GROUNDS OF DEFENCE – WHY IGST @ 3% IS NOT LEVIABLE ON RE-IMPORT OF JEWELERY BROUGHT BACK FROM EXHIBITION ABROAD

[pooja jajwani]

ISSUE :  Exemption On Re-Import Of Gold, Precious & Semi-Precious Jewelery 

In our last article on 19 Sept. we discussed about proceedings being initiated by Customs to demand tax from such re-importers  of gold jewellery, alongwith interest, confiscation and penalty  under the Customs Act, 1962.

Analysis of the Taxability of re-import of goods in India

It is noteworthy that  as per Circular No. 21 / 2019 dated 22.07.2019 ('Customs Circular') read with Circular No. 108 / 27 / 2019 dated 18.07.2019 ('GST Circular'), in order to qualify for the exemption contained under the Notification no. 45/2017, it has to satisfy the conditions as laid down under GST Circular.

GST Circular clarifies that the activity of sending/taking the goods out of India for exhibition or on consignment basis for export promotion, except in certain situations does not constitute 'supply' under Section 7 of the Central Goods and Services Tax Act, 2017. Such activity also does not qualify as 'zero rated supply' under Section 16 of the Integrated Goods and Services Tax Act, 2017 as per the aforesaid circular.

Relevant part of the GST Circular is as under:

"6. It is, accordingly, clarified that the activity of sending / taking the goods out of India for exhibition or on consignment basis for export promotion, except when such activity satisfy the tests laid down in Schedule I of the CGST Act (hereinafter referred to as the 'specified goods'), do not constitute supply as the said activity does not fall within the scope of section 7 of the CGST Act as there is no consideration at that point in time. Since such activity is not a supply, the same cannot be considered as "Zero rated supply" as per the provisions contained in section 16 of the IGST Act."

Further, as per Customs Circular, re-import of specified goods that had been sent/taken out of India for exhibition or on consignment basis would not attract payment of IGST at the time of re-import. Such re-import also does not fall under Sr. No. 1(d) of Notification No. 45/2017-Cus as per GST Circular.

Relevant part of the Customs Circular is as under:

"3. Situation mentioned at SI.No.1(d) of the Notification no.45/2017-Customs dated 30.06.2017 require payment at the time of re-import of integrated tax not paid initially at the time of export, for availing exemption under the said notification. As in the case of re-import of specified goods, no integrated tax was required to be paid for specified goods at the time of taking these out of India, the activity being not a supply, hence the said condition requiring payment of integrated tax at the time of re-import of specified goods in such cases is not applicable. It is clarified that such re-import cannot be taken to be falling under situation at SI.No.1(d) of the said Notification. Such cases will fall more appropriately under residuary entry at SI.No.5 of the said Notification even though those specified goods were exported under LUT, in view of the fact that the activity of sending/taking specified goods out of India is neither a supply nor a zero-rated supply.

Therefore, on the basis of above discussion, it can be concluded that as Exports have been made for participation in exhibition or on consignment basis, but, such goods exported are returned after participation in exhibition or the goods are returned by such Consignees without approval or acceptance, as the case may be, the basic requirement of 'supply' as per Section 7 of CGST Act, 2017, cannot be said to be met as there has been no acceptance of the goods by the Consignees. Hence, re-import of such goods after return from such exhibition or from such Consignees will be covered by Entry at Serial No.5 of the Notification No. 45/2017 dated 30.06.2017, provided re-import happens before six months from the date of Delivery Challan.

Therefore, the Exporter would be entitled to the exemption from payment of the integrated tax leviable thereon under sub-section (7) of section 3 of the Customs Tariff Act, 1975 as contained under Entry 5 of the Notification no. 45 / 2017.

It is pertinent to note that as per Customs Circular, Sr. No.1(d) of the Notification No.45/2017-Cus requires payment at the time of re-import of integrated tax not paid initially at the time of export, for availing exemption under the said notification. In the case of re-import of specified goods as in the present case, no integrated tax is required to be paid at the time of taking these out of India as the said activity does not constitute a supply. Hence, Sr. No. 1(d) of the said Notification requiring payment of integrated tax at the time of re-import of goods is not applicable to the facts of the present case. It has also been clarified by Customs Circular that such cases will fall more appropriately under Sr. No.5, as such activity of sending/taking specified goods out of India is neither a supply nor a zero-rated supply.

Pooja Jajwani CA & Rakesh Chitkara, Adv.

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