Business Standard

Tax circular raises fear of double IGST


A Customs circular has raised fears of the government imposing integrated goods and services tax (GST) twice on goods lying in customs bonded warehouses.

These goods would attract integrated goods and services tax (IGST) twice — once at the time of import and again while being cleared from bonded warehouses by importers.

The Central Board of Excise and Customs (CBEC) has issued a circular clarifying that any supply of imported goods taking place before the goods cross customs frontiers of India should be treated as an interstate supply and such transactio­n for sale and transfer would be subject to IGST. This is without prejudice to the levy of customs duty and collection of duty at exbound stage.

PwC said the circular recognised the possibilit­y of double taxation when goods stored in bonded warehouses were transferre­d to another person. The rationale seemed to be a tax on value addition accruing on an inbond sale, which is subject to customs duty (including IGST) on the original import value.

It said the industry should assess the impact of this clarificat­ion (mainly on cash flow and compliance) on the warehousin­g models, including impact on supplies from special economic zones.

The industry should represent to the government to provide a mechanism to address this anomaly of double levy on the same transactio­n, by way of exemption or levy only on value addition or other possible options, it suggested.

This circular might lead to litigation­s and might be challenged primarily on the grounds of jurisdicti­on since it was issued as a customs circular, the consultant said.

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