Removal of duty exempted capital goods in gst regime

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samir (Querist)
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07 October 2017 We have STPI unit where we have duty exempted capital goods. We now wish to remove them as they are outdated. Please let us know how to pay the duty liability in GST regime and remove the goods from unit.

Asha Kanta Sharma

Asha Kanta Sharma (Expert)
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07 October 2017 You have to charge the current GST Tax Rate at the time of selling out the old capital goods and pay the taxes to the Govt.

samir

samir (Querist)
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11 October 2017 Thanks you very much for your reply. If we have excise duty exempted goods and custom duty exempted good. In such on excise duty exempted goods which duty we should pay and in case custom duty exempted which duty we should pay. Do we need to pay CGST and SGST in case the goods are sold in same state, in the both the cases?

Asha Kanta Sharma

Asha Kanta Sharma (Expert)
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21 July 2025 You're asking a very practical and important question regarding removal of duty-exempted capital goods from an STPI unit under the GST regime, especially where excise duty and customs duty exemptions were availed in the pre-GST era.

Let’s break this down clearly for both types of exemptions: Excise Duty Exempted Capital Goods and Customs Duty Exempted Capital Goods.

✅ 1. Excise Duty Exempted Capital Goods (Domestic Procurement)

These are capital goods procured without paying central excise duty when your unit was operating under STPI benefits.

📌 Now under GST (post-July 2017):
If you're removing (selling or disposing of) these goods:

You must charge and pay GST on the transaction value of those capital goods.
If sold within the same state, then CGST + SGST is payable.
If sold interstate, then IGST is payable.
🚫 No need to pay excise duty now.

Excise duty is subsumed under GST. So, for goods removed after July 1, 2017, excise does not apply, only GST applies.

✅ 2. Customs Duty Exempted Capital Goods (Imports under EPCG or STPI)

These are goods imported under duty exemption schemes, typically under notification like 52/2003-Customs, when STPI units were eligible for customs duty exemption.

📌 Now under GST:
If you are removing these goods (e.g., clearing them into Domestic Tariff Area or scrapping them), then customs laws + GST both come into play.

🧾 Duties Payable:
You may need to pay back proportionate customs duty (BCD, CVD, SAD) foregone at the time of import, depending on the usage period and relevant exemption conditions.
Additionally, GST is also payable:
CGST + SGST if sold in the same state.
IGST if sold interstate.
✅ Steps:
Get permission from the jurisdictional GST/customs authority (especially if under bond or warehousing).
Calculate customs duty forgone (based on depreciation allowed under customs rules).
Pay customs duty to customs department (as applicable).
Charge and pay GST on transaction value or residual value of goods.
📘 Depreciation Rules (Customs)

Usually, depreciation is allowed up to:

100% for capital goods used beyond 5 years.
If used less than 5 years, proportionate duty is payable.
Refer to Circulars like 76/76/94-Cus and notification terms for the depreciation percentage (4% per quarter, max 100%).

✅ Summary

Capital Goods Type Duty to Pay Now GST Applicable?
Excise Duty Exempted (domestic) No excise, only GST on value Yes (CGST+SGST or IGST)
Customs Duty Exempted (imported) Payback of customs duty (with depreciation) + GST Yes (CGST+SGST or IGST)

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