The CBIC or The Central Board of Indirect Taxes and Customs has directed its field offices to charge GST on goods stored in customs warehouses by the third party only during final clearance. The move comes after the amendment in the Customs Tariff Act. The amendment reportedly comes into effect from March 31, 2018, and is aimed to facilitate ease of doing business for importers.
Reportedly, importers file an ‘into-bond’ or bill of entry wherein they provide the transactional value of the imported goods to be stored in the warehouses. The CBIC has decided that based either on the transactional value or the then-current valuation of the warehoused imports (whichever is higher), GST would be levied on that amount whose value would be higher. It is common practice among importers to store the imported goods in customs owned warehouse before transfer/sale of goods to customers.
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The Four-Step Process is explained below:
- Importer files an ‘into-bond’ bill of entry
- Goods stored in a Customs Bonded Warehouse.
- Importer Supplies stored Goods to third party/person from the warehouse.
- The Third Party/Person files ‘ex-bond’ bill of entry for Clearance.
Some key highlights from the circular to the Principal Chief Commissioners and Chief Commissioners, the GST policy wing of the CBIC include:
- IGST to be levied during Final Clearance i.e during the ‘ex-bond’ bill of entry.
- Value Addition accrued during each supply cycle would be reflected in the ex-bond’ bill of entry.
- GST would be applied only after taking into account the value added if and only if it surpasses transaction value.
- The amendment which has been in effect since March 2018, will be applicable to only those goods that have been stored on or after April 1, 2018.
The CBIC in a statement said, “The supply of goods before their clearance from the warehouse would not be subject to the levy of integrated tax and the same would be levied and collected only when the warehoused goods are cleared for home consumption from the customs bonded warehouse”
The Experts Word
Experts believe that the CBIC has done the right thing by addressing the importer grievances. The anomaly that leads to double taxation on imports since July 2017 has finally done away with. A sigh of relief for importers but dark clouds still loom over the supplies made prior to April 1.
