Levy of IGST/GST
on Sales of Goods Deposited in a Customs Bonded Warehouse
[Ref:
Circular No. 46/2017-Customs dated 24 November 2017]
Subject:
Applicability of IGST / GST on goods transferred / sold while being deposited
in a warehouse.
References
have been received from the trade regarding levy of IGST/GST on sales of goods
deposited in a customs bonded warehouse.
2. Ch IX of the
Customs Act provides for deposit of goods into a customs bonded warehouse
licensed under section 57 or 58 or 58A without payment of duty and the
procedures to be followed with respect to the warehoused goods. Sub-section (5)
of section 59 provides that the importer is at liberty to transfer the
ownership of such goods to another person while the goods remain deposited in
the warehouse.
3. It is to be noted that the value of imported
goods, for purposes of charging customs duty, is determined as per section 14
of the Customs Act, 1962 at the time of import i.e. at the time of filing of
the into-bond Bill of Entry. Any costs incurred after the import of goods, such
as, port charges / port demurrage charges or costs for customs clearing or
transporting the goods from the port to the customs bonded warehouse or costs
of storage at the customs bonded warehouse, cannot be added to the value of the
goods, for the purpose of levy of duties of customs at the stage of ex-bonding.
Further, clause (b) of sub-section (1) of Section 15 of the Customs Act
provides that the rate of duty or tariff valuation for an ex-bond Bill of Entry
shall be the date on which it is filed. There is no provision to vary the
assessable value of the goods at the ex-bond stage unless they are such goods
on which tariff valuation applies. Therefore, duties of customs (BCD + IGST)
shall be paid on the imported goods at the stage of ex- bonding on the value
determined under section 14 of the Customs Act.
4. However, the transaction of sale / transfer
etc. of the warehoused goods between the importer and any other person may be
at a price higher than the assessable value of such goods. Such a transaction
squarely falls within the definition of “supply” as per section 7 of the
Central Goods and Services Tax Act, 2017 (hereinafter referred to as, “CGST
Act”) and shall be taxable in terms of section 9 of the CGST Act read with
section 20 of the Integrated Goods and Services Tax Act, 2017 (hereinafter
referred to as, “IGST Act”). It may be noted that as per sub-section (2) of
section 7 of the IGST Act, any supply of imported goods which takes place
before they cross the customs frontiers of India, shall be treated as an
inter-State supply. Thus, such a transaction of sale/transfer will be subject
to IGST under the IGST Act. The value of such supply shall be determined in
terms of section 15 of the CGST Act read with section 20 of the IGST Act and
the rules made thereunder, without prejudice to the fact that customs duty
(which includes BCD and applicable IGST payable under the Customs Tariff Act)
will be levied and collected at the ex-bond stage.
5. Thus, in respect of goods stored in a customs
bonded warehouse, there is a possibility that certain cases may involve an
additional taxable event, if a transfer of ownership of warehoused goods takes
place between the importer and another person, before clearance of the goods,
whether for home consumption or for export.
5.1
In
other words, when goods
remain deposited in a customs bonded warehouse and are transferred by the importer
to another person, the transaction will be subject to payment of IGST at the
value determined as per section 20 of the IGST Act read with section 15 of the
CGST Act, 2017 and the rules made thereunder and the tax liability shall be
reckoned as per section 9 of the CGST Act, 2017.
5.2
However, it may be noted that so long as such
goods remain deposited in the warehouse the customs duty to be collected shall
remain deferred. Further, it is only when such goods are ex-bonded under
section 68, shall the deferred duty be collected, at the value as had been
determined under section 14 of the Customs Act, 1962 in addition to IGST
leviable, as indicated at Para 5.1 above. An illustrative chart on in bond
sales and clearance thereof is attached as Annexure.
6. Difficulties in implementation, if any, may
be brought to the notice of the Board
F.No:
473/10/2017-LC
ANNEXURE
Sale of goods in
a Bonded Warehouse and clearance thereof:
ILLUSTRATION
|
Box A |
|
Box B |
|
Box C |
|
Box D |
|
Goods imported
by “A” on 2nd July 2017. Importer wants to deposit
the goods in a bonded warehouse to
defer duty |
|
Importer files an “into bond bill of
entry” and the goods are deposited in a
Bonded Warehouse. BCD and IGST (Section 3(7) of Customs Tariff
Act 1975) are deferred.
Illustration of duty deferment: A:
Value of goods
= Rs. 100 B:
say BCD is 10% = Rs. 10 (10% of Rs. 100) C: say IGST is
12% = Rs. 13.2 (12% of Rs. 110) D: Duty Deferred (B+C) = 23.20 |
|
“A’
sells the goods
to “B” on 21st
July 2017 for Rs. 300 and
charges IGST of Rs. |
|
B” files
an
Ex-bond Bill of entry
on
25th of September 2017 and pays
Rs. 23.20 (the
deferred duty). (In
addition to duty of Rs. 36 paid earlier as
indicated in Box-C). |
