GST changes on our trade rules

No exempt of IGST on goods that will be imported under advance authorisation or EPCG authorisation

In this last week before the Goods and Services Tax (GST) comes in, here are a few points that importers and exporters whose goods are covered under it should take note of and watch for.

On imported goods, instead of additional Customs duty (CVD and SAD), Integrated GST (IGST) will be levied at the rate prescribed for the product. CVD was levied only on the assessable value plus the basic Customs duty but IGST will be levied not only on the assessable value plus basic Customs duty but also on any anti-dumping duty, safeguard duty or countervailing duty that the goods may attract. Imported goods will attract education cess and secondary and higher education cess under the new regime but some changes could be made regarding the levy or valuation of Cess before the end of this month.  

There is no exemption of IGST on goods that will be imported under advance authorisation or Export Promotion Capital Goods (EPCG) authorisation or duty credit scrips issued under various schemes of the Foreign Trade Policy (FTP) or by export oriented units (EOUs).  The Directorate General of Foreign Trade says IGST will be exempted on imports by Special Economic Zone developers and units. The finance ministry is expected to issue an exemption notification to this effect, along with amendments to several other notifications, as approved by the GST Council.
 

For any default in fulfilment of export obligations in respect of goods imported under advance authorisation or EPCG authorisation, regularisation can be made by payment of customs duties (either in cash or through debit to duty credit scrips). However, there is no provision to take input tax credit (ITC) of such duties under the GST regime. If the regularisation is done and Cenvat Credit of additional duties of customs (CVD and SAD) is taken before this month ends, these can be carried over to the GST regime.
 

Exports can be made with or without IGST payment. Export invoices must be marked ‘supply meant for export on payment of IGST’ or ‘supply meant for export under bond or letter of the undertaking without payment of IGST’. The format of bond or undertaking is not yet prescribed. An ARE-1 procedure is not prescribed under GST laws. New procedures for removal of export goods might be notified this week.  Clearances to merchant exporters must be made on GST payment. There will be no CT-1 procedure.
 

There are no provisions to remove the inputs for export production without duty payment or under rebate claim or exemptions for services used for exports or use of duty credit scrips for payment of GST on procurement of goods or services. Procurement of goods by EOUs under a CT-3 form from local manufacturers is not enabled. In all such cases, exporters must pay GST, take ITC and utilise it to pay GST on outward supplies. They can claim refund of unutilised credit on account of export under a bond or undertaking.
 

The revised FTP is expected to be announced by the end of this week. Then, we will know whether the EOU scheme survives, whether duty credit rates will be revised and what categories of supplies will be treated as deemed export. The revenue department will notify consequential changes in the exemption notifications and make necessary changes in the drawback notifications.

E-mail: tncrajagopalan@gmail.com