Reversal of IGST in case of DTA sales by EOU

[Dashrath Walkoli]

We are having a EOU and making some DTA sales. My question is whether we have to reverse BCD+SWS+IGST or only BCD+ SWS through TR-6 challan. what is the legal provisions If we have to reverse IGST portion also?

[Shilpi Jain]

Only BCD and SWS on imported material. Notification 52/2003 is clear on this. 

IGST gets paid on the DTA sale.

[Shilpi Jain]

IGST / CGST&SGST gets paid on DTA sale

[KASTURI SETHI]

After in agreement with above replies, in this context, it is also pertinent to go through the following FAQs :-

FAQs on EOUs

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.

Q2. What tax benefits will be available to EOU scheme in GST regime?

A. The duty free imports under GST regime will be restricted to Basic Custom duty. Exemption from the additional duties of Customs, if any under Section 3(1), 3(3) and 3(5) of the Customs Tariff Act, 1975 and exemption from Central Excise duty will be available for goods specified under the Fourth Schedule to the Central Excise Act. IGST or CGST plus SGST will be payable by the suppliers who make supplies to the EOU. The EOU will be eligible, like any other registered person, to take Input Tax Credit of the said GST paid by its suppliers.

Q3. Whether supplies to or from EOU will be exempted from GST?

A. No.

Under the GST law, IGST or CGST plus SGST will be payable by the suppliers who make supplies to the EOU. The EOU will be eligible to take Input Tax Credit of the said GST paid by its suppliers.

The supplies from EOU will not be exempted from GST, except in the case of zero-rated supplies defined under section 16 of the IGST Act, i.e. Supplies made by EOU in the form of physical export or supplies to a SEZ unit or SEZ Developer for authorized operations.

Q4. What procedure will be followed by EOU to import goods without payment of Customs duty in the GST regime?

A. To avail such import benefits, EOUs will have to follow the procedure under the Customs (Import of Goods at Concessional Rate of Duty) Rules, 2017.

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.

[Source : http://www.nsez.gov.in]

[Ryan Vaz]

You only have to reverse BCD + SWS (Basic Customs Duty + Social Welfare Surcharge) through the TR-6 challan. You do not need to reverse the IGST portion saved on the raw materials, provided that your final DTA sale is a taxable supply on which you are charging GST (IGST or CGST+SGST).

Why? The logic is that by paying full GST on the DTA sale price, the tax chain is maintained. If you were to pay IGST on inputs and GST on the output, it would lead to double taxation (unless you claimed ITC, which is procedurally restricted for TR-6 payments). Therefore, the law requires you to forego only the "Customs" portion (BCD+SWS) of the exemption.

Detailed Steps / Computation

Scenario:

• You imported raw materials worth ?1,00,000 duty-free.

• Duties saved: BCD (10%), SWS (10% of BCD), IGST (18%).

• You manufactured goods and sold them in DTA for Rs. 1,50,000.

Step A: DTA Invoice (GST Compliance) On the sale invoice to the DTA customer, you must charge GST on the transaction value.

• Taxable Value: Rs. 1,50,000

• GST Output Liability: Rs. 27,000 (assuming 18% rate)

• Action: Pay this Rs. 27,000 via GSTR-3B using your available ITC or Cash.

Step B: Reversal of Duties (Customs Compliance) You must calculate the duty forgone on the inputs used to manufacture the Rs. 1,50,000 worth of finished goods.

• Input Value Used: Rs. 1,00,000 (Standard Input Output Norms - SION apply)

• BCD Payable: Rs. 1,00,000 × 10% = Rs. 10,000

• SWS Payable: Rs. 10,000 × 10% = Rs. 1,000

• Total TR-6 Payment:Rs. 11,000

Step C: How to Pay (TR-6 Challan)

• Payment Mode: The reversal is paid via a TR-6 Challan (Manual or e-payment via ICEGATE depending on your ports automation level).

• Head of Account: Major Head 0037 (Customs Duties).

• Details: Mention the BCD and SWS amounts separately.

• IGST Reversal:NIL. (As per proviso to Notf 52/2003-Cus as amended, the exemption from IGST continues as long as the finished goods attract GST).

AI Summary

EOU DTA sales: reverse only BCD and SWS via TR 6; IGST remains exempt if output GST is charged on sale. For DTA clearances from EOUs the obligation is to charge and pay GST on the DTA sale and to reverse only the customs components of the import concession: remit Basic Customs Duty and Social Welfare Surcharge on inputs used (via TR 6), while the IGST exemption on imports remains where output GST has been charged on the finished goods.