The Central Council of Indirect Taxes and Customs (CBIC) issued clarification on the applicability of IGST on repair costs, insurance and freight, on goods re-imported after being exported for repair on recommendations of the GST Council made at its 43rd meeting.
Notifications 45/2017-Customs and 46/2017-Customs, both dated June 30, 2017, issued at the time of the implementation of the GST, prescribe certain concessions of duties / taxes on the re-importation of exported goods for repair outside India. These notifications, in particular serial number 2 ibid, clearly specify that exported goods (other than those exported under the claim for listed benefits), when re-imported into India, are exempt from much of the tax. customs duty payable thereon which is specified in said first schedule of the Customs Act, 1962, and the integrated tax, the compensation cease payable respectively under subsections (7) and (9) of the Article 3 of the said Customs Tariff Act, 1975 as the excess customs duty that would be payable if the value of the goods re-imported after repairs consisted of the fair cost of the repairs carried out, including the cost of materials used in the repairs. repairs (if these costs are actually incurred for no), insurance and freight costs, both ways.
“The notification prescribes that duties or taxes (including BCD, IGST, etc.) at the applicable rates shall be payable on such imports, calculated on the value of repairs, insurance and freight, instead of the value of the goods. themselves. A similar concession also existed during the pre-GST period, in accordance with Notification No.94 / 96-Customs, according to which customs duties (BCD, additional customs duties under Article 3 of the Law on 1975 tariff, etc.) were payable on the value of the repairs instead of the total value of the goods in those imports, ”the CBIC said.
The Board added that the GST rate and exemptions are prescribed on the recommendation of the GST Board. The Council, at the time of the deployment of the GST, decided to maintain the concession as it was available under the said notification n ° 94/96-Cus, with only one consequential modification, i.e. the replacement of additional customs duties with IGST and compensation tax, as discussed at the 14th meeting of the GST Council. As a result, under the GST, IGST and Compensation Tax were made applicable on the value of repairs, insurance and freight when re-importing goods sent overseas for repair.
Again, at the 37th GST Council meeting, when considering the request for provision of ITC credit paid on aircraft engines and parts exported for repair and then re-imported, the viability IGST on these imports, on the cost of repairs, insurance and transport costs, was confirmed. In fact, this was never contested in the first place and the request was to authorize the IGST credit so paid. Similarly, when considering the issue of the rate of the GST on maintenance, repair and overhaul (MRO) services of aircraft, aircraft engines and other components and parts, the character IGST tax on these re-imports was again affirmed by the GST Board in its 39th meeting, making it clear that these goods re-imported after repair from outside India attract IGST to the repair value, freight and insurance. During said discussion, the IGST levied on these re-imported goods after being exported overseas for repair was an important factor taken into account by the GST Board when deciding the rate on MRO services. The above deliberations of the GST Council leave no doubt that the Council had consciously recommended the collection of the IGST and the tax, albeit at the cost of repair, insurance and freight instead. of the total value of imports of goods, on the basis of which the said No 45/2017-Cus and 46/2017-Cus notifications were issued, added the Council.
Recently, in the case of M / s Interglobe Aviation Limited against the Commissioner of Customs, in its final order of November 2, 2020, the main bench of CESTAT, New Delhi on the analysis of notification No. 45/2017-customs , interpreted that the intention of the legislation was only to impose basic tariffs on the fair cost of repair, freight and insurance charges on such imports of goods after repair. CESTAT thus concluded that the integrated tax and the compensatory tax on these goods would be totally exempt. An appeal was filed by the Department to the Supreme Court against the said order.
The matter was referred to the GST Council at its 43rd meeting held on May 28, 2021. The GST Council deliberated on the matter and recommended that appropriate clarification, including any changes to clarification, if necessary, can be issued to remove any doubt. , to clarify the GST Council’s ruling that re-importation of goods sent overseas for repair attracts IGST and tax (if any) to a value equal to the value of the repair, insurance and freight.
“Consequently, as recommended by the GST Council, it is specified that notifications n ° 45/2017-Customs and 46/2017-Customs, both dated June 30, 2017, were issued to implement the decision of the GST Council taken earlier, that the re-importation of goods sent abroad for repair attracts the IGST on a value equal to the value of the repair, insurance and freight. In addition, in light of the recommendations of the GST Council at its 43rd meeting, a clarifying amendment has been made to said notifications, namely notifications n ° 36/2021-Customs and 37/2021-Customs, both dated July 19, 2021., without prejudice to the viability of IGST, as above, on imports as they existed before the amendment, ”said Deputy Secretary of the Indian Government, Gaurav Singh.
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