Clarification for reversal of IGST on transfer of duty-free imported goods from EOU to DTA unit
This query is : Resolved
11 November 2025
Dear sir, our company is operating two units — one as an Export Oriented Unit (EOU) functioning under Chapter 6 of the Foreign Trade Policy (FTP), 2023 read with Notification No. 52/2003-Customs, and another as a Domestic Tariff Area (DTA) unit.
The EOU has executed a Bond amounting to Rs.10 crore for the import of duty-free raw materials required for the manufacture of final products. Subsequently, certain quantities of duty-free imported raw materials were transferred from the EOU to the DTA unit through delivery challans, as they were required for production purposes at the DTA unit.
While transferring the said materials, the applicable Customs duties (Basic Customs Duty and Social Welfare Surcharge) were duly reversed and paid through TR-6 challan. However, the Integrated GST (IGST) component exempted at the time of import was not reversed, as payment through TR-6 challan does not qualify as a valid document for availing Input Tax Credit (ITC) in terms of Rule 36 of the CGST Rules, 2017.
In view of the above, your kind clarification is requested on the following points:
Whether the IGST component, initially exempted at the time of import under Notification No. 52/2003-Customs, is required to be reversed when such duty-free goods are transferred from the EOU to its DTA unit; and
If such reversal is required, what is the prescribed procedure for effecting the reversal and for subsequently claiming ITC on the same.
The EOU has executed a Bond amounting to Rs.10 crore for the import of duty-free raw materials required for the manufacture of final products. Subsequently, certain quantities of duty-free imported raw materials were transferred from the EOU to the DTA unit through delivery challans, as they were required for production purposes at the DTA unit.
While transferring the said materials, the applicable Customs duties (Basic Customs Duty and Social Welfare Surcharge) were duly reversed and paid through TR-6 challan. However, the Integrated GST (IGST) component exempted at the time of import was not reversed, as payment through TR-6 challan does not qualify as a valid document for availing Input Tax Credit (ITC) in terms of Rule 36 of the CGST Rules, 2017.
In view of the above, your kind clarification is requested on the following points:
Whether the IGST component, initially exempted at the time of import under Notification No. 52/2003-Customs, is required to be reversed when such duty-free goods are transferred from the EOU to its DTA unit; and
If such reversal is required, what is the prescribed procedure for effecting the reversal and for subsequently claiming ITC on the same.
16 November 2025
Yes, the IGST component exempted at import under Notification No. 52/2003-Customs must be reversed when duty-free goods are transferred from an EOU to a DTA unit. The prescribed procedure involves payment of IGST via a proper GST invoice to enable ITC claim by the DTA unit.
The IGST component that was exempted at import under Notification No. 52/2003-Customs must be reversed when EOU goods are cleared into DTA, unless the goods are exported or supplied to eligible units. When EOUs transfer duty-free goods to DTA, these clearances are treated as imports into India and are subject to Customs duties as if the goods were imported. This includes Basic Customs Duty (BCD), Social Welfare Surcharge (SWS), and IGST at applicable rates, regardless of IGST exemption at the time of original import (para 6.07(b) of FTP 2023 and para 6.08 of HBP).
The IGST component that was exempted at import under Notification No. 52/2003-Customs must be reversed when EOU goods are cleared into DTA, unless the goods are exported or supplied to eligible units. When EOUs transfer duty-free goods to DTA, these clearances are treated as imports into India and are subject to Customs duties as if the goods were imported. This includes Basic Customs Duty (BCD), Social Welfare Surcharge (SWS), and IGST at applicable rates, regardless of IGST exemption at the time of original import (para 6.07(b) of FTP 2023 and para 6.08 of HBP).
16 November 2025
Procedure for IGST Reversal and ITC Claim
Payment of IGST:
The EOU must pay the IGST on the quantity of goods transferred into DTA at the applicable rate as per the prevailing Customs Tariff.
Payment should be made using the prescribed Customs documents—Bill of Entry for Home Consumption—not merely via TR-6 Challan, to ensure compliance and facilitate ITC eligibility.
Document for ITC Eligibility:
Rule 36(1) of the CGST Rules, 2017, specifies that ITC can be claimed only based on a valid tax-paid document (such as a Bill of Entry, Customs Invoice, etc.), which must bear the GSTIN of the recipient (the DTA unit).
Claiming ITC:
Once IGST is paid via a proper Bill of Entry with the DTA unit as importer, the DTA unit can claim ITC of the IGST paid, as the Bill of Entry qualifies as a valid document under Rule 36.
The process involves the DTA unit booking the IGST paid as input and reflecting it in its GST returns to avail the ITC.
Payment of IGST:
The EOU must pay the IGST on the quantity of goods transferred into DTA at the applicable rate as per the prevailing Customs Tariff.
Payment should be made using the prescribed Customs documents—Bill of Entry for Home Consumption—not merely via TR-6 Challan, to ensure compliance and facilitate ITC eligibility.
Document for ITC Eligibility:
Rule 36(1) of the CGST Rules, 2017, specifies that ITC can be claimed only based on a valid tax-paid document (such as a Bill of Entry, Customs Invoice, etc.), which must bear the GSTIN of the recipient (the DTA unit).
Claiming ITC:
Once IGST is paid via a proper Bill of Entry with the DTA unit as importer, the DTA unit can claim ITC of the IGST paid, as the Bill of Entry qualifies as a valid document under Rule 36.
The process involves the DTA unit booking the IGST paid as input and reflecting it in its GST returns to avail the ITC.
16 November 2025
IGST exempted at import must be reversed and paid when EOU goods are cleared to DTA.
The prescribed procedure is payment of IGST via a Bill of Entry for home consumption declaring the DTA unit as importer, ensuring ITC eligibility.
Payment through TR-6 Challan does not qualify for ITC under Rule 36; only a Bill of Entry or equivalent Customs document does.
References
FTP 2023, Chapter 6 provisions for EOU/DTA transactions.
Notification No. 52/2003-Customs and relevant CBIC circulars.
Rule 36 of CGST Rules, 2017 outlining eligible ITC documents.
The prescribed procedure is payment of IGST via a Bill of Entry for home consumption declaring the DTA unit as importer, ensuring ITC eligibility.
Payment through TR-6 Challan does not qualify for ITC under Rule 36; only a Bill of Entry or equivalent Customs document does.
References
FTP 2023, Chapter 6 provisions for EOU/DTA transactions.
Notification No. 52/2003-Customs and relevant CBIC circulars.
Rule 36 of CGST Rules, 2017 outlining eligible ITC documents.
You need to be the querist or approved CAclub expert to take part in this query .
Click here to login now
Click here to login now
Similar Resolved Queries
Unanswered Queries
- Partnership Deed Changes for Remuneration
- GST on Education Service
- Clarification regarding clubbing of AGM and EGM into one meeting
- PROVISION FOR GRATUTY
- Tax liabilities on purchase of agriculture land from adivasi to adivasi person in Maharashtra
- Sale of agrilculture land exmpted for aerial distance calculation procedure for online
- Purchase of residential house by a foreign national (Indian origin, not holding Indian passport)
- Reverse Factoring
- Compliance PF
- Appointment of auditor in agm
- "Please ensure that the Total of the Deductions u/s 54F match the same in Table D in Sch CG"
- Composition Dealer GST Annual Return Filing process
- TDS under section 195.
- Filing GST Returns after death of proprietor
- Registered Required in GST Act
- Switch over to Composition Scheme
- Gstr 9 and itc
- Clarification regarding IMS
- RCM on Construction of Apartment - Real estate
- Treatment in GSTR-9
Trending Online Classes
-
All Subjects Combo (Regular Batch) Jan & May 26
CA Hardik Manchanda,CS Arjun Chhabra & Prof. Akash Agrawal
CAclubindia
