This Tax Alert summarizes the recent notifications and circular[1] issued by the Central Board of Indirect Taxes and Customs (CBIC).
Notification nos. 45 and 46/2017-Customs dated 30 June 2017 grants concession from payment of Basic Customs Duty (BCD), Integrated tax (IGST) and Compensation cess (cess) on re-import of goods subject to specified conditions.
As per Entry 2 of the notifications, in case of re-import of goods exported for repairs, duty of customs shall be levied on value of repairs, insurance and freight. Similarly, as per Entry 3, for cut and polished precious and semi-precious stones exported for treatment, duty of customs at the time of re-import is leviable on the cost of treatment, insurance and freight.
Delhi Tribunal, in one of its ruling, had held that duty of customs does not include integrated tax and thus, the taxpayer is entitled to full exemption from payment of IGST on re-import of goods exported for repairs.[2]
GST Council, in the 43rd meeting, deliberated on this issue and recommended clarificatory amendment to levy IGST on repair value of goods re-imported.[3]
Vide present notifications, the words “duty of customs” in Entry 2 and 3 is substituted with “said duty, tax or cess”.
An Explanation is also inserted to clarify that re-import of goods sent abroad for repairs/ treatment attract IGST and cess, besides basic customs duty, on the repair, insurance and freight value.
A circular has also been issued in this regard.
Comments
a. Since the circular indicates that the amendment is clarificatory in nature, one may need to analyse its retrospective applicability.
b. In light of amendment, apart from paying IGST under reverse charge on import of repair service, the taxpayer will also be required to pay IGST as a part of customs duty. This may lead to double taxation.
c. It is relevant to note that the Revenue’s appeal to SC against the Delhi Tribunal’s judgment in the matter is pending disposal. Circular may have a bearing on the outcome of the decision.
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