IGST on Customer Consgined item for production purpose

[SARAVANAN RENGACHARY]

Dear All,

Overseas customer wants to send few specific components (FOC) to our production unit and wants us to integrate the components into the final product. The final product will be exported to him .

In this scenario, we will have to pay IGST at the time of import. This is clear.

The question is whether the importer can avail the ITC.

As per section, serial # 2D of section 16 of GST act, ITC is not eligible if the payment is not made to the supplier. Since we are not going to make the payment to the supplier as the components are supplied free of cost. Please clarify in this scenario, can we avail the ITC or not.

regards

Saravanan.

AI Summary

Debate Over Input Tax Credit Eligibility for IGST on Free Import Components Under Reverse Charge Mechanism An overseas customer is sending components free of charge to a production unit for integration into a final product, which will then be exported back. The issue is whether the importer can claim Input Tax Credit (ITC) on the Integrated Goods and Services Tax (IGST) paid at import, given that no payment is made to the supplier. One expert argues ITC is not allowed without payment to the supplier, while another suggests that since IGST is paid on a reverse charge mechanism, the payment condition does not apply, allowing ITC to be claimed.