GST on imports

[Madhavan iyengar]

X Company based in India ( Gujrat) has placed order for tool on Y based in Germany

X will pay Y for the tool in foreign exchange

Y will make the tool and tool will remain in Germany for manufacture of parts for X

Manufactured parts will be sold by Y to X ie it will be imported by X and customs duty and IGST paid by X in India

issues

On tool purchase will X require to pay any duties as tool has never come into india

For parts sold by Y of Germany to X in India how the parts is required to be valued for customs duty purpose

[Ganeshan Kalyani]

Cost Insurance Freight (CIF) value or Free on Board (FOB) value. These are two values which is considered for import duty purpose.

[YAGAY and SUN]

In our view, you have to disclose all material facts (refer Rule 11 of the Customs Valuation (Determination of value of imported goods) Rules, 2017) about this transaction to the Customs Department and Customs Department will surely ask you to amortize the cost of the tool on the value of the goods manufactured with the help of such tools and imported such goods into India.

AI Summary

Customs valuation may require amortising overseas tool cost into import value, affecting duty and GST liability on imported parts.
The cost of a foreign tool that remains abroad but is used to manufacture imported parts may be required to be amortized into the customs value of those parts; valuation follows CIF or FOB bases and all material facts must be disclosed to customs so authorities can decide whether the tool's cost is includible, thereby affecting import duty and IGST on the imported parts.