CHATROOM: Exports on CIF terms attract IGST on CIF value, says expert

Q. We have been exporting on a CIF basis but paying IGST on export goods on an FOB basis and claiming a refund. Is this correct?

No. Section 15 of the CGST Act, 2017, deals with the valuation of taxable supply. It says that the value of a supply of goods or services, or both, shall be the transaction value, which is the price actually paid or payable for the said supply of goods or services, or both, where the supplier and the recipient of the supply are not related and the price is the sole consideration for supply. In your case the price paid or payable is based on the CIF value and the buyer gives you the payment for the CIF value. So, you must pay IGST on the CIF value when you export goods.

Q. We imported our raw material under advance authorisation without payment of IGST. We exported our finished products on payment of IGST and claimed and got a refund of the IGST paid. We now understand that this is a violation of Rule 96(10) of the CGST Rules, 2017. We would like to know how we can rectify this mistake.

You can surrender the IGST refund taken, along with interest. Alternatively, in my opinion, you can pay IGST on the raw material that you imported without IGST payment, along with interest.

Q. I understand that the Government of India recently issued a circular on the export of goods from a third country to another country without bringing the goods to Indian shores. Can you please give us the text of the circular?

The Commerce Ministry introduced Para 2.43 on “merchanting trade” in the recently released Foreign Trade Policy 2023. You can see the text of Para 2.43 in this link

Q. Our customs house agent says that when goods imported from one country and put in a bonded warehouse through in-bond bill of entry are then sought to be re-exported to another country by filing an ex-bond shipping bill, there has to be a minimum value-addition of 10 per cent. Is that correct? Is there any such requirement for re-export from DTA also?

There is no such stipulation in Section 69 of the Customs Act, 1962, which allows re-export of goods from a bonded warehouse. I have not come across any requirement of minimum value-addition for re-export of imported goods from DTA also.

Q. We refer to the Commerce Ministry notification no.55/2015-20 dated February 7, 2023, allowing RoDTEP for items falling under Chapters 28, 29, 30 and 73. It says that the revised Appendix-4R will be applicable to exports made from February 15, 2023, to September 30, 2023. The subsequent notifications 63 dated March 25, 2023, and 04/2023 dated May 1, 2023, only add to or amend Appendix-4R. Does this mean that the present RoDTEP rates for all items in the revised Appendix-4R are valid only until September 30, 2023?

Yes. That is my understanding too.