5% IGST on Imported Footwear Below Rs. 1000 Upheld as Per Transaction Value

The ruling authority confirmed the application of a 5% Integrated Goods and Services Tax (IGST) rate on imported footwear below Rs. 1000 per pair. The decision was based on interpreting 'sale value' as transaction value rather than retail sale price, aligning with GST principles of value-based taxation. Despite the absence of comments from customs authorities, the ruling emphasized the need to consider discounts in determining the tax rate. Amendments to the notification governing IGST rates on footwear were discussed, reflecting a shift towards value-based taxation. Future changes in GST rates may impact the ruling, with proposed adjustments expected in 2022.

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Issues:
1. Applicable rate of Integrated Goods and Services Tax (IGST) on import of footwear not exceeding Rs. 1000 per pair.

Analysis:
1. The applicant, engaged in import and distribution of footwear, sought an advance ruling on the IGST rate applicable to footwear not exceeding Rs. 1000 per pair. IGST is to be levied as a duty of customs at the time of import, and the applicant claimed eligibility for a reduced rate of 5% under a specific notification.

2. The applicant argued that the term 'sale value' in the notification should be interpreted as transaction value, not retail sale price. They supported this with the fitment committee's recommendation and a relevant circular. The jurisdictional customs authorities were contacted for comments but did not respond.

3. During the hearing, the applicant reiterated their submissions, emphasizing that GST is based on value addition in the supply chain. They provided details of the supply chain for imported and domestically manufactured footwear, stating that both fall below Rs. 1000 per pair initially.

4. The ruling authority reviewed the case in the absence of comments from customs authorities. IGST is to be levied on imported goods as per the Customs Tariff Act, based on assessable value plus customs duty. Amendments to the notification governing IGST rates on footwear were discussed, focusing on the shift from retail sale price to sale value for determining the tax rate.

5. The concept of 'sale value' was analyzed, highlighting the need to base GST on transaction value to account for discounts offered. The 2nd amendment to the notification aimed to link the concessional GST rate to the supply value, aligning with the GST principles of value-based taxation.

6. The ruling concluded that footwear below Rs. 1000 per pair is subject to IGST at 5%, based on the value of supply. Future changes in GST rates, discussed in the 45th GST Council Meeting, may impact the ruling, with proposed adjustments scheduled for implementation in 2022.

7. The ruling affirmed the application of a 5% IGST rate on imported footwear not exceeding Rs. 1000 per pair, based on the principles of value-based taxation and the specific amendments to the notification governing IGST rates on footwear.

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