Integrated Goods and Services Tax (IGST) is applicable on imports of goods and services into India under the Goods and Services Tax (GST) regime. IGST on imports ensures that goods coming into the country are subject to the same tax treatment as domestically produced goods.
Table of Contents
- Introduction
- IGST on Goods at the Time of Import
- Valuation for the Purpose of IGST
- Exemptions from IGST and Compensation Cess under Export Promotion Schemes
- Refund of IGST on Exported Goods
1. Introduction
Prior to 01-07-2017, Countervailing Duty (CVD) equivalent to excise duty was imposed on imported goods, along with a 4% Special Additional Duty (SAD) levied in place of sales tax or VAT.
These duties were subsequently replaced by IGST effective from 01-07-2017, except for certain products that continue to be subject to excise duty beyond this date.
2. IGST on Goods at the Time of Import
As per Section 3(7) of the Customs Tariff Act (as amended on 29-03-2018), any article imported into India is subject to Integrated Goods and Services Tax (IGST) at the rate applicable under Section 5 of the IGST Act, 2017, on a similar article supplied in India.
3. Valuation for the Purpose of IGST
The value for IGST computation is determined as per Section 3(8) or Section 3(8A) of the Customs Tariff Act.
Section 3(8) of the Customs Tariff Act (effective 01-07-2017) defines the ‘value’ as follows:
- The value of the imported article as determined under Section 14(1) of the Customs Act, or the tariff value under Section 14(2) of the Customs Act.
- The customs duty levied under Section 12 of the Customs Act and any other sum chargeable as an addition to customs duty under any prevailing law, excluding IGST under Section 3(7) and cess under Section 3(9) of the Customs Tariff Act.
Accordingly, IGST is computed on:
- Assessable Value
- Basic Customs Duty
- Social Welfare Cess
[Prior to 02-02-2018, IGST was also levied on Education Cess and Secondary & Higher Education Cess.]
3.1 Additional Provisions on IGST under Customs Tariff Act
Section 3(11) – IGST, along with any applicable duty or cess, is levied in addition to other duties or taxes under the Customs Tariff Act or any other legislation.
Section 3(12) – All provisions of the Customs Act and Rules, including those related to drawbacks, refunds, and exemptions, apply to IGST and related levies.
3.2 IGST on Sale of Warehoused Goods
For goods stored in a customs warehouse and sold before clearance for home consumption or export:
- If the entire goods are sold, IGST is calculated on the higher of the value determined under Section 3(8) or the transaction value.
- If a portion of the goods is sold, IGST is based on the proportionate value determined under Section 3(8) or the transaction value, whichever is higher [Section 3(8A), inserted w.e.f. 29-03-2018].
If warehoused goods are sold multiple times before clearance, IGST is levied on the transaction value of the last sale [First Proviso to Section 3(8A)].
For unsold warehoused goods, IGST is determined as per Section 3(8) [Second Proviso to Section 3(8A)].
Definition of Transaction Value – The term “transaction value” refers to the amount paid or payable as consideration for the sale of such goods [Explanation to Section 3(8A), inserted w.e.f. 29-03-2018].
3.3 Nature of IGST on Imports
IGST collected at the time of import is not considered a customs duty under the Customs Act or Customs Tariff Act but is instead levied under Section 5(1) of the IGST Act. The Customs framework is merely utilized for its collection [Interglobe Aviation Ltd. v. CC, Air Cargo (2020) 121 taxmann.com 70 (CESTAT)].
3.4 IGST on Education Cess and SAHE Cess (Till 02-02-2018)
Education Cess on customs duty was treated as ‘duty of customs’ under Section 94 of the Finance (No. 2) Act, 2004. Similarly, Secondary & Higher Education Cess (SAHE Cess) of 1% was levied under Sections 136 and 139 of the Finance Act, 2007. Consequently, IGST was applicable on these cesses until their omission on 02-02-2018.
3.5 IGST on Other Duties (Dumping Duty, Protective Duty, etc.)
Anti-dumping duty (Section 9A), countervailing duty on subsidized articles (Section 9), protection duty (Section 6), and safeguard duty (Section 8B) are levied under the Customs Tariff Act. These duties are not classified as ‘duties of customs’ although customs law is used for their levy and recovery.
Anti-dumping duty is not considered a ‘duty of customs’ as per CC v. Chandra Prabhu International Ltd. [(2014) 44 GST 701 = 43 taxmann.com 447 = 302 ELT 168 (Delhi HC DB)] and Caprihans India v. CC [(2001) 129 ELT 162 (CEGAT LB)].
However, Customs Guidance Note (30-06-2017) states that IGST and GST Compensation Cess are payable on dumping duty and protective duty.
3.6 IGST on Specific Imports
Project Imports – Classified under tariff heading 9801, IGST is levied at 18%.
Baggage – IGST is not applicable on baggage imports.
4. Exemptions from IGST and Compensation Cess under Export Promotion Schemes
Exemptions for Certain Export Promotion Schemes
From 13-10-2017 to 30-06-2022, IGST and Compensation Cess exemptions were granted for imports under the following schemes:
- Advance Authorization Scheme
- Export Promotion Capital Goods (EPCG) Scheme
- Export Oriented Units (EOU)
This exemption was introduced to address exporters’ difficulties and was incorporated into Foreign Trade Policy (FTP) 2015-2020, as amended on 31-03-2022 [Paras 4.14, 5.01(a), and 6.01(d)(ii)].
4.1 No Exemption for Imports under DFIA
Since 01-07-2017, exemption applies only to Basic Customs Duty, Safeguard Duty, Product-Specific Safeguard Duty, and Anti-Dumping Duty. IGST remains payable on such imports as per CBI&C FAQs (July 2017) and Customs Notification No. 19/2015-Cus (01-04-2015). This is likely due to the free transferability of imported inputs post-fulfillment of export obligations.
5. Refund of IGST on Exported Goods
A taxable person has the option to pay IGST on exported goods and claim a refund, which may be beneficial if there is excess Input Tax Credit (ITC) that cannot be otherwise utilized. Refund provisions are governed by Rule 96 of CGST and SGST Rules, 2017.
