IGST interest is it applicable during Re Import of Export goods

[Raja Palaniappan]

Dear Sirs

We have done an import for customer where in exports of garments 5 shipments valued approx 5cr, export done under LUT has been found quality defect at destination and due to Covid 19 and not possible travel for any repair, it is returned back. It is not sure of re export so filed as re import only. (not repair and return)

All benefits of export Drawback and Rosctl has been paid along with interest.

IGST 5% customer is ready to pay and will apply for ITC. However customs is asking for interest 18% on IGST applicable from date of export until return of goods. Importer is already under loss due to return, and the sale is incomplete. In that case is it mandatory to pay

IGST during import ?

Interest on IGST applicable ?

Kindly give your comments and reply sir.

[JSW CEMENTLIMITED]

Sir,

Kindly check your electronic credit ledger, if it contains balances more than IGST reversed since the day of availing the same, then as per PATNA High Court decision in the case of Commercial Steel Corporation vs State of Bihar reported in 2019 (7) TMI 1452, no interest is required to be paid. In case, entire credit was exhausted after availing ITC of IGST availed on import, it means that you have utilized the ITC on such date and you have to pay interest from that day onward partly or wholly depending on the extent of utilization

[Raghunandhaanan rvi]

Sir

This is a case of re-import of goods exported under LUT on the ground of quality defect. You are not sure of sending it back after repair. Trust, you have re-imported the goods within one year from the date of export. In such cases, re-imported goods can be customs cleared under Notification No. 45/2017 Customs dated 30.06.2017. (Serial No. 1(d)). As per the Notification BCD and SWC is exempted. However, you have to reverse the IGST amount which was not paid at the time of export. i.e. the rate of IGST was prevailing on the date of export need to pay with interest. This is my view.

[Raja Palaniappan]

Dear Sirs

Thanks for your reply and clarification. However yes it is reimport of export goods beyond 1 year and less than 2 years. Delay due to covid19 related reasons and approved by customs.

However on IGST payment we have a doubt as per 45/2017 and 47/2017 IGST is not applicable for return of goods exported originally availing duty drawback where in notification says duty drawback availed upto 1st of July as Excise duty, state VAT, and post 1st july 2017 as CGST SGST paid for purchase of raw materials, dyeing and other process claimed back as duty drawback.

Now that duty drawback and other DGFT benefits are returned with interest IGST itself during import is not applicable. The sale has not happened.

So is it right we claim that IGST during import is not applicable?1

[Raghunandhaanan rvi]

Sir,

There are two ways to export

1. Export without payment of IGST under LUT/Bond

2. Understand that you have exported under LUT

3. When goods re-imported, Cusotms duty exemption notification No. 45/2017 is applied

4. Notification specifically says duties exempt "as is in excess of the amount indicated in the corresponding entry in column (3) of the said table".

5. Serial No. 1(d) says amount of IGST not paid at the time of export under LUT/Bond is payable on re-importation of such goods. There is no mention in the said notification that IGST not payable if no sale taken place. However, you can take ITC if such re-imported goods are used for furtherance of business.

6. IGST on re- importation is not payable only if goods exported under Advance authorization or EPCG as per Serial No. 1(e)(iv) of the said notification.

7. If goods exported for exhibition abroad and re-imported, IGST is not payable as per Sl. No. 5 of the said Notification. (In this case goods exported are not for sale.)

AI Summary

IGST on re-importation may be payable with interest unless electronic IGST credit covers the reversal, subject to exemptions. Re-importation of goods exported under LUT typically requires reversal and payment of the IGST not paid at export and interest from the date of export until reversal. Customs exemption provisions relieve certain duties but expressly make the unpaid IGST payable on re-import unless a specific exemption applies. If the electronic credit ledger contained sufficient IGST credit from the date of availing, interest may not be payable; where ITC was utilized and later exhausted, interest liability can arise from the date of utilization. Exemptions exist for exports under Advance Authorization or EPCG and for exhibition goods, and paid IGST may be claimed as input tax credit if used for business.