Implications of the Goods and Services Tax (GST) on Imports

Introduction:
Imports and exports are critical in not only determining but also deciding the country's economic health. Though imports are discouraged, no country can meet its economic and consumption demands without them. India's imports were estimated to be worth $390 billion in 2020-21. In this post, we'll focus on the records that must be kept and the proper use of GST tax credits.

Imports come in a variety of forms.
1. Import of Goods
The IGST Act, 2017 defines importation as bringing commodities into India from a country other than India. All imports will be considered inter-state supplies, and an integrated tax will be imposed in addition to any applicable customs charges.

2. Import of Services
The IGST Act, 2017, defines import of services as the supply of any service where the supplier is located outside India, the recipient is based in India, and the site of supply of service is in India.

List of Documents required for Import of Goods
1.Bill of Entry
A bill of entry is a registered document issued by the Customs Authority that contains all of the information about the items that are being imported. It includes information like Invoice Numbers, Party Names, Assessable Value of Goods, Duty Amount, and so on. This is the primary document from which the importer can obtain ITC.

2.Commercial Invoice
The principal document issued by the exporter to the importer is a commercial invoice. It includes details about the order, such as the description, selling price, quantity, packaging charges, weight or volume of the goods, and so on. Based on this Invoice, the customs representative will decide whether or not to clear the shipment.

3. Bill of Lading or Airway Bill
A bill of lading in the case of a maritime cargo or an airway bill in the case of an air shipment is a carrier's document that must be submitted to customs for clearance. A bill of lading, also known as an airway bill, is a document that contains information about the cargo as well as the terms of delivery.

4. Other documents required for the import of goods:
• Import Permit (IEC)
• Letter of Credit or LC (Certificate of Insurance)
• Technical Is it a report or a piece of literature? (Only required for specific goods)
• Industrial Permit (for specific goods)
• Report on the Test (If any)
• RCMC Membership and Registration GATT/DGFT Declaration Certificate
• DEEC/DEPB/ECGC Duty Benefits License

List of Documents Required for Import of Services
• Certificate of Commercial Invoice
• Tax Residency Service

A Tax Residency Certificate is a document issued by the country's tax department to its citizens. It will aid in determining the nation of residence of the service provider so that the terms of the Double Taxation Avoidance Agreement (DTAA) can be applied appropriately. If there are any withholding tax consequences on the services given, this is quite significant.

Tax On Import of Goods
The importer receives an input tax credit for the integrated tax (IGST) and the GST Compensation Cess paid during importation. In order to claim IGST and GST compensating cess input tax credits, importers must provide their GST Registration number (GSTIN) in the Bill of Entry. GST credit will be instantly reflected in Importer's GSTR 2B once the Custom Agent (CHA) processes the Import through Customs. The bill of entry status can be checked on the Indian Customs Electronic Gateway (ICEGATE) website by the importer. However, it is critical to compare the GST Amount on the bill of entry with the GST Amount on GSTR 2B and notify the CHA promptly if there is a discrepancy.

Tax On Import on Services
Services importers would be required to pay GST on a reverse charge basis. As a result, the recipient of the service in India becomes tax responsible. Once the GST is paid on an RCM basis, a credit can be obtained.

Important Considerations
ITC should only be used for IGST and not for Custom Duty.

For firms that import items on a regular basis, keeping an import tracker is a good idea. At the end of the year, the tracker should be reconciled with GSTR 2B and ICEGATE.

In the event of goods imports, a set of import paperwork must be presented on a regular basis to the Authorised Dealer (AD) Bank.

Conclusion:
Businesses whose Import GST credits do not match their imports, according to the department's data, are being sent notifications. In order to provide correct explanations in response to such alerts, it is critical to keep comprehensive documentation and a detailed tracker of imports.