RCM applicable on import of "Goods"

After a deep interpretation of GST Law, I am of opinion that import of 'goods' will be taxed under RCM u/s 5(4) of IGST.

There were many different views on whether import of 'goods' will attract RCM or not. Unlike import of service which is EXCLUSIVELY provided in act to be taxed under RCM basis,act is silent on applicability of RCM on import if 'Goods'.

Now we will interpret step by step different clauses /definitions and deal with various arguments for above transaction

Import of goods may be governed by sec 5(4) in IGST (RCM).

The said section is reproduced for ready reference

'(4) The integrated tax in respect of the supply of taxable goods or services or both by a supplier, who is not registered, to a registered person shall be paid by such person on reverse charge basis as the recipient and all the provisions of this Act shall apply to such recipient as if he is the person liable for paying the tax in relation to the supply of such goods or services or both'

Following arguments can be made to claim that Import of goods does not attract RCM:

• Whether import of goods Is supply of taxable goods?
• Whether a foreign entity is a supplier
• Will a foreign entity be covered as a not registered person
• To what extent import of goods is governed by Custom Act 1975 as ,Sec 5(1) IGST para 2nd says 'Provided that the integrated tax on goods imported into India shall be levied and collected in accordance with the provisions of section 3 of the Customs Tariff Act, 1975 on the value as determined under the said Act at the point when duties of customs are levied on the said goods under section 12 of the Customs Act, 1962.

Lets settle down above arguments

• As IGST is charged on import of goods and also input tax includes IGST paid on import, it means import of goods is without any argument a supply of goods.
• To apply RCM foreign entity/company must be a supplier and also non register person

As per definition of supplier, supplier is "a person" supplying goods etc

Now definition of person includes any body corporate incorporated by or under the laws of the country outside India.

Thus a foreign company qualifies to be a person, and thus qualifies to be a supplier. Now whether it qualifies to be a non register person? Yes!

Because Not registered person is not defined in act so we shall see definition of registered person which says person registered under sec 25 but does not include person having UIN.

So a 'Not registered person' is one who did not take registration under section 25, thus foreign company not registered us 25 will qualify as not register supplier

Now the final and very applauded argument that for IMPORT of goods, custom act is applicable so no RCM will be applicable. Friends on minutely reading the sec 5(2) You will realize that the IGST law ONLY for purpose of determination of VALUE refers to custom act. that’s it nothing else.

As it says provided that IGST shall be {levied and collected in accordance with the provision of sec 3 of custom tariff act} 'ON VALUE' AS DETERMINED by said act.

I repeat the sentence say IGST shall be levied and collected 'ON THE VALUE' as per customs act.

Thus Custom act is to be referred ONLY AND ONLY for purpose of Valuation. Once you derive the value, then your import will be again governed by IGST law, thus will be governed by Sec 5(4) of IGST.

Further I had posted this query on GST GOI official tweeter handler, and I received the reply as 'YES'

I am providing link to the tweet.

GST@GoI (@askGST_GoI) tweeted at 3:43 PM on Tue, Jul 04, 2017:
Yes https://t.co/Qcfdu21ZLa
(https://twitter.com/askGST_GoI/status/882180482439548930?s=03)

Now I do not see any issue in covering it under RCM. Thus following two implication can be drawn:

1. In case of import of goods retention of money can be done (as condition to claim credit is not applicable for taxes paid under RCM, thus you can still make part payment to foreign exporter and claim full credit subject to RCM conditions)

2. Secondly returns to be filed by considering sec 5(4) of IGST i.e. reverse charge and not forward charge

The author can also be reached at anketdodya@gmail.com