For warehoused goods, IGST to be levied and collected upon final clearance for home consumption
Recently, the Central Board of Indirect Taxes and Customs (CBIC) vide Circular No. 3/1/2018-IGST dated 25th May, 2018, has clarified that IGST would be levied and collected only when the goods are cleared for home consumption from the customs bonded warehouse, i.e., at the time of filing the ex-bond bill of entry.
The Customs Act, 1962 provides the facility to the importer to deposit the imported goods into a customs bonded warehouse without payment of duty, in such importer can defer the payment of Customs Duty. Also, IGST Act, 2017, provides that import of goods shall be treated as supply in the course of inter-state trade till they cross the Customs Frontiers of India. Therefore, the duties of customs (BCD+IGST) in respect of warehoused goods shall be paid on the imported goods at the stage of ex-bonding.
However, in certain cases, the importer of goods transfers the ownership of warehoused goods to another person, before clearance of goods for home consumption or for exports. The CBIC vide Circular No. 46/2017- Customs, dated 24th November, 2017 clarified that when imported goods are sold to another person before clearance from customs bonded warehouse, the IGST shall be payable by the importer at the when such goods are sold to another person. Further, the buyer of such warehoused goods becomes the importer, and therefore liable to pay the duties at the time of removal of such goods from the warehouse (BCD+IGST) which were deferred earlier. This results in double taxation of the same transaction.
Now, vide Circular No. 3/1/2018-IGST, it is therefore clarified that IGST in respect of warehoused goods be levied and collected at the time of filing the ex-bond bill of entry and the and the value addition accruing at each stage of supply shall form part of the value on which the IGST would be payable at the time of clearance of the warehoused goods for home consumption. Further, for the purpose of valuation of warehoused goods, sub-section (8A) has been inserted in section 3 of the Customs Tariff Act, 1975 vide Section 102 of the Finance Act, 2018, with effect from 31st March, 2018.
This Circular would be applicable for supply of warehoused goods which are deposited in a customs bonded warehouse on or after April 1, 2018.