Imports Under GST

The IGST (Integrated Goods and Services) Act, 2017, defines the import of goods as bringing commodities from overseas into India. As such, all imports are considered as inter-state supplies. IGST will be applicable to all imported goods along with custom duties as applicable.

As for the import of services, the IGST Act, 2017, defines it as the supply of a service by a supplier who is based outside the company, but the recipient of the services is based in India, and the place at which the service is supplied is also within the geographical boundaries of the country. In this article, we will discuss in depth the import of goods and services under GST.

Import of Goods

Following the implementation of GST, the import of commodities will not be impacted by charges such as safeguard duty, education cess, basic customs duty, anti-dumping duty, etc. All these additional custom duties will be subsumed by GST.

Article 269A of the GST regime states that the supply of commodities or services or both, if imported into India, will be considered as supply under inter-state commerce or trade and will attract integrated tax. For instance, if the assessable value of a commodity imported into the country is Rs.500, basic customs duty is 10%, and the integrated tax rate levied is 18%, the taxes shall be computed in the following manner:

Assessable Value = Rs.500

Basic Customs Duty = Rs.50

Value for the levy of integrated tax = Rs.500 + Rs.50 = Rs.550

Integrated Tax = 18% of Rs.550 = Rs.99

Overall Taxes = Rs.50 + Rs.99 = Rs.149

Over and above these taxes, commodities may also attract an additional cess under the GST regime. This cess shall be collected on the value chosen for the levy of integrated tax. In the aforementioned example, the cess will be levied on Rs.550.

Import of Services

The import of services is defined as the supply of a service by a supplier who is based outside the company, but the recipient of the services is based in India, and the place at which the service is supplied is also within the geographical boundaries of the country.

The provisions present in Section 7(1)(b) of the Central Goods and Services Tax Act, 2017, mentions that when services are imported with consideration, it will be deemed as a supply, regardless of whether it is utilised in the continuance or course of business. When services are imported without consideration, they will not be deemed as supply. Businesses, however, are not mandated to undertake any tests for service imports to be deemed as a supply.

Moreover, the provisions present in Schedule I of the Central Goods and Services Tax Act, 2017, services imported by registered taxable individuals from relatives or distinct individuals as stated in Section 25 of the Central Goods and Services Tax Act, 2017, in the continuance or course of a business will be considered as supply regardless of whether or not it has been made without consideration.

Input Tax Credit

Under the GST regime, an importer who is registered can use the IGST levied to them when importing goods as input tax credit. During the outward supply of goods by the importer, the input tax credit could be used to pay taxes such as CGST / SGST / IGST. The importer can also avail GST Compensation Cess along with the input tax credit of IGST before transferring it to the ones in the supply chain. The importer, however, will not be able to avail the credit of basic customs duty. In any case, if the importer wishes to avail input tax credit of GST Compensation Cess and IGST, he/she will have to compulsorily declare GSTIN (GST Registration Number) in the Bill of Entry.

GSTN provides provisional IDs which can be utilised over the course of the transition period, and importers are urged to ensure that their GSTIN registration process is complete. Since the GSTIN declared in the Bill of Entry is the basis for the availability of input tax credit, registered individuals can avail input tax credit only if they furnish Form GSTR 2 which contains all applicable details as mentioned in the Invoice Rules along with relevant information as required. GSTN will be interconnected with Customs EDI (Electronic Data Interchange) system for the validation of ITC. Moreover, information relating to the Bill of Entry in non-EDI locations will take a digital format and will be utilised for validating input tax credit provided by GSTN.

Impact of GST on Imports

In case a commodity attracts IGST, but does not attract any Countervailing Duty, if the Assessable Value of the commodity inclusive of landing charges is Rs.500, IGST is levied at 12%, Basic Customs Duty is levied at 10%, Education Cess is levied at 2% and Higher Education Cess is levied at 1%, the calculation of duty will be:

BCD = 10% of Assessable Value (10% of Rs.500) = Rs.50

Education Cess = 2% of BCD (2% of Rs.50) = Re.1

Higher Education Cess = 1% of BCD (1% OF Rs.50) = Rs.0.50

IGST = 12% of (Assessable Value + BCD + Education Cess + Higher Education Cess) = Rs.66.18

In case a commodity does not attract any Countervailing Duty, but is subject to IGST and Compensation Cess, if the Assessable Value of the commodity inclusive of landing charges is Rs.500, IGST is levied at 12%, Basic Customs Duty is levied at 10%, Education Cess is levied at 2%, Higher Education Cess is levied at 1%, and Compensation Cess is levied at 10%, the calculation of duty will be:

BCD = 10% of Assessable Value (10% of Rs.500) = Rs.50

Education Cess = 2% of BCD (2% of Rs.50) = Re.1

Higher Education Cess = 1% of BCD (1% OF Rs.50) = Rs.0.50

IGST = 12% of (Assessable Value + BCD + Education Cess + Higher Education Cess) = Rs.66.18

Compensation Cess = 10% of (Assessable Value + BCD + Education Cess + Higher Education Cess) = Rs.55.15

In case a commodity attracts Countervailing Duty as well as IGST, if the Assessable Value of the commodity inclusive of landing charges is Rs.500, IGST is levied at 28%, Basic Customs Duty is levied at 10%, Countervailing Duty is levied at 12%, Education Cess is levied at 2%, and Higher Education Cess is levied at 1%, the calculation of duty will be:

BCD = 10% of Assessable Value (10% of Rs.500) = Rs.50

Countervailing Duty = 12% of (Assessable Value + BCD) = Rs.66

Education Cess = 2% of (BCD + Countervailing Duty) = Rs.2.32

Higher Education Cess = 1% of (BCD + Countervailing Duty) = Rs.1.16

IGST = 28% of (Assessable Value + BCD + Countervailing Duty + Education Cess + Higher Education Cess) = Rs.173.45

In case a commodity attracts Countervailing Duty, IGST as well as Compensation Cess, if the Assessable Value of the commodity inclusive of landing charges is Rs.500, IGST is levied at 28%, Basic Customs Duty is levied at 10%, Countervailing Duty is levied at 12%, Education Cess is levied at 2%, Higher Education Cess is levied at 1%, and Compensation Cess is levied at 10%, the calculation of duty will be:

BCD = 10% of Assessable Value (10% of Rs.500) = Rs.50

Countervailing Duty = 12% of (Assessable Value + BCD) = Rs.66

Education Cess = 2% of (BCD + Countervailing Duty) = Rs.2.32

Higher Education Cess = 1% of (BCD + Countervailing Duty) = Rs.1.16

IGST = 28% of (Assessable Value + BCD + Countervailing Duty + Education Cess + Higher Education Cess) = Rs.173.45

Compensation Cess = 10% of (Assessable Value + BCD + Countervailing Duty + Education Cess + Higher Education Cess) = Rs.61.95