Skip to main content

IGST to be levied only when goods are brought for customs clearance


The integrated goods and services tax (IGST) would not be levied on sale of goods on high seas but would be charged when they are brought for customs clearance, authorities have clarified, much to the relief of oil and gas, power and telecom companies. 
The Central Board of Excise and Customs (CBEC) has issued a circular to this effect after receiving references on the issue as all inter-state transactions are subject to IGST. 
'High sea sale' is a common trade practice where in original importer sells goods to a third person before they are customs cleared. Final customs clearance is filed by the final owner. CBEC has said IGST would be required to be levied only once at the time of importation of goods, which is when goods are cleared by customs. 
It also clarified that value addition accruing in each high sea sale transaction shall form part of the value on which IGST would be levied at the time of clearance. 
This means that IGST would be payable on the value for the last buyer in the chain. The importer would be required to furnish the entire chain of documents such as original invoice, high-seas-sale contract, details of service charges, commission paid, etc. to establish a link between the first contracted price of the goods and the last transaction. 
Tax experts said the circular has ended the confusion on the issue, but the government should clarify whether such sales trigger reversal of input credit. 
"There was lot of confusion in the industry on the taxability of high seas sale, i.e., whether it is taxable twice or only once in the hands of the ultimate importer," said Abhishek Jain, tax partner at EY India. "The circular provides logical and right clarity that high seas sale should be taxed only once in the hands of ultimate importer."
The Economic Times, New Delhi, 03rd August 2017

Comments

Popular posts from this blog

At 18%, GST Rate to be Less Taxing for Most Goods

About 70% of all goods and some consumer durables likely to cost less

A number of goods such as cosmetics, shaving creams, shampoo, toothpaste, soap, plastics, paints and some consumer durables could become cheaper under the proposed goods and services tax (GST) regime as most items are likely to be subject to the rate of 18% rather than the higher one of 28%.

India is likely to rely on the effective tax rate currently applicable on a commodity to get a fix on the GST slab, said a government official, allowing most goods to make it to the lower bracket.

For instance, if an item comes within the 12% excise slab but the effective tax is 8% due to abatement, then the latter will be considered for GST fitment.

Going by this formulation, about 70% of all goods could fall in the 18% bracket.

The GST Council has finalised a four-tier tax structure of 5%, 12%, 18% and 28% but has left room for the highest slab to be pegged at 40%. A committee of officials will work out the fitment and the council…

Firms with sales below Rs.50 crore out of ambit

The tax department has reiterated that the PoEM rules, which require foreign firms to pay taxes in India if the effective control is here, will not apply to companies withaturnover of Rs.50 crore or less inafinancial year. Last month, the tax department had come out with the longawaited Place of Effective Management (PoEM) rules, which require foreign companies in India and Indian firms with overseas subsidiaries to pay local taxes if their businesses are effectively controlled by Indians. Then the rules did not setathreshold above which they were to apply. However, the accompanying press release states that the rules will not apply to companies withaturnover of up to Rs.50 crore inayear. That created confusion whether the threshold will be adhered to. Inacircular to clarify things, the Central Board of Direct Taxes (CBDT) said the provision "shall not apply toacompany havingaturnover or gross receipts of ~50 crore or less inafinancial year".

PoEM rules essentially target shell …