This is to
update you on the circular issued by CBEC Circular No. 46/2017-Customs
dated 24th November 2017 (‘Circular), which is with regards to the applicability of IGST/ GST
on goods transferred / sold while being deposited in in customs bonded
warehouse.
As per this
Customs Circular (copy of the circular
attached for your reference) :
Levy
of customs duty on clearance of goods warehoused in a bonded warehouse
· On import of goods, the
importer is liable to pay BCD and IGST on customs clearance. However, the
payment of the same is deferred in cases where the goods are deposited into a
customs bonded warehouse (by filing an ‘into bond Bill of Entry’) until such
goods are ex-bonded.
· The warehoused goods may be cleared
upon filing ‘BOE for home consumption’ / ‘Ex-bond BOE’. In either case, the
importer is required to pay BCD and IGST on the imported value, on the
rates/duties as applicable on the date of filing the aforementioned BOE.
· Further, any additional cost
incurred after import of goods such as: port charges, demurrage charges,
transportation charges, warehouse rental charges cannot be included to the
import value for the purpose of computing BCD and IGST at the stage of
clearance for customs duty payment.
EY
Comments
The above
scenario shall apply in situation where the importer files a bill of
entry for warehousing for temporarily warehousing the goods in a customs bonded
warehouse and thereafter clears the goods by filing a bill of entry for home
consumption / re-warehousing in the case of STPI purchases. In this
situation where the goods are cleared against STPI icence/ approval, BCD and
IGST should not apply by virtue of the exemption under Customs Notification 52/
2003 until March 31, 2018
Levy
of IGST on sale by importer of goods bonded in the warehouse
· As per this Circular, sub -
section (5) of section 59 provides that the importer has the liberty to
transfer the ownership of imported goods to another person while the goods
remain deposited in the warehouse. However, the sale / transfer of the
warehoused goods between the importer and any other person may be at a price
higher than the assessable value of such goods. (i.e the value higher than the
import value). Such a transaction squarely falls within the definition of
“supply” as per section 7 of the Central Goods and Services Tax Act, 2017
(‘CGST Act’) and shall be taxable in terms of section 9 of the CGST Act read
with section 20 of the Integrated Goods and Services Tax Act, 2017 (‘IGST Act’)
.
· Further,
as per sub - section (2) of section 7 of the IGST Act, any supply of imported
goods which takes place before they cross the customs frontiers of India, shall
be treated as an inter - State supply. Thus, such a transaction of sale
/transfer will be subject to IGST under the IGST Act.
· This
IGST shall be payable over and above the BCD + IGST payable at the stage of
filing of bill of entry for clearance of goods by the purchaser of the goods.
To illustrate the above with an example:
A imports goods on 2nd July 2017 and deposits the
goods in the bonded warehouse to defer duty, by filing ‘into bond BOE’. Duties
and taxes deferred are INR 23.2
Value of goods: 100
Say BCD @ 10% - 10% of 100 = 10
Say IGST @ 12% - 12% of (100+10) = 13.2
Total duty and taxes deferred = 10 + 13.2 = 23.2
A sells the goods to B from bonded warehouse on 21st
July 2017 for INR 300 (higher value) and charges IGST @ 12% (on account
of inter-state supply) = INR 36 (Payment of IGST INR 36 and filing of return of
the same should be done by 20th August 2017)
B files Ex-bond BOE on 25th September 2017 and
pays INR 23.2 (deferred duty) in addition to IGST INR 36 (transfer of
ownership/tittle to B on sale from bonded warehouse, hence goods to be cleared
by B by filing Ex-bond BOE and upon payment of BCD and IGST on import value).
Hence, the total taxes /duties paid under this transaction,
under this arrangement is = 23.2 + 36 = INR
59.2.
TBM comments on in-bond sale implications :
· This
Circular confirms the potential dual GST levy on in-bond sales discussed by us
earlier – (i) at the stage of bill of entry filing by purchaser and (ii) on
in-bond sale by seller of goods
· For
new campus as well as old campus STPI procurement, the first type of IGST
against bill of entry filing should be exempted until 31 March 2018 on
account of the restoration of exemption under Customs Notification 52/
2003. Vendors may however seek to charge IGST on their in-bond-sale relying
on this Circular. These being goods not manufactured
domestically, whether upfront exemption/ refund to vendor shall be allowed is
moot
· As
regards non STPI procurements, in-bond procurements shall attract a dual GST
levy in terms of the illustration in the Circular. While the legality of
such a dual levy could be challenged in courts, till such time the same is set
aside, it shall be enforced at the ground level.
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