Imports of Goods or Services Under GST Regime

Team Masters India
Team Masters India at June 29, 2022

What are Imports under GST?

  • The import of goods has been defined in the IGST Act, 2017 as bringing goods into India from a place outside India.
  • Import of goods or services will be treated as deemed inter-State supplies and would be subject to Integrated tax in addition to the applicable Custom duties.

Levy

  • IGST on import of services would be levied under the IGST Act.
  • Levy of the IGST on import of goods would be levied under the Customs Act, 1962 read with the Custom Tariff Act, 1975.

Who is liable to pay?

  • The importer of services will have to pay tax on reverse charge basis.
  • But, in respect of import of online information and database access or retrieval services (OIDAR) by unregistered, non-taxable recipients, the supplier located outside India shall be responsible for payment of taxes.
  • For this purpose, either the supplier will have to take registration or will have to appoint a person in India for payment of taxes.

Assessable value for Imports of Goods

  • Goods which are imported into India shall, in addition to the Basic Customs duty, be liable to integrated tax at such rate as is leviable under the IGST Act, 2017 on a similar article on its supply in India.
  • The value of the goods for the purpose of levying integrated tax shall be, assessable value plus Customs Duty levied under the Customs Act.
  • In addition, GST compensation cess, may also be leviable on certain luxury and demerit goods under the Goods and Services Tax (Compensation to States) Cess Act, 2017 on the assessable value plus BCD.

Let’s take an example:

Suppose the assessable value of an article imported into India is Rs. 100/-. Basic Customs Duty is 10% ad valorem. Integrated tax rate is 18%.

The taxes will be calculated as under:

  • Assessable Value= Rs. 100/-
  • Basic Customs Duty (BCD) = Rs. 10/-
  • Value for the purpose of levying integrated tax= Rs. 100/- + Rs.10/-= Rs. 110/-
  • Integrated Tax = 18% of Rs.110/- =Rs. 19.80
  • Total taxes = Rs. 29.80

In case the goods are also leviable to cess under the Goods and Services Tax (Compensation to States) Cess Act, 2017, the same would be levied on Rs. 110/-.

Input tax credit of integrated tax paid under Imports

  • Input tax credit of the integrated tax paid at the time of import shall be available to the importer and the same can be utilized by him as Input Tax credit for payment of taxes on his outward supplies.
  • The Basic Customs Duty (BCD) shall not be available as input tax credit.
  • The place of supply of goods, imported into India shall be the location of the importer. For eg:- if an importer is located in Rajasthan, the state tax component of the integrated tax shall accrue to the State of Rajasthan.

Import of Services

  • In general, import of services under consideration, whether or not in the course or furtherance of business, shall be considered as a supply. Business test is not required but consideration test is required to be fulfilled for import of service to be considered as supply.
  • Import of services by a taxable person from a related person or from a distinct person as defined in Section 25 of the CGST Act, 2017, in the course or furtherance of business shall be treated as supply even if it is made without any consideration. Thus ,in this case, Business test is required but consideration test is not required to be fulfilled for import of service to be considered as supply.

Summary in Table

Nature of Service

Consideration

Business Test

Import of services

Necessarily Required

Not required

Import of services by a taxable person from a related person or from a distinct person

Not required

Necessarily Required

Section 21 of  IGST Act, 2017:

  • Imports of services made on or after the appointed day i.e. 1st July,2017 will be liable to integrated tax regardless of whether the transactions for such import of services had been initiated before the appointed day.
  • If the tax on such import of services had been paid in full under the existing law, no tax shall be payable on such import under the IGST Act.
  • In case the tax on such import of services had been paid in part under the existing law, the balance amount of tax shall be payable on such import under the IGST Act.

For instance, suppose a supply of service for Rs. 1 crores was initiated prior to the introduction of GST, a payment of Rs. 20 lacs has already been made to the supplier and service tax has also been paid on the same, the. integrated tax shall have to be paid on the balance Rs. 80 lacs.

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