EXPORT AND IMPORT OF GOODS UNDER GST
By: – Srikanth Rao
Goods and Services Tax – GST
Dated:- 23-12-2017
Taxation of exports and imports has always been a topic of great interest and it is no different under the GST regime. Readers may be well aware of the fact that in the recent past, under Central Excise law, clearances of manufactured goods to merchant exporters and to 100% EOUs were exempted from duties on furnishing of CT 1 form and CT 3 form respectively. Apart from this, inter-state sale of goods to an exporter of goods had also been exempted from Central Sales Tax through the usage of Form H. This has now changed under GST as these forms have been done away with. Before we proceed further to discuss the benefits available on deemed exports and on supplies to ultimate exporters, it would be necessary to review the concept of “export” and “import” under GST along with certain changes in the Customs Act 1962 which have brought about a change in the manner in which s
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d both have to be within the same State to treat the supply as an intra-state supply. The supplier here would be the person actually supplying the goods (including his agent) as defined u/s 2(105) of Central Goods & Services Tax Act 2017.
Equally important is the concept of zero rating under GST. This would mean supplies in question being zero rated (carrying zero rate of tax). Section 16(1) of IGST Act 2017 regards export of goods and supply of goods to SEZ Developers and SEZ units as zero-rated supplies. Credit of input tax used in relation to zero rated supplies are not denied going by Section 16(2) of the Act. More importantly, u/s 16(3) of the Act, the exporter would have the option of either claiming refund of unutilized input tax credit by exporting the goods under Letter of Undertaking without paying GST on outward supply for export or opt for payment of IGST on such export by utilizing credits in books and then claim refund of tax so paid on export (similar to old rebate on e
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ed prima facie as intra-state supplies. Section 2(4) of the IGST Act 2017 makes a reference to customs area as understood under Customs Act 1962 in this regard.
U/s 2(11) of the Customs Act 1962, "customs area" means the area of a customs station or a warehouse and includes any area in which imported goods or export goods are ordinarily kept before clearance by Customs Authorities. This term has been amended by The Taxation Laws (Amendment) Act 2017 to include a warehouse within its ambit with effect from 1st July 2017. The term “warehouse” under Section 2(43) of Customs Act 1962 would include a public warehouse (licensed u/s 57) as well as a private warehouse (licensed u/s 58).
Readers may note here that the Supreme Court in N.K Bapna Vs Union of India (1992 (5) TMI 20 Supreme Court of India) had held a warehouse to be an extension of the customs area and that goods can be cleared for home consumption only after payment of customs duties and import cannot be said to be co
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hich may be acquired.
The territories of various States and Union Territories are as specified in First Schedule to the Constitution of India. This would be relevant in the context of Article 246 (3) and Article 245 dealing with legislative power and extent of law made by the States read in conjunction with Article 246A (1) dealing with GST. This generally would prevent a State from collecting tax on a supply which is outside its territory. States have also been specifically barred under Article 286 (1) from imposing a tax on supply of goods or services or both where such supply takes place outside the State or in the course of import into or export out of the territory of India. Determination of whether or not a supply is within State, would be made by Parliament (by law) going by Article 286 (2).
The legal position regarding sale in the course of import for the purpose of Article 286 (1) of Constitution of India has been summarized well in JV Gokal & Co (Pvt.) Ltd. Vs Assistant Col
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ction to the concerned State (nearest coastal state) over territorial waters in respect of taxing of supplies either based on location of supplier or place of supply being in such territorial waters. This would be relevant where goods either come into the State or move to a place in territorial waters from a supplier located within the State. With regard to goods coming into India or moving out of India, there are some judicial precedents which continue to be relevant in the context of GST. These assume significance if we were to consider the first proviso to Section 5 of IGST Act 2017 as per which the IGST on imported goods would be levied on the value of the article u/s 14 of Customs Act 1962 plus duty of customs levied u/s 12 of the said Act (Section 3(8) of Customs Tariff Act 1975) and at the point customs duty is levied u/s 12 of Customs Act 1962.
Import
In M/s Aban Loyd Chiles Offshore Ltd & Ors Vs Commissioner of Customs Mumbai (2017 (2) TMI 294 Supreme Court of India) the Sup
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(2) TMI 62 Supreme Court of India), the Supreme Court has confirmed that goods kept in bonded warehouses and sold at duty free shops did not cross customs frontiers could not be subject to tax by any State as such sale was in the course of import or export of goods. Consequently, transaction was not liable to sales tax. More importantly, the Court confirmed the view that when any transaction takes place outside the customs frontiers of India, the transaction would be said to have taken place outside India. Though the transaction might take place within India but technically, looking to the provisions of Section 2(11) of the Customs Act 1962 and Article 286 of the Constitution, the said transaction would be said to have taken place outside India.
This verdict will continue to be relevant in the context of GST as far as High Sea Sales are concerned. The question of levying customs duty along with IGST should arise only on actual import of goods and in the hands of the buyer rather than
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order to have the exporter claim export benefits.
The phrase “taking out of India to a place outside India” would also mean a place in high seas. It is beyond the territorial waters of India going by the confirmation of Supreme Court in Sun Industries Vs Collector of Customs Calcutta (1988 (4) TMI 49 Supreme Court of India). Going by the decision of the Court in this case, we can have export of goods once goods cross the territorial waters of India and title on goods also passes to customer from the seller. The timing of transfer of ownership would be critical and Incoterms Rules published by International Chamber of Commerce would prove determinative in this regard.
We can have a scenario where transfer of ownership of goods from seller to buyer occurs prior to goods leaving India (including territorial waters) and where the buyer happens to be registered under GST. This scenario has now been covered by Notifications 41/2017 Integrated Tax (Rate) dated 23rd October 2017 and 40/2017
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have to look at the name of the shipper as per Bill of Lading as well as name of recipient appearing on invoice of supplier in addition to any clause in agreement/contract indicating transfer of ownership prior to goods being transferred to foreign buyer in order to determine identity of exporter going by the confirmation of the Supreme Court in CT Ltd. & Another Vs CTO & Others (1996 (10) TMI 394 (Supreme Court of India)).
Readers will also have to note that a scenario where constructive delivery is given to buyer would not satisfy the definition of export in the absence of physical movement of goods out of India. The place of supply would therefore be based on Section 10(1)(c) of IGST Act 2017.
Supply of goods by a registered person to 100% EOU or against Advance Authorisation or EPCG Authorisation has been notified as deemed export vide Notification 48/2017 Central Tax Dated 18th October 2017 issued u/s 147 of the Act. The supplier of deemed exports would be entitled to refund on
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/21/2016 GST (Policy Wing)) Dated 6th November 2017 in order to facilitate refunds and readers are advised to go through the procedural requirements. This would be in the context of procurements within India as imports by EOUs have been exempted from basic customs duty along with IGST and compensation cess vide Notification 78/2017 Customs dated 13th October 2017 amending Notification 52/2003 Customs. The amendment would apply to all possible procurements under the old Notification 52/2003 Customs by 100% EOUs.
Exporters would be entitled to claim duty drawback under revised rates applicable with effect from 1st October 2017 under Notification 89/2017 Customs (NT). Readers are advised to follow Circular 38/2017 Customs Dated 22.09.2017 which clarifies the drawback to exclude IGST component on import. Readers could reach the author at srikantharaot@gmail.com or 9845273812 in case of need.
Reply By ANITA BHADRA as =
All the relevant notifications and provisions are well compiled
D
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wo situations given below :
1. At the time of import, the Importer is filing the BOE with Haryana address but providing the GST of TN in the Bills of Entry of Customs.. As per Customs it is legal as the importer has option to avail IGST at any place of their registration. Now my question is, with this BOE, the goods are transported from Customs location with EWAY Bill generated from TN GST. Whether this is valid and acceptable in GST?
2. At the time of import, the Importer is filing the BOE with Haryana address but providing the GST of Haryana only in the Bills of Entry of Customs.. As per Customs it is legal as the importer has option to avail IGST at any place of their registration. Now my question is, with this BOE, the goods are transported from Customs location with EWAY Bill generated from TN GST. Whether this is valid and acceptable in GST? In this case the document sent with vehicle are BOE & EWB.
3. Under situation 2 above, whether the importer can raise invoice from Harya
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