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A comprehensive dual Goods & Service Tax (GST) has replaced the complex multiple indirect tax structure from July 01, 2017. GST will also have enormous impact on imports & will subsumed Additional duty of customs namely Countervailing Duty (CVD) under section 3(1) & Special Additional duty (SAD) under section 3(5) of the Custom Tariff Act, 1975. So, Basic Custom duty levied under section 12 of the Custom Act, 1962, Education Cess & Higher Secondary education Cess, Safeguard duties & Anti- dumping duties will be continued to be levied on import of goods.

'Supply' in case of Imports

For a transaction to qualify as 'supply', it is essential that the same is 'in the course or furtherance of business'. This implies that any supply of goods and / or services by a business entity would be liable to tax, so long as it is in the course or furtherance of business. Supplies which are not in the course of business (or in furtherance of business) will not qualify as 'supply' for the levy of tax, except in case of import of service for consideration, where the service is a supply whether or not it is made in the course or furtherance of business. This implies that import of services even for personal consumption would qualify as 'supply' and therefore would be liable to tax.

The definition of 'Supply' includes import of services for consideration only. However, Schedule I includes transaction without consideration also in the ambit of supply. According, import of services by a taxable person from a related person, or from any of his other establishments outside India, in the course or furtherance of business will be supply even though without consideration as per clause iv of this schedule.

Levy & Collection of Tax

Supply of goods or services or both in the course of import into the territory of India shall be deemed to be supply of goods or, of services or both in the course of interstate trade or commerce. So, Igst will be levied on such imports.

Other than IGST, GST Compensation Cess at the prescribed rate will also be levied on import of some goods like pan masala, tobacco & tobacco products, aerated water, motor cars & passenger motor vehicles etc.

The importer will be liable to pay integrated tax on a reverse charge basis and the same will have to be discharged by cash only and credit cannot be utilized for discharging such a liability.

Input Tax Credit Availability

Input tax Credit of IGST on import of goods or services or both can be availed & utilized against IGST, CGST and SGST respectively. So, Input tax credit of BCD, Education & Secondary Higher Education Cess cannot be availed.

The GST Compensation law provides that the provisions of input tax would apply mutatis mutandis to cess. However, it categorically specifies that the input credit of cess can only be utilized for discharging the liability on such cess.

Registration

The threshold limits for registration would not apply and the importer would be required to obtain registration irrespective of his turnover.

Valuation & Method of Calculation

IGST is leviable on the value of imported goods and for calculating integrated tax on any imported article, the value of such imported goods would be the aggregate of -

(i) the value of imported article determined under sub - section (1) of section 14 of the Customs Act, 1962 or the tariff value fixed under sub - section (2) of the that section and

(ii) any duty of Customs chargeable on that article under section 12 of the Customs Act, 1962 and any sum chargeable on that article under any law for the time being in force as an addition to, or as duty of Customs.

 Proforma of Calculation of Duty & Tax in case of Import of Goods


  Sl. No.

                                                 Particulars

       Amount

1

Assessable Value as per Sec 14(1) or Sec 14(2) of the Custom Act, 1962

XXX

2

Basic Custom Duty @10%

XXX

3

Education & Secondary Higher Education Cess @ 3% (On '2' above)

XXX

4

Safeguard duty & Anti-Dumping duty (As applicable)

XXX

5

Transaction Value for IGST & GST Compensation Cess (1+2+3+4)

XXX

6

IGST (On '5' above)

XXX

7

GST Compensation Cess (On '5' above)

XXX

8

Total Value (5+6+7)

XXX


Analysis of Impact of GST on Imports

Under previous indirect tax law, Manufacturers & Traders were getting the input tax credit of Special Additional Duty (SAD) on specified goods while Manufacturers & Service providers on Counterveiling Duty (CVD). Also, Education & Secondary Higher Education Cess were not eligible for input tax credit. But under the GST Law, Manufacturers, Traders & Service Providers will get input tax credit of complete Igst on goods which subsumes CVD, SAD & percentage of cess levied on CVD which is against the 'MAKE IN INDIA' drive. This will boost imports but at a disadvantage to domestic manufacturers.

The author provides professional & consultancy services & can be reached at tarunj1010@gmail.com


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