CBIC prescribes procedure for payment of IGST and cess on non-fulfilment of pre-import condition and manner of claiming ITC pursuant to SC order

 This Tax Alert summarizes a recent Circular  issued by Central Board of Indirect Taxes and Customs (CBIC) pursuant to the Supreme Court (SC) judgement ², upholding the validity of pre-import condition under Advance Authorization (AA) scheme during the period 13 October 2017 till 9 January 2019.

Accordingly, the importers were required to pay integrated tax (IGST) and compensation cess on imports which did not meet the pre-import condition. However, SC directed Revenue to permit the claim of refund and/or input tax credit (ITC), w.r.t. such payment.

In the Circular, CBIC noted that once Out-of-Charge (OOC) is given on the imported goods, customs duties can be paid only through TR-6 challan. Since TR-6 challan is not a prescribed document under Goods and Services Tax (GST) for availing ITC, CBIC prescribed following procedure to be adopted at the Port of Import (POI):

• The concerned importers may approach the assessment group at the POI with relevant details for the purpose of payment of IGST and cess along with interest.
• The assessment group shall cancel the OOC and re-assess the bill of entry (BoE). The payment of integrated tax and cess shall be made against electronic challan generated in the Custom Electronic Data Interchange (EDI) System.
• On completion of payment, the POI shall make a notional OOC for the BoE on the EDI System to enable transmission of data to GSTN portal.

Accordingly, ITC with respect to such BoE shall be available to the importers subject to fulfilment of the prescribed eligibility conditions under GST. Further, in case such ITC is utilized for payment of tax on zero-rated supplies, then the benefit of refund of such IGST paid may also be available.

The procedure laid down by CBIC is likely to facilitate smooth compliance of tax payments and corresponding refund claims by the concerned importers pursuant to SC ruling.