India is one of the fastest growing economy and holds the seventh place for having largest economy in the world. Trade is one of the most significant factors that leads to the growth of a country’s economy. Therefore, it is imperative to keep a tab on the trade performance in both the domestic as well as international markets.
With the introduction and implementation of GST launched on 1st July 2017, there has been a change in the way business in India is done. GST has had a significant impact on the international trade (import and export) of the goods and services through the changes in the taxation structure and removal of certain indirect taxes and exemptions.
In this blog, we are going to discuss the impact of GST on imports and importers in India.
In the pre-GST tax system, import of the goods were subject to different import duties like custom duty, Countervailing duties of excise and special additional duty which is equivalent to VAT whereas import of services was subject to service tax.
Now, however, after the reformed tax structure has been introduced, the IGST has replaced the indirect taxes that were earlier imposed on import of goods and services. But, there are certain exceptions on imports of petroleum products and pan masala that attract levy of countervailing duties even after the GST regime. Moreover, apart from the IGST, education cess, customs duty and protective taxes such as safe guard duty and anti-dumping duty are also levied on import of certain goods. Whereas for the import of services only the IGST is levied.
As Article 269A mandates, constitutionally, that the supply of goods or services or both shall be deemed to be supply of goods or services in the course of import into the Indian territory and will attract IGST. It will be treated as deemed inter-state supplies.
IGST on import of services would be leviable under the IGST Act, the levy of the IGST on import of goods would be levied under the Customs Act, 1962.
As per section 11 of the IGST Act, 2017 the place of supply of goods, imported into India shall be the location of the importer. Thus, if an importer, say is located in Maharashtra, the state tax component of the integrated tax shall accrue to the state of Maharashtra.
The import of services under GST is taxable if it meets the following conditions: