Applicability of GST on Imports under Duty Exemption Schemes in India

Goods and Services Tax (GST) has revolutionized the way taxes are levied and collected in India. It has replaced a plethora of indirect taxes with a single, cohesive tax system. However, the complexity of the GST regime has created some challenges for importers, especially those who avail of duty exemptions under various schemes. In this article, we will discuss the applicability of GST on imports under Duty Exemption schemes in India.

Duty Exemption Schemes under GST

The Indian government has introduced various Duty Exemption schemes to promote exports and boost the economy. These schemes allow importers to import goods without paying the applicable customs duties and taxes. The following are some of the popular Duty Exemption schemes:

Advance Authorization Scheme
Export Promotion Capital Goods (EPCG) Scheme
Deemed Exports
Duty-Free Import Authorization (DFIA) Scheme

Advance Authorization Scheme

Under this scheme, an importer can import raw materials and inputs required for the manufacture of export goods without paying customs duties and taxes. The exporter is required to export the finished goods within a specified period to avail of the exemption. The applicable GST rate on imports under this scheme is zero.

Export Promotion Capital Goods (EPCG) Scheme

This scheme allows importers to import capital goods at a concessional rate of customs duty. The importer is required to fulfill an export obligation equivalent to six times the duty saved on the imported capital goods. The applicable GST rate on imports under this scheme is 18%.

Deemed Exports

Deemed exports refer to those transactions in which the goods supplied do not leave the country but are deemed to be exported. The government provides duty exemptions on such transactions to promote domestic production. The applicable GST rate on deemed exports is 0.1%.

Duty-Free Import Authorization (DFIA) Scheme

Under this scheme, an importer can import specified inputs required for the manufacture of export goods without paying customs duties and taxes. The exporter is required to export the finished goods within a specified period to avail of the exemption. The applicable GST rate on imports under this scheme is zero.

Procedure for Availing Duty Exemption

To avail of duty exemptions under the above schemes, an importer needs to follow the prescribed procedure. The following are the key steps involved:

Application for Authorization: The importer needs to apply for authorization under the relevant scheme to the Director-General of Foreign Trade (DGFT).
Procurement of Inputs: The importer can procure the specified inputs required for the manufacture of export goods without paying customs duties and taxes.
Manufacture of Export Goods: The importer needs to manufacture the export goods using the imported inputs within the prescribed period.
Export of Finished Goods: The exporter needs to export the finished goods within the prescribed period and submit the necessary documents to claim duty exemption.

Challenges Faced by Importers

Despite the benefits of duty exemptions, importers often face challenges in availing them. The following are some of the key challenges:

Compliance: The compliance requirements under the GST regime are complex and time-consuming, making it difficult for importers to meet the deadlines.
Documentation: The documentation requirements for claiming duty exemptions are extensive and require meticulous attention to detail.
Customs Procedures: The customs procedures involved in importing and exporting goods can be cumbersome and time-consuming.

Conclusion

GST has brought about significant changes in the taxation system of India. The Duty Exemption schemes introduced by the government have provided a boost to the economy and helped promote exports. However, importers face several challenges in availing of these schemes, and it is essential to address these challenges to ensure their smooth implementation. By following the prescribed procedures and seeking professional help, importers can make the most of these schemes and contribute to the growth of the economy.