EOU TO EOU SALE OF GOODS - PAYMENT OF GST & CUSTOMS DUTY

[Ramachandran Chandru]

As per Foreign Trade Policy, supply of finished goods from EOU to EOU is permissible on payment of GST & Cess and also Customs duty leviable under First Schedule, availed as exemption on such goods. When the goods are transacted between two EOUs, I doubt whether payment of Customs duty is required for clearance. Need clarification whether Customs duty is also to be paid along with GST.

Request the experts to clarify on this.

[KASTURI SETHI]

Extract from FAQs

(iv) Inter Unit Transfers

Supply of goods from one EOU to another EOU (inter-unit transfer) will require payment of applicable GST. The BCD exemption availed on inputs by the supplier EOU, utilized in such transferred goods would have to be reversed by the recipient EOU at the time clearance of such goods in DTA. Same provisions apply on sending of Goods for Job work.

Q1. Whether the EOU scheme will continue to be in operation in the GST regime and whether EOU is required to take registration under the GST law?

A. EOU is like any other supplier under GST and all the provisions of the GST Law will apply. However, the benefit of Basic Customs Duty exemption on imports will continue.

Q5. Whether an EOU can clear goods to another EOU (Inter-unit transfer)? And whether an EOU can send goods for carrying out job work on such goods? In such situations, how will the tax liability be discharged?

A. Supply of goods from one EOU to another EOU will be treated as any other supply under GST Law. An EOU can send goods for job work as per section 143 of the CGST Act, 2017 and rule 45 of the CGST Rules, 2017 and the tax liability shall be discharged accordingly.

Q. As an EOU, BCD is exempted under customs notification 52/2003. In GST regime, EOUs should pay IGST on imports ?

A.Only SEZs have been exempted from payment of IGST on import. EOUs will have to pay IGST on imports.

[Amit Ruia]

As per FTP 2015-2020,

6.13 Inter Unit Transfer (a) Transfer of manufactured goods from one EOU/ EHTP/STP/BTP unit to another EOU / EHTP/ STP/ BTP unit is allowed on payment of applicable GST and compensation cess with prior intimation to concerned Development Commissioners of the transferor and transferee units as well as concerned Customs authorities, as per following procedure for movement of goods:

i. The supplier EOU shall endorse on usual commercial documents, such as, tax invoice and delivery challan, the amount of duties of Custom leviable under First Schedule to the Customs Tariff Act, 1975 availed as exemption on inputs used in the manufacture of such finished goods (including byproducts, rejects, waste and scraps arising in the course of production, manufacture, processing or packaging of such goods) supplied to another EOU. The recipient EOU shall pay such endorsed Customs duty besides his own liability of reversal of Customs duty as provided in Para 6.08 above, before clearance of such finished goods in DTA and as provided under DoR notifications/circulars/ guidelines in this regard.

ii. Upon receipt of goods, the recipient EOU shall submit endorsed copies of tax invoice to their jurisdictional Customs authority as well as to the jurisdictional Customs authorities of the supplier EOU.

AI Summary

GST and Customs Duty Rules for Transferring Goods Between Export Oriented Units in India The discussion focuses on the tax implications of transferring goods between Export Oriented Units (EOUs) in India. It clarifies that while transferring goods from one EOU to another, applicable GST and compensation cess must be paid. The supplier EOU must endorse commercial documents with the amount of Customs duty exempted on inputs used in manufacturing. The recipient EOU must reverse this exemption and pay the endorsed Customs duty upon clearance in the Domestic Tariff Area (DTA). The EOU scheme continues under GST, with EOUs required to pay IGST on imports, unlike SEZs.