CESTAT New Delhi: Same IGST Rate and Interest Apply to Inter-State Trade and Import Supplies

The CESTAT Bench of New Delhi held that the same IGST rate and interest are applicable to both inter-state trade and import transactions.

The bench, comprising Dilip Gupta (President) and P.V. Subba Rao (Technical), emphasised that the chargeability of Integrated Goods and Services Tax (IGST) arises from the inter-state supply of goods and services, including supplies involved in international trade. In the absence of an actual supply, IGST cannot be levied, even in cases where goods are imported.

Unlike other customs duties that are credited to the Consolidated Fund of India and later distributed between the Centre and the States based on Finance Commission recommendations, the Integrated Goods and Services Tax (IGST) follows a different process.

IGST is not routed through the Consolidated Fund; instead, it is apportioned between the Union and the States as determined by Parliament, based on the recommendations of the GST Council. As a result, the bench noted that the same tax rates and interest applicable to inter-state trade also apply to import-related supplies.

The taxpayer in the case had imported and cleared the goods with the use of 13 advance authorisations without filing basic customs duty, integrated goods and services tax on them.

It was discovered by DGRI that the taxpayer has incorrectly claimed the exemption from IGST since this exemption was available for the actual user condition, which the taxpayer does not fulfil. On the imported consignments, the taxpayer filed IGST, including interest.

Interest was levied on the IGST paid on imported goods after a delay, and the amount paid as interest was appropriated, the Commissioner of Customs mentioned.

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The taxpayer, dissatisfied with the decision of the Commissioner of Customs, submitted a plea to the Commissioner (Appeals), who upheld the order of the Commissioner of Customs.

Against the final order, the taxpayer appealed before the Rajasthan High Court, but the final order has not been stayed. The order of the Commissioner (Appeals) has been contested by the taxpayer before the Tribunal.

On the basis that IGST is an additional duty of customs, and the provisions of interest do not apply to the additional Duty of Customs, the taxpayer is not obligated to pay any interest despite it paid IGST with delay. The same appeal may be adjourned and opted for after the decision of the Rajasthan High Court.

The department argued that, as the case has already been adjudicated by the Tribunal and the order remains in force, without any stay or reversal by a higher court, there is no justification for delaying the proceedings.

Tribunal, under the IGST Act on inter-state supplies within India, whatever is payable should be liable to get paid u/s 3 of the Customs Tariff Act, read with section 5 of the IGST Act if the supplies are in the course of importation.

The IGST paid on goods in international trade should not be treated differently from the IGST paid on goods in inter-state trade. Consequently, the same tax rates and interest rules that apply to IGST in inter-state transactions also apply to imports.

The Tribunal for the above said permitted the appeal and remitted the case to the Commissioner to decide the interest applicable to IGST.