Clarification regarding reversal of IGST on transfer of duty-free imported goods from EOU to DTA unit

[Dashrath Walkoli]

Dear sir, our company is operating two units — one as an Export Oriented Unit (EOU) functioning under Chapter 6 of the Foreign Trade Policy (FTP), 2023 read with Notification No. 52/2003-Customs, and another as a Domestic Tariff Area (DTA) unit.

The EOU has executed a Bond amounting to Rs. 10 crore for the import of duty-free raw materials required for the manufacture of final products. Subsequently, certain quantities of duty-free imported raw materials were transferred from the EOU to the DTA unit through delivery challans, as they were required for production purposes at the DTA unit.

While transferring the said materials, the applicable Customs duties (Basic Customs Duty and Social Welfare Surcharge) were duly reversed and paid through TR-6 challan. However, the Integrated GST (IGST) component exempted at the time of import was not reversed, as payment through TR-6 challan does not qualify as a valid document for availing Input Tax Credit (ITC) in terms of Rule 36 of the CGST Rules, 2017.

In view of the above, your kind clarification is requested on the following points:

1. Whether the IGST component, initially exempted at the time of import under Notification No. 52/2003-Customs, is required to be reversed when such duty-free goods are transferred from the EOU to its DTA unit; and

2. If such reversal is required, what is the prescribed procedure for effecting the reversal and for subsequently claiming ITC on the same.

[Shilpi Jain]

Are both these units under the same or different GSTIN?

[Dashrath Walkoli]

both these units under the same GSTIN

[Shilpi Jain]

Under the said notification, in case where a FG is manufactured with duty free inputs and if the FG is cleared to DTA, then IGST exemption need not be paid back on the inputs, rather the payment of IGST on the clearance to DTA would suffice. Though in your case it is the input itself which is cleared.

 

AI Summary

Reversal of IGST on transfer of duty-free imported inputs to DTA under Rule 36 and claiming ITC An export-oriented unit imported inputs duty-free under Customs Notification 52/2003 and transferred some inputs to an affiliated domestic tariff area unit under the same GSTIN. Basic customs duty and SWS were paid on transfer, but IGST originally exempted at import was not reversed because TR-6 payment is not valid for ITC under Rule 36. The query asks whether IGST must be reversed on transfer of duty-free imports to DTA and how to reverse and claim ITC. A respondent noted that where finished goods made from duty-free inputs are cleared to DTA, paying IGST on that clearance suffices, but observed the present case involves transfer of inputs rather than finished goods.