Sandeep Ahuja & Co.

Established in the year 1986, we are a leading chartered accountancy firm based in Delhi & NCR rendering comprehensive professional services which include statutory audit, internal audit, direct tax, transfer pricing, GST, bank audit, propriety audit, cost accounting, internal financial controls and risk advisory.

Friday, July 14, 2017

Custom Duty under GST for Importers

Presently, the customs duty is having three major components

i. Basic Customs Duty (BCD),
ii. Countervailing Duty (CVD), and
iii. Special Additional Duty (SAD)

Under the GST Law, CVD and SAD will be subsumed by GST, however, BCD will continue as under the present regime and will be charged as per the current law.

EC & SHEC shall also continue to be levied on imports of goods on custom duties except CVD and SAD.

Some of the salient features of GST's impact on imports are given below.

Tax Structure under GST for Imports
Taxes Levied
Input Tax Credit
IGST - Allowed
BCD - Not Allowed

Imports to be Treated as Inter-State Supply

Supply of goods in the course of imports will be deemed to be a supply of goods in the course of inter-state trade and accordingly leviable to Integrated Goods & Service Tax (IGST) in addition to the customs duties and other charges.

Destination Based Taxation

The incidence of tax will follow the destination principle i.e. GST shall be levied where goods are to be consumed and services are to be received. The liability of payment of tax and filing of return will, therefore, akin to the provision under reverse charge mechanism, be on the service receiver, if such services are provided by a person residing outside India.

Transaction Value Based Valuation

The concept of MRP valuation under GST will be replaced by the transaction value based valuation. Consequently, the amount of CVD levied on customs duty will be effected as this is calculated on MRP under the present regime, but the same will be replaced with IGST as calculated on the transaction value. This transaction value includes any taxes, duties, fees and charges such as anti-dumping duty, safeguard duties, and other additional duties levied under any other statute. This would impact the valuation, working capital and management of such imports.

Input Tax Credit Available

IGST paid on imported goods would be available as credit under "import and sale" model without any restrictions on credit of SAD. No such credit is available under the present regime for either CVD or SAD on which credit is available only after special compliances.

Hence, these changes will significantly impact the working capital requirements under GST regime, but at the same time decrease the cost of imports as there will be a free flow of credit.

Withdrawal of Exemptions

At present there are various exemptions available and CVD is calculated considering those exemptions. To align the provisions of Customs Act or Rules and Foreign Trade Policy with GST, the various exemption notifications which are presently available in customs would not be available due free flow of the credit chain.

Filing of Return

Under GST, a monthly tax return shall be filed by an importer as opposed to the present regime of filing return under state tax law for imports and for claiming CVD.

- Compiled by Kashika Ahuja


  1. Informative post! I really like and appreciate your work, thank you for sharing such a useful information about taxation management strategies, keep updating the information, hear i prefer some more information about jobs for your career hr jobs in hyderabad .

  2. Thanks for the post, could you please mention any relaxation for IGST for import of agriculture related machinery.