Expert corner: Re-import of exported goods does not attract duty, IGST

We had exported certain goods without payment of Goods and Services Tax (GST) under legal undertaking. The buyer had paid for the goods. However,the buyer says that he wants to send back the exported goods for repairs and re-export. How to deal with the situation under FEMA, GST and Customs laws?
 
You can re-import the exported goods under notification no. 158/95-Cus dated 14th November 1995 without payment of basic customs duty and IGST.
 
You have to execute a bond with the Customs that you will re-export the goods after repairs, within six months from the date of re-import. This period can be extended by six months. If you fail to re-export the goods within the period allowed, you have to pay full duties and IGST that were exempted. An important condition is that the re-imported goods must be identified as the same as exported. At the time of re-export, the goods again must be identified as the same as imported and you must seek redemption of the bond upon fulfilment of the conditions of the notification and the bond. You can re-export the goods without IGST payment under legal undertaking. Since the customer has already paid for the goods and has only sent it back for removal of defects, there is no FEMA implication.  You can get a GR waiver from banks for the re-export and submit to the customs.

 

We have placed an order for import of goods from a foreign party. The payment terms require us to open a letter of credit. There are many conditions in the order. So, we asked our bankers to make the order a part of the letter of credit but they have refused.  Are they correct?
 
Yes. A documentary credit is, by its very nature, a separate transaction from the sale or other contract on which it may be based. The letter of credit must be seen essentially as a tool to facilitate the process of payment against performance as evidenced by the documents presented. Banks are not in any way concerned with or bound by the terms and conditions in the contract, even where any reference to it is included in the letter of credit. Banks should discourage any attempt by the applicant to include, as an integral part of the credit, copies of the underlying contract, proforma invoice and the like. Article 4 of Uniform Customs and Practices for Documentary Credits (UCP 600) is explicit on this point.

 
We have obtained advance authorisation on self declaration basis, as the standard norms are not fixed. We have filed necessary documents but we have not heard anything from the Norms Committee regarding fixation of the norms. How can we know the status of our application?
 
Please see DGFT Trade Notice no. 24 dated 16.08.2018 regarding the facility to view status of your application online. The status displayed  is for information only. For regularization of authorisation, you need actual signed minutes.
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