SME CHATROOM: Third-party payment allowed for imports subject to conditions

Notification No. 66/2017 exempts all suppliers of goods who have not opted for composition scheme, from payment of GST on advances received

We have received advance payment during the period July 1-November 15, 2017, for the export of certain goods. The goods were exported one year after receiving advance payment. Are we liable to pay GST on that?

Notification No. 66/2017, dated November 15, 2017, exempts all suppliers of goods who have not opted for composition scheme, from payment of GST on advances received. For such categories of taxpayers, time of supply would arise only at the time of issue of invoice, and they need to discharge GST liability accordingly. Exports of goods are, however, zero-rated.

We have placed a purchase order for the import of goods but the foreign supplier wants payment to be made to a third party. Is it permissible under FEMA?

Para B.7 of RBI Master Direction no.17/2016-17 dated January 1, 2016 (as amended) says that AD category I banks are allowed to make payments to a third party for import of goods, subject to the condition that firm irrevocable purchase order/tripartite agreement should be in place. However, this requirement may not be insisted upon in a case where documentary evidence for circumstances leading to third party payments/name of the third party being mentioned in the irrevocable order/invoice has been produced.

Secondly, the AD bank should be satisfied with the bonafide of the transactions and should consider the Financial Action Task Force Statement before handling the transactions. Third, the invoice should contain a narration that the related payment has to be made to the (named) third party. Fourth, the bill of entry should mention the name of the shipper and the narration that the related payment has to be made to the (named) third party. Finally, the importer should comply with the related extant instructions relating to imports, including those on advance payment being made for the import of goods.

We imported some goods from Malaysia and found them defective. The supplier has agreed to take them back and give replacements. But Customs are not allowing the return, saying that the defective goods were deliberately imported and want to issue a show-cause notice. What process must be followed for the smooth return of goods and to obtain a replacement?

CBEC Circular no.100/2003-Cus dated November 28, 2003, refers to the instructions Board’s letter F. No. 18/1/59-Cus. (CRC), dated June 8, 1959, stating that where the importer wants to re-export the goods shipped contrary to his instructions of the importer, the Commissioner may use his discretion and release the goods on payment of a nominal penalty, or without any penalty, as he deems fit, provided that he is satisfied that the goods have been imported as a result of a bona fide mistake and contrary to the importer’s instructions.

So, you may plead before the Customs that you did not intend to import defective goods and that the supplier has made a mistake for which he is willing to atone by taking back the goods and giving replacements. Much depends on your credibility.