India: Recent Developments Under GST, Customs, And Foreign Trade Policy

Last Updated: 13 December 2017
Article by SKP  

Circulars issued by the Government

To erase doubts arising in the implementation of GST, the government has issued various circulars providing clarifications on vital issues. They have been encapsulated hereunder:

Circular No. and issue dealt Effect of circular
46/2017-Customs dated 24 November 2017 – Applicability of IGST/GST on goods transferred or sold while being deposited in a customs bonded warehouse.
  • Section 59(5) of the Customs Act, 1962 allows the importer to transfer ownership of goods deposited into a customs bonded warehouse while such goods remain deposited in the warehouse.
  • The circular has clarified that:
    • Such a transfer or sale falls within the definition of 'supply' under GST and where such transfer or sale of ownership is at a price higher than the assessable value determined under section 14 of the Customs Act, this higher price will be considered for the purpose of determining the Integrated Goods and Services Tax (IGST) liability.
    • Further, in such a scenario the transferee or buyer will have to pay the following:
      1. GST (on invoice value) on such imported goods at the time of transfer and
      1. Basic Customs Duty (BCD) + IGST (on assessable value) determined under Customs Act and IGST Act respectively) at the ex-bonding stage.
    • Although Input Tax Credit (ITC) of the GST paid should be available to the buyer, the said circular has caused the tax to be charged twice on the same transaction resulting in blockage of working capital.
18/18/2017-GST dated 16 November 2017 - GST Refund of unutilized input tax credit of GST paid on inputs in respect of exporters of fabrics.
  • Under Notification No. 5/2017-Central Tax (Rate) dated 28 June 2017 government had notified goods which are ineligible for a refund of unutilised ITC. If this ITC was unutilised on account of tax on inputs being at a rate higher than the rate of tax on output the said notification covered certain woven fabrics in its purview.
  • It has now been clarified that in respect of fabrics manufactured and exported, the refund of unutilised ITC on inputs shall be eligible (other than capital goods), as exports fall under nil rated supplies which are specifically excluded from the purview of the said notification.

Boost to exports and employment in textiles and apparels sectors

  • The Ministry of Textiles has notified amended definition of rebate of state levies under clause 3.5 of scheme guidelines of Rebate on State levies (RoSL) for garments and made-ups.
Earlier definition Amended definition (with effect from 1 October 2017) Effect of amendment
Rebate of State Levies shall be understood to comprise State VAT/CST on inputs including packaging, fuel, duty on electricity generation and duties and charges on purchase of grid power, as accumulated through the stages of production from yarn to finished garments. Rebate of State Levies shall be understood to comprise VAT on fuel used in transportation (raw materials, finished goods and factory workers), VAT on fuel used in generation of captive power, Mandi tax on purchase of cotton, duty on electricity used in manufacture as accumulated from the stage of Cotton/MMF fibre till garment or made upstage, stamp duties on export documents and SGST on inputs used in the production of cotton and embedded SGST in purchases from unregistered dealers". The scope of the definition has been widened to include, inter alia:
  • Component of SGST paid on:
    • Stamp duties
    • Inputs used in the production of cotton
  • Embedded SGST in purchases from unregistered dealers.
  • Mandi tax on the purchase of cotton.
  • Post-GST rates notified under scheme of Remission of State Levies (RoSL)

    • Government vide notification no. 14/26/2010-IT dated 24 November 2017 has notified the post-GST rates under the scheme for Remission of State Levies (RoSL) on exports of readymade garments, made-ups and under Advanced Authorisation - RoSL for garments. The same has been encapsulated below:
Sr No Items Maximum applicable RoSL rate (with effect from 1 October 2017)
1. Cotton garments 1.70%
2. MMF, Silk and Woolen garments 1.25%
3. Apparel of blends 1.48%
4. Cotton made-ups 2.20%
5. MMF and silk made-ups 1.40%
6. Made-ups of blends 1.80%
7. Sacks and bags made of jute 0.60%
8. Garments under Advanced Authorization - All Industry Rates combination 0.66%
  • Directorate General of Foreign Trade has enhanced the rates under the Merchandise Exports from India Scheme (MEIS) from 2% to 4% on readymade garments and made ups with effect from 1st November 2017 till 30th June 2018.

Advertising services provided to central or state government or a statutory body or a local authority
The Government vide Notification No. 12/2017-Integrated Tax has notified the manner of determining the proportion of value attributable to different States or Union territories, in the case of supply of advertisement services to the Central Government, a State Government, a statutory body or a local authority, in the absence of any contract between the supplier of service and recipient of services. The notification covers various scenarios in an inter-state supply of advertisement services enunciating the treatment to be followed by this service provider including raising of separate invoices state wise or union territory wise. The detailed notification can be accessed here.

Refund of excess amount in Electronic Cash Ledger

Taxpayers have been provided with a mechanism on the GST portal to claim a refund of excess amount in their Electronic Cash Ledger. This functionality can be accessed by using the following path - Visit https://www.gst.gov.in/> Login > Refund menu > Select 'Refund of excess balance in Electronic Cash Ledger' in refund type.

Anti-profiteering provisions enabled

  • The Central Board of Excise and Customs (CBEC) has released Form APAF-1 for consumers to complain about profiteering under the GST regime. This form is to be filed before the Standing Committee or State level screening committee regarding rule 128 of CGST Rules, 2017.
  • Consumers would be able to complain against cases of inadequate commensurate reduction of prices of goods or/and services even after a cut in GST rate or availment of the benefit of input tax credit by companies or service providers.

E-way bill notified in Uttar Pradesh

  • The Uttar Pradesh (UP) government vide notification no. KA.NI.-2-1845/XI-9 (52)/17- U.P.Act-1-2017-Order-(94)-2017 dated 6 December 2017 has notified e-way bill under GST. The e-way bill in Form e-way bill 02 shall be carried with the goods if following conditions are fulfilled:

    • Transportation or transit storage of taxable goods valuing rupees fifty thousand or more.
    • Transportation within UP or from a place in UP to a place outside the state.
    • The goods to which this rule shall apply are as follows:
  1. Mentha Oil, Menthol and D.M.O
  2. Iron and Steel
  3. Coal tar, tar coal and charcoal
  4. Bitumine
  5. Coal and coke in all its forms
  6. Wood and timber
  7. Supari
  8. Cigarette/Cigar
  9. Pan Masala
  10. Khaini, Zarda, Surti, other manufactured tobacco and tobacco products,
  1. Kattha
  2. All types of edible oils and Vanaspathi ghee
  3. All kinds of tiles except earthen roofing tiles (khaprail and naali)
  4. Paper of all kinds including newsprint
  5. Marble stone
  6. All kinds of Lubricants
  7. Tyre and tube
  8. Skimmed milk powder
  9. Paint and varnish
  10. Sanitary ware and fitting
  • The notification will be applicable from 16 December 2017.

SKP's comments

  • The government is continuing with its efforts of stabilising GST by providing clarifications, enabling more online functionalities, and providing relief to exporters wherever felt necessary.
  • Companies should be careful in arriving at the pricing of their supplies as the government appears to be serious in taking action against suppliers who have not passed on the GST benefits to their customers. The constitution of Anti-profiteering authority and empowering consumers to file complaints points towards this direction. Companies should prepare and maintain a complete cost sheet and back up documents to substantiate their case in the event of any inquiry by the authorities.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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