From the finer print in GST

In the coming GST regime, imported goods attract IGST instead of present additional customs duty

In the coming Goods and Services Tax (GST) regime, imported goods attract Integrated GST (IGST) instead of the present additional customs duty (CVD and SAD).

There are different views regarding levy of IGST on high seas sale, when the ownership in goods is transferred by the original importer to another party while the goods are in transit.

Section 2(10) of the IGST Act says ‘‘import of goods” with its grammatical variations and cognate expressions means bringing goods into India from a place outside 

India. The proviso to Section 5(1) of this Act says IGST on goods imported shall be levied and collected in accordance with Section 3 of the Customs Tariff Act, 1975, 

on the value as determined under the said Act at the point when duties of customs are levied on the said goods under Section 12 of the Customs Act, 1962.

This means that the event of taxation for imported goods occurs when the goods enter India but levy and collection will be only when a bill of entry is filed under the Customs Act.

Under Section 2(56) of the Central GST Act, “India” means the territory of India as referred to in Article 1 of the Constitution, its territorial waters, seabed and sub-soil underlying such waters, continental shelf, exclusive economic zone or any other maritime zone as referred to in the Territorial Waters, Continental Shelf, 

Exclusive Economic Zone and other Maritime Zones Act, 1976, and the air space above its territory and territorial waters. Section 11(a) of the IGST Act says the place of supply of goods imported into India shall be the location of the importer. Section 7(2) of the Act says supply of goods imported into the territory of India, till they cross the customs frontiers, shall be treated to be a supply of goods in the course of inter-state trade or commerce.

And, Section 9 of this Act says that where the location of a supplier is in the territorial waters or where the place of supply is in the territorial waters, the place of supply shall, for the purposes of the Act, be deemed to be in the coastal state or Union Territory where the nearest point of the appropriate baseline is located.

There are many views regarding the constitutional validity of enabling states or UTs to levy taxes on sales that take place in territorial waters. Leaving these aside for now, the question is whether the law provides any mechanism for collection of taxes on high seas sale, whether within or outside the territorial waters.

If we look at the IGST, there is only one mechanism prescribed for its levy and collection on imported goods. Tthat is at the point when Customs duties are levied on imported goods under Section 12 of the Customs Act -- that is, at the time of filing the bill of entry. So, the view that no IGST is payable when a high seas sale takes place and that it is payable only when the last high seas buyer, the ultimate importer, files his bill of entry, commends itself. Anyway, the Central Board of Excise and Customs should clarify this matter.   E-mail: tncrajagopalan@gmail.com