The Delhi High Court has issued notices to the Union government, the GST Council and the Central Board of Excise and Customs (CBEC) over the issue of double taxation on imported goods sold from one Customs-bonded warehouse to another. The matter would come up for hearing on March 8. Abhishek Rastogi of Khatian & Co said the issue relates to a Customs circular that has raised fears of the government imposing integrated goods and services tax (GST) twice on these kinds of transaction. Also, the company paying the taxes will not be able to get input tax credit, he said. Suppose a company imports goods and keeps it in its Customs-bonded warehouse. It then sells it to another company which keeps the goods in its own bonded warehouse.
The second company will have to pay Customs duty and integrated GST (IGST) twice. Also since the first company has not paid duties, the second one will not get the credit. Petitioner Aditya Mody of Devashish Polymers said, “It will become very difficult to sell goods while those are in bonded premises.” The CBEC had issued a circular clarifying that any supply of imported goods taking place before the goods crosses Customs frontiers of India should be treated as an inter-state supply and such transaction for sale and transfer would be subject to IGST. This is without prejudice to the levy of Customs duty and collection of duty at ex-bound stage. The industry is worried since it would impact its cash flow and compliance. The impact would be on the warehousing models, including impact on supplies from special economic zones.