In the present tax scenario, laws on VAT, Service Tax, Customs duty and Excise duty are the ones that lay down the respective tax treatment of imports and exports. However, under the GST regime, the VAT, Service Tax, Excise, and Customs would all be comprehended within GST and the duties on Customs would still continue to be imposed separately.
Before we do a detailed understanding of the impact of imports and exports under GST, let us first understand the basic meaning of import and export of goods and services under the GST laws.
Import and Export of Goods
“Goods’’ means every kind of movable property other than actionable claim and money but includes securities, growing crops, grass, and things attached to or forming part of the land which is agreed to be severed before supply or under the contract of supply.
Note – For the purpose of this clause, the term ‘moveable property’ shall not include any intangible property.
“Import of Goods” as defined by the Model Gst Law 2016 with its grammatical variations and cognate expressions, means bringing into India from a place outside India.
“Export of goods” with its grammatical variations and cognate expressions, means taking out of India to a place outside India.
Import and Export of Services
“Services’’ means anything other than goods. Services include intangible property and actionable claim but do not include money.
The supply of any service shall be treated as an “import of service” if,
– The supplier of service is located outside India,
– The recipient of service is located in India,
– The place of supply of service is in India, and
– The supplier of service and the recipient of service are not merely establishments of a distinct person;
Note – the above definition is exhaustive in nature and hence all the conditions must be fulfilled. Also for the purpose of the above definition, an establishment of a person in India and any of his other establishment outside India shall be treated as establishments of distinct persons. A person carrying on a business through a branch or agency or representational office in any territory shall be treated as having an establishment in that territory.
The supply of any service shall be treated as “export of service” when
(a) The supplier of service is located in India,
(b) The recipient of service is located outside India,
(c) The place of supply of service is outside India,
(d) The payment for such service has been received by the supplier of service in convertible foreign exchange, and
(e) The supplier of service and recipient of service are not merely establishments of a distinct person.
Note – For the purposes of the last point above, an establishment of a person in India and any of his other establishment outside India shall be treated as establishments of distinct persons.
Imports and Exports under the Current Regime
Import of Goods
Under the present taxation regime, any person importing goods within the country has to pay customs duty, countervailing duty (CVD), and special additional duty (SAD).
If the goods have been manufactured in India, then the countervailing duty(CVD) is levied at a rate equivalent to the rate of Excise on such goods. On the other hand, the special additional duty (SAD) is levied at a rate equivalent to VAT on the goods in India.
In India, both CVD and SAD are levied to bring down the imported product’s price to its true market price. In case the importer uses the imported goods to manufacture goods that are dutiable in India or ones that provide taxable services, CVD paid on inputs for this case is available as a tax credit. If the importer is just a trader, then the CVD paid on imports is not available as credit.
On the other hand, SAD paid on import is eligible for a refund, subject to conditions. However, the customs duty paid is not available as credit and it becomes a cost for the importer.
Import of Services
A person who imports services in India has to pay the Service Tax on the imported service at the Service tax rate applicable in the country. The importer can claim a tax credit of the Service Tax paid on imports.
Exports of Goods and Services
In the present tax regime, the rate of tax on exports of goods and services is 0%. An exporter can also claim a refund of the tax paid on inputs used to purchase/provide/manufacture the exported goods or services.
Imports and Exports Under GST
“Integrated Goods and Services Tax” (IGST) means tax levied under the GST Act on the supply of any goods and/or services in the course of inter-State trade or commerce.
Note 1 – A supply of goods and/or services in the course of import into the territory of India shall be deemed to be a supply of goods and/or services in the course of inter-State trade or commerce.
Note 2 – An export of goods and/or services shall be deemed to be a supply of goods and/or services in the course of inter-State trade or commerce.
Import and Export under GST
IGST and Basic Custom Duty(BCD) will be levied.
|Zero rated supply. No tax shall be charged.
|Input Tax Credit
|ITC of IGST allowed. ITC of BCD not allowed.
|ITC allowed. Refund shall also be allowed
Under the GST regime, any person importing goods within the country has to pay the customs duty as well as the IGST. The difference between the current regime and GST regime is that the CVD and SAD that are being levied on imports at present will be replaced by IGST under GST.
IGST on the imported goods will be imposed at the rate applicable in India. Any person importing these goods can claim a full tax credit of IGST paid on imports. Hence, importers who were unable to claim the credit of CVD or SAD in the current regime can now fully claim the tax credit of the IGST paid on imports. However, no tax credit will be given on customs duty paid and it remains a cost for the importer under GST also.