GST on Import of Goods – India

GST stands for Goods and Service Tax. It was launched on April 1, 2017, by Finance Minister of India.  It replaced indirect and direct taxes into one. A person who is earning more than Rs.20 lakhs per year (Rs 10 lakhs for the North Eastern and the Hill States) should register under GST. Here we are going to discuss GST registration for Importers.Imported goods

Import of goods means bringing goods into India from foreign countries.

How to calculate GST for Import of Goods?

  1. Imagine the assessable value of the goods which is imported into India is Rs.200
  2. Basic Custom Duty (BCD) is 10% that is Rs.20

Now we have to calculate the IGST for Rs.220 (BCD + Assessable value)

  • Integrated tax is 18%

So IGST is 18% of Rs.220 = Rs.39.60

Total tax =BCD + IGST =Rs.20 + Rs.39.60 =Rs.59.60 and you have to pay GST Compensation Cess (Cess, if Applicable).

See also: GST on Export of goods – India

GSTIN (Goods and Service Tax Identification Number)

Each registered taxpayers should have a separate identification number under GST which is known as GSTIN (Goods and Service Tax Identification Number). Before GST was implemented all the taxpayers had the TIN (Taxpayer Identification Number). GSTIN is the same as the TIN. GSTIN is mandatory to all new taxpayers and existing taxpayers who already registered under State VAT / Service Tax / Central Excise Tax

All the Importers need GSTIN to take out their goods from Customs Department when they import. Importers should mention the GSTIN in their Bill of Entry and Importer Licence (IEC). The Importer needs GSTIN to charge ISGT and GST Compensation Cess.

IGST (Integrated Goods and Service Tax) and GST Compensation Cess

After GST is implemented, import of goods into India is considered as inter-state supply. So IGST is applicable on all goods which are imported into India from foreign countries. IGST and GST Compensation Cess is charged on imported goods. After paying IGST, Customs Duty and GST Compensation Cess (Cess, if Applicable) only, the importer will be allowed to take out his goods from the customs station.

Special Additional Duty (SAD) and Countervailing Duty (CAD) are included in IGST (Integrated Goods and Service Tax). When you import goods, you have to pay Basic Customs Duty as usual. IGST will be applied to the value of the imported goods and it will be collected along with Customs Duty. After paying Customs Duty and IGST only, the importer can take out his goods from the customs department.

Input Tax Credit (ITC) on imported goods

Input Tax Credit means when you pay tax on output, you can deduct the tax that you have already paid on input and pay the remaining amount. Under GST, Input Tax Credit has changed the multiple cascading tax (tax on tax) system.

For Example,

A manufacturer buy a raw material to make a saree at Rs.100. He should additionally pay Rs.10 as IGST (IGST rate is 10%). Now that raw material price is Rs.110.

After producing the saree the manufacturer sells the saree at Rs.200. Gst for that saree is 12% that is Rs.24. So now the manufacturer should pay Rs.24 as GST. But he has already paid Rs.10 as IGST. Now he has to pay the balance amount Rs.14 of the total Rs.24. Now the Rs.10 is the Input Tax Credit which can be claimed by the manufacturer. To claim Input Tax Credit, you should have the GSTIN.

So GST has changed the tax system of Import of goods. A person who wants to start an import business should have the knowledge of GST.

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