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

IGST reversal on duty free imports: clarification sought where EOU transfers inputs to DTA under same GSTIN. Whether IGST exempted at import must be reversed when duty free imported inputs are transferred from an EOU to a DTA unit under the same GSTIN. The EOU reversed Basic Customs Duty and Social Welfare Surcharge via TR 6 but did not reverse IGST, citing TR 6's insufficiency as ITC documentation. The discussion contrasts the treatment where finished goods cleared to DTA (IGST on clearance may suffice) with the present factual variation where inputs themselves are moved, and asks what procedure enables reversal and later ITC claim.