reverse charge registration category does not cover imports of goods. However, the importers who are registered under GST have to quote their GSTIN in the bill of entry.
In case of Import of Services :
As per section 24(iii) of the CGST Act, registration is mandatory for persons liable to pay GST on reverse charge. Hence importers of services are compulsorily required to register since they are liable to pay IGST on reverse charge.
ITC of IGST paid on import of Goods and Services :
The IGST which has been paid by the importer of goods is available as ITC for the registered importer and the same can be used to offset his output liability.
Also, in the case of the importer of services, the IGST paid on a reverse charge basis is available as an input tax credit to be utilized for the payment of output liability.
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