IGST to be Levied Only When Goods are Brought for Cus­toms Clear­ance

The Economic Times - - Economy: Macro, Micro & More - Our Bu­reau

New Delhi: The in­te­grated goods and ser­vices tax (IGST) would not be levied on sale of goods on high seas but would be charged when they are brought for cus­toms clear­ance, au­thor­i­ties have clar­i­fied, much to the re­lief of oil and gas, power and tele­com com­pa­nies. The Cen­tral Board of Ex­cise and Cus­toms (CBEC) has is­sued a cir­cu­lar to this ef­fect af­ter re­ceiv­ing ref­er­ences on the issue as all in­ter-state trans­ac­tions are sub­ject to IGST.

‘High sea sale’ is a com­mon tra- de prac­tice where in orig­i­nal im­porter sells goods to a third per­son be­fore they are cus­toms cleared. Fi­nal cus­toms clear­ance is filed by the fi­nal owner. CBEC has said IGST would be re­quired to be levied only once at the time of im­por­ta­tion of goods, which is when goods are cleared by cus­toms. It also clar­i­fied that value ad­di­tion ac­cru­ing in each high sea sale trans­ac­tion shall form part of the value on which IGST would be levied at the time of clear­ance. This means that IGST would be payable on the value for the last buyer in the chain.

The im­porter would be re­quired to fur­nish the en­tire chain of doc­u­ments such as orig­i­nal in­voice, high-seas-sale con­tract, de­tails of ser­vice charges, com­mis­sion paid, etc. to es­tab­lish a link between the first con­tracted price of the goods and the last trans­ac­tion.

Tax ex­perts said the cir­cu­lar has ended the con­fu­sion on the issue, but the gov­ern­ment should clar­ify whether such sales trig­ger re­ver­sal of in­put credit.

“There was lot of con­fu­sion in the in­dus­try on the tax­a­bil­ity of high seas sale, i.e., whether it is tax­able twice or only once in the hands of the ul­ti­mate im­porter,” said Ab­hishek Jain, tax part­ner at EY In­dia. “The cir­cu­lar pro­vides log­i­cal and right clar­ity that high seas sale should be taxed only once in the hands of ul­ti­mate im­porter.”

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