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

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.