Custom Duty and Import Duty in India

Custom Duty in India

Custom Duty is levied when goods are transported across borders between countries. It is the tax that governments impose on export and import of goods. The tax imposed on the import of goods is known as the import duty. Whereas, the tax imposed on the export of goods is known as the export duty. Customs Duty is beneficial for many reasons. For instance, it ensures a country’s economic stability, jobs, environment, among others. It regulates the movement of goods in and out of the country. It keeps a check on restricted items.

In the past few months, the government of India brought a major change in the tax systems of the nation. They introduced GST (Goods and Services Tax), a new tax collection system, which is a destination-based tax, which implies that the consumers are liable to pay tax when they use any goods and services.

GST has three categories –

  1. CGST (Central Goods and Services Tax),
  2. SGST (States Goods and Services Tax) and
  3. IGST (Integrated Goods and Services Tax).

Both CGST and SGST are applicable on the intra-state transactions whereas the IGST is applicable on the inter-state transactions. If the business is in the union territory, then UTGST will apply in place of SGST. The custom duty is now replaced by IGST, which means that instead of the custom duty, IGST tax is applicable (along with other applicable customs duties) on every import and export of goods and services. Let us understand IGST tax better.

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IGST: GST for Importers

Earlier, the tax system was complex and custom duty was levied to export and import goods and services. Multiple taxes such as countervailing duty (CVD), basic custom duty, anti-dumping duty, and safeguard duty were imposed on every import of goods and services. Under GST, these multiple taxes have been replaced by just one tax known as IGST (Integrated Goods and Services Tax). Only the integrated tax and the basic customs duty will be chargeable on the import of goods.

Import of goods refers to bringing merchandise into India from anywhere outside of India as per the IGST Act 2017. All the imports will be regarded as inter-state supplies and integrated tax will be imposed on them along with other applicable customs duties.

Calculation of IGST

GST can be calculated simply by multiplying the Taxable amount by GST rate. One must know that the tax on goods is imposed as per the size, mass, and extent of the imported and exported goods. The IGST tax for imports will be received by the State where the goods or services are consumed and not by the state where they are manufactured. Mentioned below is an example of the calculation of IGST on the import of goods:

For example,

The assessable value of an imported item is INR 10000/-
Basic Customs Duty = 10%
Integrated Tax Rate = 18%
The taxes will be calculated as follows:
Assessable Value = INR 10000/-
Basic Customs Duty = INR 1000/-
The value to impose integrated tax = INR 11000/- (10000 + 1000 = 11000)
Integrated tax = 18% of INR 11000 = INR 1980/-
Sum of Taxes = INR 1000 + INR 1980 = INR 2980/-

In addition to the above IGST, cess as per the GST Cess Act, 2017 may also be applicable on the goods. In such a case, the cess will be collected on the value taken for imposing the integrated tax. According to the example given above, the cess will be calculated on INR 11000.

Importers will not be liable to pay integrated taxes at the time of moving of commodities from a custom station to warehouse.

Input Tax Credit

Input Tax Credit under GST means the credit of input tax paid on import/purchases. A registered importer can claim the credit of the IGST imposed on him as the input tax credit under the GST system. The importer can offset the same input tax credit against the tax on the outward supply of goods. However, the Basic Customs Duty (BCD) paid will not be allowed to be claimed as the input tax credit. Along with the input tax credit, the importer can also benefit from the GST Compensation Cess before transmitting it to the ones in the supply chain. It is compulsory for the importers to mention the GSTIN (GST Registration Number) in the Bill of Entry in order to get the input tax credit of GST Compensation Cess and IGST.

Calculate Input Tax Credit online: ITC calculator
Input Tax Credit under GST means the credit of input tax paid on purchases. ITC can be used to set of against the CGST, SGST and IGST outward tax liabiliy.
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Calculate Input Tax Credit online: ITC calculator
Input Tax Credit under GST means the credit of input tax paid on purchases. ITC can be used to set of against the CGST, SGST and IGST outward tax liabiliy.
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What is the Import of Service under GST?

Import Of Service

Import of services as per the IGST Act 2017 means the supply of any service where:

  1. The supplier of service is located outside India
  2. The recipient of service is located in India, and
  3. The place of supply of service is in India

As per the provisions of Section 7(1) (b) of the CGST Act, 2017, import of services with consideration whether or not in the course or furtherance of business, will be considered as supply. In simple terms, the services that are imported without consideration will not be considered as a supply. However, the business test is not obligatory for the imported services to be deemed as a supply.

Import of services by a taxable person between related entities in the course or furtherance of business will be treated as supply, even if it is made without any consideration. Thus, import of some services by an Indian branch or foreign subsidiary from their parent company, in the course or furtherance of business, even without consideration, will be a supply and shall be subject to GST.

OIDAR Services

OIDAR services or Online Information and Database Access or Retrieval Services attract GST. Persons providing OIDAR services should mandatorily acquire GST registration. Also, a person who is importing services will be liable to pay tax on a reverse charge basis. However, in respect of the import of online information and database access or retrieval services (OIDAR) by unregistered, non-taxable recipients, the supplier located outside India will be responsible for the payment of taxes. The supplier will either have to take registration or assign a person in India for paying the taxes.

Supply to SEZ

Supply of goods or services or both to a Special Economic Zone Developer or an SEZ unit shall apply as inter-state supply and will be subject to levy of IGST.

GST Number Search: Verify GST Number or GSTIN online
Enter GST number or GSTIN (GST Identification Number) and verify GST details online. GST Number or GSTIN is a unqiue 15 digit number allotted after GST Registration.
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GST Number Search: Verify GST Number or GSTIN online
Enter GST number or GSTIN (GST Identification Number) and verify GST details online. GST Number or GSTIN is a unqiue 15 digit number allotted after GST Registration.
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GST for Exporters

Before GST was introduced, duties were imposed even on the export of goods and services. However, as per the new tax system, the export of goods and services from India to any other place outside the country are to be treated as ‘zero-rated supplies’. This means that no GST is applicable for the exporters. The registered taxable individuals that are exporting goods or services to places outside the country can claim refund.

FAQ

How IGST credit can be used?

According to the tax offsetting rules under GST, IGST credit needs to be used first to offset IGST tax liability. Whatever IGST credit is left can be used against CGST liability, then against SGST liability (in that order).

What is zero rated supply under GST?

Under GST, exports and supplies to SEZ are zero rated as per Section 16 of the IGST Act, 2017. By zero rating, it is meant that the entire supply chain of a particular supply is tax free, i.e., there is no burden of tax either on the input side or output side.

GST Portal : Applications and Their ARN

A registered GST user can view their applications on the GST Portal. In order to do so, they have to sign in to the GST portal using their credentials. Users cannot view all of their submitted applications by entering the submission date on the “My Applications” page. It is mandatory for the user to choose the “Application Type.” This means that the user can view one type of application of a particular submission period at once.

GST Portal: Applications and Their AR
A registered GST user can view their applications on the GST Portal. In order to do so, they have to sign in to the GST portal using their credential
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GST Portal: Applications and Their AR
A registered GST user can view their applications on the GST Portal. In order to do so, they have to sign in to the GST portal using their credential
Read Answer

Steps to View the Applications in GST Portal

  1. Access the GST Portal.

    Firstly, log in to the GST Portal using valid credentials.

  2. Click on Services > User Services > My Applications

    Clicking ‘Service’ will toggle a menu. Click on ‘User Services’ and then ‘My Applications’

  3. The “My Applications” page is displayed. Select the Application Type from the drop-down list.

    Note: This field is mandatory.

  4. Additionally, select the submission period from the calendar given.

    Note: This field is not mandatory.

  5. Search option

    Finally, click on the option to search.

The result is displayed as per the search criteria. Click on the ARN hyperlink you want to open.

GST Portal – List of Applications

We move to the “Case Details” page. You can click on the tabs on the left side of the page to view or download the related details.

FAQs

What is ARN number in GST?

ARN i.e Application Reference Number is a sort of an acknowledgment number issued by GSTN system portal to the taxpayers who have successfully submitted their application after completing the full process

How to check GST Registration Status- ARN application

– Go to the GST Portal
– Register with your details
– Click ‘Services’ > ‘Registration’ > ‘Track Application Status’
– Enter the ARN you received
– Enter captcha code and click om search

Can we use ARN number instead of GST?

No. ARN cannot be used in the replacement of the GST number. ARN and GST numbers are meant for two different purposes. They can’t be used interchangeably.

GST Portal: View Submissions

The GST Portal provides its users with an option to view all the submissions and responses. These submissions and responses to queries submitted to the tax authorities are available at one location on the GST Portal. Moreover, the details of these submissions are displayed in chronological order. The order is as follows:

  1. ARN (Application Reference Number)
  2. Submission Date
  3. Form No./Description
  4. View/Download

The previous submissions/responses are also available on the GST Portal. Furthermore. these are available on the GST database for a 5 tax-period. The tax-period indicates the Financial Year.

Steps to View User Submissions in GST Portal

  1. Go to the GST Portal

    Access the GST Portal Login Page and Login using your Credentials.

  2. Additionally, click on Services > User Services > View My Submissions

    To View My Submissions, click on Services and then Click on User Services.

  3. Select the relevant Form number.

    Select the appropriate from the “Form No.” drop-down list.

  4. Secondly, select the appropriate date

    Now,from the calendar under the “Submission Period” category, select the appropriate date.

  5. Finally, click on the “Search” option.

    You can then download the Form.

As mentioned above, the user can specifically search for an application by selecting the Form No. from the drop-down list. Additionally, users can also View/Download the documents.

GST Number Search: Verify GST Number or GSTIN online
Enter GST number or GSTIN (GST Identification Number) and verify GST details online. GST Number or GSTIN is a unqiue 15 digit number allotted after GST Registration.
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GST Number Search: Verify GST Number or GSTIN online
Enter GST number or GSTIN (GST Identification Number) and verify GST details online. GST Number or GSTIN is a unqiue 15 digit number allotted after GST Registration.
Explore

FAQs

How do I edit a saved GST application?

The following are the steps to edit a saved GST application:
1. Go to GST Portal home page and Login with your Credentials
2. On the Dashboard, go to “My saved Applications”
3. Click on Edit
4. Make the necessary changes to your application
5. Submit

Can we find Address from GST number?

The Government doesn’t allow individuals to search geographical addresses through GSTIN. However, one can get to know the state in which the number is registered.

How do I verify GSTIN?

To verify an Individual’s GSTIN, you can use Quicko’s GST verification tool. However, one can partly verify the GSTIN if the digits between 3-10 matches with a vendor’s PAN.

What is HSN / SAC Code under GST?

There are innumerous variety of goods and services. Applying a common rate of tax to all goods and services is not possible. Thus, they are classified into groups and sub-groups and a specific GST rate is applied to a specific sub-group. The most scientific way of classifying goods is on the basis of HSN while classifying services is on the basis of SAC.

HSN means the Harmonized System of Nomenclature code used for classifying goods under GST. This classification is used in Customs, Central Excise and Foreign Trade Policy. The use of HSN codes is to make GST systematic and globally accepted.

However, there is no international classification of services similar to HSN for goods. They are classified on the basis of SAC. SAC means Service Accounting Code used for classifying services under GST.

How many digits of HSN or SAC should I mention in my invoice?

Annual Turnover in previous financial year HSN Digits to be shown in Invoice & Return
T/O <= 1.5 Cr NIL
1.5 Cr < T/O <= 5 Cr 2
T/O > 5 Cr 4

In the case of Imports/ Exports, HSN codes of 8 digits shall be compulsory since GST needs to be compatible with international standards and practices.

Where should I mention HSN / SAC Code?

HSN for goods and SAC for services should be mentioned by the taxpayer at the following instances:

1. GST Registration
Under GST, every business must declare the type of goods or services they are dealing into. Thus, it is important to mention the correct HSN/SAC Code at the time of enrollment or registration.

2. GST Rate
If the taxpayer is aware of the HSN or SAC code of the good or service, he can determine the applicable GST Rate.

3. GST Invoice
When a seller issues invoice for the goods or services sold, he should mention the HSN or SAC Code in the invoice based on the turnover of his business.

4. GST Returns
When a taxpayer files the GST Return, he must report the HSN Summary. Under the Summary, details of goods or services sold categorised on basis of HSN or SAC are reported.

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FAQs

Is it compulsory to use the HSN Code?

HSN Code must be used by all dealers except in the following cases:
> Dealers who have an Annual Turnover of less than Rs.1.5 Cr
> Dealers who have registered to pay tax under the composition scheme.

Where can I find the HSN Code List?

The list of Codes is available on the Ministry’s website which would have a list of goods with the relevant HSN Code and a list of services with a relevant SAC Code.

Who needs an HSN code?

Taxpayers having turnover exceeds Rs. 1.5 crore but up to 5.00 crore will be required to mention only two digits of HSN code. Taxpayers having turnover exceeds Rs 5.00 crore will be required to mention four digits of HSN code.