EOU's B-17 bond serves purpose of continuity bond under IGCR Rules

Rajagopalan answers SME queries related to GST, export and import matters

We refer to DGFT PN 14/2024 dated August 22, 2024 amending Para 4.49(g)(i) and (g)(ii) of the HBP. The first sentence of the amended Para 4.49(g)(ii) says that exports made under any shipping bills/under same authorisation after expiry of export obligation period using unutilised quantity of drugs shall also be accepted in lieu of submission of destruction certificate. Later, this Para says that the authorisation holder shall pay Customs duty with applicable interest to the  Customs authority on unutilised quantity imported under advance authorisation and that such exports shall be considered for waiver of destruction certificate and not for waiver of liability of applicable duties and interest. Our doubt is whether we can claim drawback on such exports and what is the gain in exporting under same authorisation after export obligation (EO) period expiry?

In my opinion, after payment of duties and interest, you can use the inputs in the manufacture of finished goods and export the same under claim of duty drawback. I see no particular gain in export of such goods under same authorisation after EO expiry period, when you can claim drawback.

Our foreign buyer cancelled an export order and so is ready to pay our claim for damages.  How can we treat this transaction under GST?

Quite obviously, the foreign party is ready to honour your claim in consideration for your not dragging him to court. So, you can treat it as a service of ‘agreeing to refrain from doing an act’ falling under service code 999793. The service will attract IGST of 18 per cent as per S.No.35 of notification no.8/2017-IT (Rate) dated June 28, 2017. However, the service will be zero rated as the place of supply of service is outside India, according to Section 13(2) of IGST Act, 2017 and all the conditions for treating the transaction as ‘export of services’ in accordance with Section 2(6) of the IGST Act, 2017 are fulfilled.

We refer to CBIC Circular No.11/2024-Customs dated  August 25, 2024 regarding implementation of automation in the Customs (Import of Goods at Concessional Rate of Duty or for Specified End Use) Rules, 2022 in respect of EOUs with effect from 01.09.2024. The Circular says that all EOUs would be required to obtain IGCR identification number (IN) at the ICEGATE portal and also register IGCR bond for filing bill of entry with IGCR benefit. Please clarify whether we have to execute a fresh IGCR bond in addition to our existing B-17 bond? Also, can we mention broad description of finished goods to be manufactured in the IGCR-1?

CBEC Circular 29/2017-Customs dated July 17, 2017 says that the B-17 bond,  being a general-purpose running bond will serve the requirement of continuity  bond to be submitted under Customs (Import of Goods at Concessional Rate of Duty) Rules, 2017 and therefore EOU/STP/EHTP units are not required to submit separate continuity bond. I think you can mention broad description of finished goods but we have to see how the system responds, when it goes live. 

Business Standard invites readers' SME queries related to GST, export and import matters. You can write to us at smechat@bsmail.in