The Central Board of Indirect Taxes and Customs (CBIC) has notified guidelines on the pre-import condition in the Advance Authorization Scheme (AAS) pursuant to a Supreme Court decision. The Supreme Court has upheld the requirement of the pre-import condition to claim IGST and GST compensation cess on imports made under the AAS. The Gujarat High Court had earlier set aside the pre-import condition, but the Supreme Court reversed the decision. The pre-import condition was removed in January 2019, and guidance was given on tax treatment where imports are effected without payment of IGST.
Further, the SC had also directed the Tax Authorities to allow refund or input tax credit (ITC) of IGST and Cess, as the case maybe, payable by the Respondents (in the aforesaid matter). For this, the Respondents were required to approach the jurisdictional Commissioner and provide the relevant documents within 6 weeks of the aforesaid judgement in case of past imports where IGST and Cess was paid, and the tax authorities were directed to issue a circular for appropriate procedure in this regard.
Pursuant to the above, the Central Board of Indirect Taxes and Customs (CBIC) has issued a circular in this regard which observes the following details were involved in carrying out the SC instructions:
- ICES does not have a functionality for payment of customs duties on a bill of entry (BE) (unless it has been provisionally assessed) after giving the Out-of-Charge (OOC) to the goods. In this situation, duties can be paid only through a TR-6 challan.
- Under GST law, the BE for the assessment of integrated tax/ compensation cess on imports is one of the documents based on which the input tax credit may be availed by a registered person. A TR-6 challan is not a prescribed document for the purpose.
- The facility for Suo moto payment of customs duty in case of bona fide default in export obligation (in terms of Circular no:11/2015 dated 01 April 2015) is inadequate to transfer of relevant details between Customs and GSTN for availing ITC by the importer.
- The section 143AA of the Customs Act, 1962 provides that the Board may, for the purposes of facilitation of trade, take such measures for a class of importers-exporters or categories of goods in order to, inter alia, maintain transparency in the import documentation.
Keeping above aspects in view, noting that the order of the Hon’ble Court shall have bearing on importers others than the respondents, and for purpose of carrying forward the Hon’ble Court’s directions, the following procedure can be adopted at the port of import (POI):-
- The importers (including the Respondents as well as others, who did not fulfil pre-import condition) should approach the concerned assessment group at the POI, with relevant details for payment of IGST and Cess along with applicable interest.
- The assessment group at POI shall cancel the OOC and indicate the reason in remarks. The BE shall be assessed again so as to charge the tax and cess, in accordance with the above judgment.
- The payment of tax and cess, along with applicable interest, shall be made against the electronic challan generated in the Customs EDI System.
- On completion of above payment, the port of import shall make a notional OOC for the BE on the Customs EDI System [so as to enable transmission to GSTN portal of, inter alia, the IGST and Compensation Cess amounts with their date of payment (relevant date) for eligibility as per GST provisions].
- Above procedure specified above can be applied once to a BE.
INPUT TAX CREDIT IN GST: The IGST and Cess paid can be claimed as ITC or refund subject to the conditions and restrictions provided under the GST Act, 2017
- The input credit with respect to such assessed BE shall be enabled to be available subject to the eligibility and conditions for taking input tax credit under Section 16, Section 17 and Section 18 of the CGST Act, 2017 and rules made thereunder.
- In case such input tax credit is utilized for payment of IGST on outward zero- rated supplies, then the benefit of refund of such IGST paid may be available to the said registered person as per the relevant provisions of the CGST Act, 2017 and the rules made thereunder, subject to the conditions and restrictions provided therein.
You can read our earlier article on said case law here : “Supreme Court Reverses Gujarat High Court and Upholds ‘Pre-Import’ Condition as Prospective” – RMPS (rmpsco.com)
Detail Circular is also attached here with for ready reference.
This Article is only a knowledge-sharing initiative and is based on the Relevant Provisions as applicable and as per the information existing at the time of the preparation. In no event RMPS & Co. or the Author or any other persons be liable for any direct and indirect result from this Article or any inadvertent omission of the provisions, update etc. if any.
