Applicability of IGST on goods transferred / sold while being deposited in a warehouse

As a common practice while importing goods, the goods shall first land to custom bonded area then transfer or sale of such goods occur from that area.

As a trade practice importer files an into-bond bill of entry and stores the goods in a customs bonded warehouse and thereafter, supplies such goods to another person who then files an ex-bond bill of entry for clearing the said goods from the customs bonded warehouse for home consumption.

For the purpose of determining the value of imported goods for charging custom duty, section 14 of The Customs Act, 1962, shall be referred. Any cost 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.

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.

In respect of goods stored in a customs bonded warehouse, if importer transfers ownership to another person, before clearance of the goods, this case involves additional taxable event. 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 IGST Act read with section 15 of CGST Act and the tax liability shall be reckoned as per section 9 of CGST Act. However, the customs duty shall be collected only at the time of filling ex-bond bill of entry as per section 68, at the value as had been determined under section 14 of the Customs Act.

The above stated law was mentioned under the Circular No. 46/2017 under Customs, dated 24.11.2017.

In continuation of above, government had issued another Circular No. 3/1/2018 under IGST, dated 25th May,2018.  The circular clarifying that from 1st April,2018 the supply of goods imported into the territory of India, till they cross the customs frontiers of India, is treated as a supply of goods in the course of inter-state trade or commerce.

It is further clarified that integrated tax shall be levied and collected at the time of final clearance of the warehoused goods for home consumption i.e., at the time of filing the ex-bond bill of entry and the value addition accruing at each stage of supply shall form part of the value on which the integrated tax would be payable at the time of clearance of the warehoused goods for home consumption.

It has been brought to notice of the Board that during the period from 1st of July, 2017 to 31st of March, 2018, the common portal did not have the facility to enable the taxpayer to report payment of integrated tax, for such supplies especially where the supplier and the recipient were located in the same state or Union territory. Hence taxpayers making such supplies have reported such supplies as intra-state supplies and discharged CGST & SGST instead of IGST accordingly.

Considering the limitations of the portal government has decided through Circular No. 91/10/2019-GST dated 18th February,2019, as a one-time exception, suppliers who have paid CGST & SGST on such supplies, during the said period, would be deemed to have complied with the provisions of law as far as payment of tax on such supplies is concerned as long as the amount of tax paid as CGST & SGST is equal to the due amount of IGST on such supplies.

Disclaimer : This content is meant for information only and should not be considered as an advice or opinion, or otherwise. AKGVG & Associates does not intend to advertise its services through this.

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