CHANGES IN CUSTOMS LAW AND PROCEDURE DUE TO GST REGIME

[DR.MARIAPPAN GOVINDARAJAN]

The Goods and Services Tax is going to subsume all indirect taxes levied by Central Governments and State Governments.  The GST, as already aware by all, is of central tax, State tax, Union territory tax and integrated tax.

Integrated tax

Integrated tax, according to section 5(1) of IGST Act, 2017 is leviable on all inter-State supplies of goods or services or both.  This tax is not leviable on the supply of alcoholic liquor for human consumption.  The value on which the integrated tax shall be leviable is to be computed in accordance with section 15 of CGST Act, 2017.    The rate of tax shall not exceed 40%.  The rate may be fixed by the Government on the recommendations of the GST Council.

The integrated tax shall be levied on goods imported into India and collected in accordance with the provisions of section 3 of the Customs Tariff Act, 1975 on the value as determined under the said Act at the point when duties of customs are levied on the said goods under section 12 of the Customs Act, 1962.

With effect from 01.07.2017 when the GST is going to be implemented the imported goods shall attract integrated tax, compensation cess, if applicable in addition to the customs duty such as basic customs duty etc.,  The levy of CVD and SAD shall cease to exist on the imported goods other than those on which central excise duty/VAT continues to be levied even in GST regime.

Valuation of imported goods

The Taxation Laws (Amendment) Act, 2017 which came into effect from 04.05.2017 has brought out changes in Section 3 of the Customs Tariff Act.

Section 3(7) of the Customs Tariff Act, 1975 provides that any article which is imported into India shall, in addition, be liable to integrated tax at such rate, not exceeding 40% as is leviable under section 5 of the Integrated Goods and Services Tax Act, 2017 on a like article on its supply in India, on the value of the imported article as determined under Section 3(8).

Section 3(8) provides that for the purpose of calculating the integrated tax under section 3(7), the value of imported article shall be the aggregate of-

• the value of the imported article determined under sub-section (1) of section 14 of the Customs Act, 1962 or the tariff value of such article fixed under sub-section (2) of that section, as the case may be; and
• any duty of customs chargeable on that article under section 12 of the Customs Act, 1962, and any sum chargeable on that article under any law for the time being in force as an addition to, and in the same manner as, a duty of customs, but does not include the tax referred to in sub-section (7) or the cess referred to in sub-section (9).

Section 3(9) provides that any article which is imported into India shall, in addition, be liable to GST compensation cess at such rate on a like article on its supply in India, the value of the imported article shall be the aggregate of –

• the value of the imported article determined under sub-section (1) of section 14 of the Customs Act, 1962 or the tariff value of such article fixed under sub-section (2) of that section, as the case may be; and
• any duty of customs chargeable on that article under section 12 of the Customs Act, 1962,and any sum chargeable on that article under any law for the time being in force as an addition to, and in the same manner as, a duty of customs, but does not include the tax referred to in sub-section (7) or the cess referred to in sub-section (9).

Advisory by Board

The Board brought an advisory on customs related matters on introduction of GST to its officers vide letter dated 20.06.2017, in which the changes to be made in the existing system due to the introduction of GST in export regime.  The said letter indicated that bill of entry, shipping bill and courier regulations and forms, both manual and EDI have been suitably modified.    The modified forms are available in the website of the Department.  The letter advised all importers, exporters, customs brokers, customs clearance software providers and other stakeholders to get themselves familiar with the modified forms. 

Change in EDI bill of entry

It is indicated that the information in the bill of entry would be reconciled with their returns filed on GSTN.  By that the credit claimed in their return in respect of IGST paid on imports would be cross checked with the Customs EDI system. It is made mandatory for the importers to declare their GSTIN number on the Bill of Entry if they wish to claim the credit of IGST paid on the imported goods. 

• The importer who is not registered with GST system is to declare his PAN along with their State code as per the Census of India, which is required for transfer of IGST paid by them to the account of the Consumption State.
• Diplomatic organization or UN bodies are to quote their UIN on the Bill of Entry;

DGFT issued trade notice in this regard vide No.09/2018, dated 12.06.2017.  In this trade notice it has been indicated that the importer/exporter registered with GST is to declare only GSTIN at the time of import and export of goods.

The letter further states that changes have been made in bill of entry forms to capture details of GSTIN, PAN, State Code etc., of the importer.  Similar changes will also be taken for imports at SEZ and imports through Courier.  In case of Courier, GSTIN or PAN number in case of unregistered consignees, has to be quoted in the bill of entry filed by the courier agency, if the goods are subject to IGST.  It is further advised for that time being the importers/exporters are advised to declare GSTIN, PAN and IEC while filing document for import/export of goods.

The importer shall have to quote the relevant number of the levy notification as well as the exemption notification in respect of each imported item for application of correct rate.  The GST and Compensation Cess will be published on every Bill of Entry which can be quoted by the importer to claim the corresponding credit in the GST return.

Change in EDI Shipping Bill

Section 16 of IGST Act, 2017 provides that export of goods shall be zero rated supply.  Credit of input tax maybe availed for making zero-rated supplies, notwithstanding such supply may be made an exempt supply.

The exporters are required to quote the Shipping Bill and export invoice details in the GST return.  The same shall be validated in the Customs EDI system.  The confirmation of the export details shall be made once the EGM is filed.  The exporter shall be granted refund of IGST paid by him on the exported goods based on the validation by Customs EDI system.  This validation is also a proof of export in case the exporter has made the supply under bond or LUT without payment of IGST.

The Shipping Bill forms have also been modified to capture details such as GSTIN of exporter, GST  export invoice number etc.,  The exporter is to declare item-wise taxable value and corresponding IGST on the shipping bill.   For the time being in force importers/exporters are to declare GSTIN, PAN and IEC while filing document for import/export of goods.

Changes in manual system

Any manual bill of entry or shipping bill in EDI locations is required to be filed the instructions in F.No. 401/81/2011-Cus III, dated 02.06.2017 is to be followed with effect from 15.06.2017.  The following is the procedure-

• The basic details of the bill of entry, currently entered manually in a register mainlined by the noting section are to be entered in ICES 1.5 and Job No. assigned to such bill of entry which are as follows-

• Importer and Exporter Code;
• Custom Broker Number, if applicable;
• Total assessable value;
• Total duty (self assessed);
• Port of Destination;
• Customs Site;
• IGM No;
• IGM Date;
• Master BL/AWB;
• House BL/AWB;
• GSTN No;
• Assessment Group;

• Once a job number is assigned by the system, the IGM details are matched and linked with the cargo declared in bill of entry;
• The declaration shall then move to Assistant Commissioner/Deputy Commissioner of the concerned group who may approve the job in the role of ACL in ICES after records the reasons for manual bill of entry and the reference no. of file approval by Commissioner;
• A six digit bill of entry number would be generated and assigned to the declaration after the concurrence of the AC/DC;
• The manual BoE shall be filed by the importer quoting the assigned bill and will be assessed on paper as per usual process;
• After assessment by Appraiser and AC or DC concerned the ACL has an option to enter the total duty and licence associated, if any with this declaration in ICES 1.5;
• The manual debit of licence is to be invariably done in the licence ledger prior to this process;
• A challan of duty amount to be paid, post adjustment etc., would be generated in the system and be available for payment in the e-payment portal ICEGATE and bank;
• Once paid, the receipt of payment would be automatically integrated in the system;
• The OOC acknowledgement shall be entered by Shed Appraiser in the option provided in the SUP role;
• Once goods are cleared, the docket shall be forwarded to the Noting Section, which shall enter the remaining details including examination report;
• It shall be ensured that post clearance of goods, the complete details have been entered in the ICES 1.5 on the date the OOC is given and not later than the next day in case of adequate reason;
• No bill of entry at any EDI location shall be filed with a bill of exchange number other than the running number generated by the system

For non EDI locations, the Directorate of systems is designing a utility where certain basic consignment data can be uploaded digitally, post clearance.  The non EDI locations may have a nodal officer in each of such location who would oversee uploading preferably the same day.