Skip to content

Implications of GST on Imports

Imports and exports play an important role in determining the economic health of the country and also ascertaining the company’s economic health. Though Imports are discouraged, but no country is self-sufficient to meet their economic and consumption needs. In 2020-21, Indian imports were valued at approximately US Dollars 390 billion.

These are the Types of Imports:

1. Import of Goods

The definition of import of goods is in IGST Act, 2017 as bringing goods into India from outside India. All imports will be considered as inter-State supplies and integrated tax will be levied accordingly in addition to the applicable Custom duties.

2. Import of services

Same as import of goods the Import of services is also defined under IGST Act, 2017. It refers to supply of any service where the supplier is located outside India, the recipient is situated in India and the place of supply of service is in India.

What Documents are required for Import of Goods?

1. Bill of Entry

A bill of entry is known as a registered document issued by Custom Authority which keep complete details of imported goods. It covers details like Invoice Details, Assessable Value of Goods, duty amount, Party Names etc. This document is the primary document based on which the importer can take benefits of ITC.

2. Commercial Invoice

It is the primary document issued by the exporter to the Importer. Commercial Invoice contains information about the order, including details like description, packaging costs, weight or volume, selling price, quantity of the goods etc. The custom representative will decide to clear the shipment on the basis of this Invoice.

3. Bill of Lading or Airway Bill

Under sea shipment Bill of lading or under air shipment airway bill is the document of carrier required to be submitted with customs for clearance purpose. Airway bill or Bill of lading is issued by carrier provides the details of cargo with delivery terms.

4. What are the other documents which will be required for Import of Goods?

  • Import License (IEC)
  • Certificate of Insurance
  • LC (Letter of Credit)
  • Technical Write-up (Only needed for specific goods)
  • Industrial License (for specific goods)
  • Test Report (If any)
  • RCMC i.e. Registration cum Membership Certificate
  • GATT/DGFT declaration
  • DEEC/DEPB/ECGC License for duty benefits

Here are the List of Documents required for Import of Services

  1. Commercial Invoice
  2. Tax Residency Service Certificate

Tax Residency Certificate also known as TRC is a certificate issued by the Tax Department to the Residents of that Country. It will help to country for determining in which service provider is a resident and accordingly provisions of DTAA (Double Taxable Avoidance Agreement) can be applied. It is really essential if there are withholding tax implications on the services provided.

Tax on Import of Goods

Input tax credit of the IGST and GST Compensation CESS paid during import is made available to the importer. In order to get benefit from such ITC of IGST and GST compensation CESS, an importer has to essentially declare GST Registration no. i.e. GSTIN in the Bill of Entry. Once the CHA i.e. Custom Agent processes the Import through Customs, GST credit will get reflected automatically in GSTR 2B of Importer. The Importer can check the bill of entry status through ICEGATE i.e.  Indian Customs Electronic Gateway website. However, it is essential to compare the GST Amount between bill of entry and GSTR 2B and in the case of any discrepancies you need to inform the Custom Agent immediately.

Tax on Import of Services

Importer of services will need to pay Goods and services tax on reverse charge basis. Hence, the service recipient in India becomes liable for the tax payment. Once the GST is paid on reverse charge mechanism basis the credit for the same can be availed.

Important Points to Note

  • ITC should be availed of Integrated Goods and Services Tax only and not of Custom Duty
  • It is advisable to maintain an import tracker for those businesses who are engaged in frequent import of goods. The tracker should be match with GSTR 2B as well as Indian Customs Electronic Gateway website at the yearend.
  • In case of imports of goods, set of import documents are required to be submitted with Authorized Dealer Bank regularly.

Conclusion:

The department is issuing notices to those businesses whose Import GST credits are not matching with Imports according to the departments records. It is compulsory to maintain robust documentation and detailed tracker of imports in order to provide proper explanation against such notices.

Imports and exports play an important role in determining the economic health of the country and also ascertaining the company’s economic health. Though Imports are discouraged, but no country is self-sufficient to meet their economic and consumption needs. In 2020-21, Indian imports were valued at approximately US Dollars 390 billion.

These are the Types of Imports:

1. Import of Goods

The definition of import of goods is in IGST Act, 2017 as bringing goods into India from outside India. All imports will be considered as inter-State supplies and integrated tax will be levied accordingly in addition to the applicable Custom duties.

2. Import of services

Same as import of goods the Import of services is also defined under IGST Act, 2017. It refers to supply of any service where the supplier is located outside India, the recipient is situated in India and the place of supply of service is in India.

What Documents are required for Import of Goods?

1. Bill of Entry

A bill of entry is known as a registered document issued by Custom Authority which keep complete details of imported goods. It covers details like Invoice Details, Assessable Value of Goods, duty amount, Party Names etc. This document is the primary document based on which the importer can take benefits of ITC.

2. Commercial Invoice

It is the primary document issued by the exporter to the Importer. Commercial Invoice contains information about the order, including details like description, packaging costs, weight or volume, selling price, quantity of the goods etc. The custom representative will decide to clear the shipment on the basis of this Invoice.

3. Bill of Lading or Airway Bill

Under sea shipment Bill of lading or under air shipment airway bill is the document of carrier required to be submitted with customs for clearance purpose. Airway bill or Bill of lading is issued by carrier provides the details of cargo with delivery terms.

4. What are the other documents which will be required for Import of Goods?

  • Import License (IEC)
  • Certificate of Insurance
  • LC (Letter of Credit)
  • Technical Write-up (Only needed for specific goods)
  • Industrial License (for specific goods)
  • Test Report (If any)
  • RCMC i.e. Registration cum Membership Certificate
  • GATT/DGFT declaration
  • DEEC/DEPB/ECGC License for duty benefits

Here are the List of Documents required for Import of Services

  1. Commercial Invoice
  2. Tax Residency Service Certificate

Tax Residency Certificate also known as TRC is a certificate issued by the Tax Department to the Residents of that Country. It will help to country for determining in which service provider is a resident and accordingly provisions of DTAA (Double Taxable Avoidance Agreement) can be applied. It is really essential if there are withholding tax implications on the services provided.

Tax on Import of Goods

Input tax credit of the IGST and GST Compensation CESS paid during import is made available to the importer. In order to get benefit from such ITC of IGST and GST compensation CESS, an importer has to essentially declare GST Registration no. i.e. GSTIN in the Bill of Entry. Once the CHA i.e. Custom Agent processes the Import through Customs, GST credit will get reflected automatically in GSTR 2B of Importer. The Importer can check the bill of entry status through ICEGATE i.e.  Indian Customs Electronic Gateway website. However, it is essential to compare the GST Amount between bill of entry and GSTR 2B and in the case of any discrepancies you need to inform the Custom Agent immediately.

Tax on Import of Services

Importer of services will need to pay Goods and services tax on reverse charge basis. Hence, the service recipient in India becomes liable for the tax payment. Once the GST is paid on reverse charge mechanism basis the credit for the same can be availed.

Important Points to Note

  • ITC should be availed of Integrated Goods and Services Tax only and not of Custom Duty
  • It is advisable to maintain an import tracker for those businesses who are engaged in frequent import of goods. The tracker should be match with GSTR 2B as well as Indian Customs Electronic Gateway website at the yearend.
  • In case of imports of goods, set of import documents are required to be submitted with Authorized Dealer Bank regularly.

Conclusion:

The department is issuing notices to those businesses whose Import GST credits are not matching with Imports according to the departments records. It is compulsory to maintain robust documentation and detailed tracker of imports in order to provide proper explanation against such notices.