India is no doubt among the fastest evolving economy across the globe. It will soon become the global hub for manufacturing. At the same time, Indian economy is also observing expansion across foreign trade (in both exports and imports).
As per the newly established GST law, import/export duties such as SAD (Special Additional Duty), CVD (Countervailing Duty) etc will be subsumed by GST.
However, import bills will be charged with the usual Customs Duty. BCD (Basic Customs Duty) is kept outside GST’s purview and the charges shall be as per the current tax laws only.
Imports under the GST in India will be influenced in the following manners:
Import as Inter-State Supply
All imports into the Indian continent shall be deemed as Inter-State supplied under the GST model. Accordingly, the import will attract IGST (Integrated Goods and Services Tax) apart from BCD & other surcharges.
Impact on Goods Import under GST
Goods import process has been identified under the 2017 IGST Act. The process is defined as the act of bringing goods inside the Indian subcontinent from outside India. The collection and levy of tax on the imported goods will be according to provisions of CTA (Customer Tariff Act), 1975. Demerit and luxury goods might also attract addition compensation cess under the GST (Goods and Services Tax) – Compensation to the States, Cess Act of 2017.
Process of Goods Import under GST
Let’s understand with an example:
- Value of an item imported in India- INR 1000
- BCD (Basic Customs Duty) @ 10% and ITR (Integrated Tax Rate) is @ 18%. Tax calculation will be as follows:
- Accessible value of the item- INR 1000
- BCD @ 10% – INR 100
- Value of Item for levying IT (Integrated Tax) – INR 1000 + INR 100 = INR 1100
- Integrated Tax levied- 18% of INR 1100 = INR 198
- Total Tax incurred- INR 100 + INR 198 = INR 298
In case of luxury or demerit goods, additional compensation cess will be applicable. Similar to the above example, the cess shall be applicable on value of the item for the intention of levying IT.
Goods can be removed from customs stations to warehouse without paying any duty charges as per the CA (Customs Act) of 1962. In the revised act, the term’ warehouse’ has been included in the ‘customs area’ definition. This means an importer is not required to provide any integrated tax during goods removal from customs station to warehouse.
Impact on Service Import under GST
As per the definition under the ICST Act, service import refers to those service supplies wherein supplier location is outside India and recipient location is inside India. The location for supply of the service is India.
As per GST provisions, service imports without consideration will not be regarded as supply. However, for the service import considered as a supply, there is no requirement for business test.
Importing free services by an individual from India from Facebook or Google will not be regarded as supply (without consideration). Importing (downloading) songs for personal usage will be considered service. If a branch based in India imports any service from its parent organisation with the objective of furthering the business, then it will considered a supply even if it is without consideration.
Transaction Value-based Valuation Principal
Transaction Value-based Valuation Principal Concept has been taken by the GST law from present customs law. This principal will have influence during determining the tax liability. At present CVD is calculated based on the MRP. As the CVD is subsumed by IGST, tax will be calculated based on the transaction value. It may result in restructuring of the working capital.
Import taxes that will continue even after GST
Below are the taxes or duties that will continue to be levied even after GST is introduced:
- BCD (Basic Customs Duty)
- ADD (Anti-Dumping Duty)
- Safeguard Duties