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.

[KASTURI SETHI]

For availing and utilisation of Credit, there are two basic conditions. Duty must be paid and must be utilised in the business or in furtherance of business while paying tax. Both the conditions are to fulfilled. You qualify only second condition. Hence ITC is not allowed.

[SARAVANAN RENGACHARY]

Dear Kasturi Sir,

We qualify 1st condition also as the consignment is cleared on payment of Duty. My question is can we avail the input on the duty amount (IGST) though the shipment value is not payable to the supplier as the shipment is on FOC basis.

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.

[KASTURI SETHI]

You will do assembling which is manfacturing process. How will you arrive at correct transactional value for the purpose of payment of GST ? May be for the purpose of export. Full value of goods including IGST to be paid, if you want ITC. This is my view. I would like oher experts to intervene.

[CASusheel Gupta]

Dear Sir

IGST on import is paid on reverse charge basis. condition of payment to supplier is not their when tax is to be paid on RCM basis. You can take the ITC.

Regards

CA Susheel Gupta

9811004443

AI Summary

Input tax credit eligibility for imported free components hinges on payment-to-supplier rule versus reverse-charge treatment. Whether input tax credit is claimable on IGST paid at import when components are supplied free of cost for incorporation into exported goods. The issue contrasts the exclusion of ITC where payment to the supplier is not made with the position that IGST on import may be paid under reverse charge, in which case the payment-to-supplier condition would not apply and ITC could be available; determination of transaction value for import GST is a related practical concern.