During this critical time, where the people are seeking for the preventive measures for the Corona Virus. The economic condition of India is dwindling day by day. So here is my article, where I will be discussing the ways imports can be taxable under GST. First of all, what is GST? The Goods and Service Tax (GST) is a value-added tax imposed on most goods and services sold for domestic consumption, introduced in 2017 by the parliament. It is the destination-based tax and is the most revolutionary tax reform that has been introduced in the country. It will remove all the major indirect taxes from the country and will be exercised by the majority of the country.
Implementation of this tax will transform the way of doing business in the country, where both export and import of trade will get affected. In India, GST will have three components: Central Goods and Service Tax (CGST) where the center would charge the GST, State Goods and Service Tax (SGST) where the state would charge the GST and Integrated Goods and Service Tax (IGST); it will be equal to the SGST plus CGST.
Import is bringing something (goods and services) from another country to our country. When we used to import goods, there were certain duties needed to be followed, but after GST all these duties were subsumed. Now only custom duty and GST are being imposed on goods. Under the Goods and Services Tax, if we import goods and services from outside the geographical boundaries, then it is known as IGST and treated as inter-state supply. For Example: if we import Rs.500 goods where 10% is the Basic Custom Duty (BCD) then it will be equal to Rs.550, only after that IGST will be applied. Input Tax Credit i.e. if we are registered under GST and do not come under the composite scheme, then it will register as a regular taxpayer.
Services are treated as supply under Goods and Services Tax, if any company is providing you services that do not come under the geographical boundaries of our nation then it will be considered as supply. GST will follow the Transaction Value-based Valuation Principal from the current customs law. Transaction Value is the price actually paid or payable for the supply of goods and services. It is also the basis for valuation for the supply of goods and services under the GST administration. IGST will be computed on the transaction value of the goods.
Tax paid while import will remain available as a credit under the “Import and Sale” model. Also refund of Special Additional Duty (SAD), which is available now, after doing specific compliance, no such restrictions will be part of GST. If the goods supposed to have manufactured in India, then the SAD is countervailing to VAT/sales tax.
SAD/additional custom duty is leviable under sub-section (5) of Section 3 of the Customs Tariff Act 1975, which charged at the rate of 4% on the goods imported into India. It is chargeable on the total value of imports, including CIF + Basic Customs duty + CVD (Countervailing Duty). This 4% is refundable to the importer tradesmen i.e. who sold their goods in India without changing identity/modification of goods. The tax revenue in the case of SGST will be added together of interest or different investments over some time to the State where the imported goods and services are consumed, as GST is a destination-based tax.
The prevailing customs import tariff that is packed with multiple exception notifications will be critiqued and possibly withdrawn or transformed into a refund mechanism. This exercise could change the composition of export-linked duty exemption schemes, under the FTP (Fund Transfer Pricing, which measures the contribution by each source of funding to the overall profitability in a financial institution). Under which the duty exemptions may be relieved from the payment of BCD (Binary Code Decimal). However, IGST may not be exempted.
To conclude, both the Central Goods and Services Tax (CGST) and the State Goods and Services Tax (SGST) would be levied simultaneously on each transaction of the supply of goods and services except the spared goods and services, goods that are outside the purview of GST, and the transactions, which are below the prescribed threshold limits. With the preponderance of the taxes being subsumed by the GST, exportation will receive a hike. Simultaneously, this single tax will help diminish the cost of imports.
This article is authored by Aarti Tiwari, 3rd year BA.LLB student of Ramaiah Institute of Legal Studies, Bangalore.
Also Read – Goods and Services Tax (GST) Act: Development, Objectives and Reasons
