Chatroom: EOU exemption on inputs unavailable for services not exported

Our foreign customer has asked us to make certain goods and send them to a party in India. We will get payment in foreign exchange from the foreign customer. Please guide us on how to prepare the invoices and whether we have to pay the GST. 

Since you will send the goods to a party in India, this is not an export transaction and so, the supply attracts GST. It will not be zero rated. You will have to prepare a GST invoice in rupee equivalent of the price and charge GST. You should prepare an e-way bill for sending the goods to the consignee, as instructed by the foreign buyer. You can send a commercial invoice in foreign exchange to the foreign party and receive the payment through normal channels.

 

We are an EOU in the services sector, providing R&D services and we import a number of reagents duty free under the notification 52/2003-Cus dated March 31, 2003, to carry out our R&D activities. Para 6.07(a)(ii) of the FTP allows us to sell our services up to 50 per cent of foreign exchange earned in the DTA. This provision does not say anything about reversal of duties on inputs, as in the case of goods as mentioned at Para 6.07(a)(i) of the FTP. Our question is whether we are required to surrender any exemption availed for importing the reagents, when we sell our services in DTA as allowed under Para 6.07(a)(ii) of the FTP.

 

Yes. Para 3 and Para 11 of the notification 52/2003-Cus dated 31st March 2003 restrict the benefit of the exemption in situations where the services are not exported by

the EOU.

 

For our R&D laboratory recognised by the Department of Scientific and Industrial Research, we are eligible to import essential goods at 5 per cent BCD, under S.No.2 of the Table annexed to the notification 51/96 Cus dated 23rd July 1996. The foreign supplier, however, says that their supply will be only through their sole selling agents in India. The agent says that this can be done as CBEC Circular no.27/2003-Cus dated 2nd April 2003 and 28/2004-Cus dated 6th April 2004 clarify the position beyond doubt. Can the said agent import the goods in his own name and IEC at concessional duty under the said notification 52/96-Cus and then sell it to us? 

The said CBEC Circulars clarify that benefit of concessional rate of duty under the said notification 51/96-Cus has to be allowed even in those cases where imports are made by importers other than the institutions specified in column (2) against Sl. No. 1 of the Table, provided such imports are made for delivery to an institution specified in the notification. However, you are covered under S.No.2 of the Table annexed to the notification and not under S. No. 1 of the said Table. You may point this out to the agent and also that the words’ for delivery to’ appear at the said S.No.1 only but not at the said S.No.2.   

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