Key Points:
Explanation :
When imported goods are stored in a Free Trade Warehousing Zone (FTWZ), they are not subject to GST or customs duties until they are released for domestic use (home consumption). This clarification was solidified by amendments to the CGST Act in February 2019. The Integrated Goods and Services Tax (IGST) is only applied at the time of final clearance from the bonded warehouse, when the goods are withdrawn for domestic consumption. Any value addition that occurs during this warehousing period is considered when calculating the IGST payable at the time of clearance.
When the imported goods are warehoused, as long as the said goods are not cleared for home consumption, duties under Customs including IGST are not required to be discharged. Specifically, the legal position of such cases became much clearer, after the amendment whereby clauses 7 and 8 were added with effect from 01.02.2019 to Schedule III of the CGST Act, 2017, which talks about 'Activities or Transactions which shall be treated neither as a supply of goods nor a supply of services.
From 01.02.2019 onwards, when an amendment to Schedule III of the CGST Act, 2017 took place to the effect that 'supply of warehoused goods to any person before clearance for home consumption shall be neither a supply of goods nor a supply of services.',
Sub section(1) of Section 5 of the IGST Act provides that the integrated tax on goods imported into India shall be levied and collected in accordance with the provisions of section 3 of the Customs Tariff Act, 1975 on the value as determined under the said Act at the point when duties of customs are levied on the said goods under section 12 of the Customs Act, 1962.
Addition to that, under Rule 46(13) of the SEZ Rules, 2006, a unit is permitted transfer goods to a bonded warehouse without payment of duty, and it runs as below :
"(13) The Authorized Officer may permit a Unit to transfer goods to an Export Oriented Unit or Electronic Hardware Technology Park Unit or Software Technology Park Unit or Bio-technology Park Unit or to a bonded warehouse, without payment of duty subject to following conditions, namely."
In other words, the supply of goods before their clearance from the warehouse would not be subject to the levy of integrated tax and the same would be levied and collected only when the warehoused goods are cleared for home consumption from the customs bonded warehouse.
It is therefore, clarified that integrated tax shall be levied and collected at the time of final clearance of the warehoused goods for home consumption i.e., at the time of filing the ex-bond bill of entry and the value addition accruing at each stage of supply shall form part of the value on which the integrated tax would be payable at the time of clearance of the warehoused goods for home consumption.
Conclusion
GST is not leviable on the sale of goods warehoused in FTWZ on "as is where is" basis to customer who clear the same to bonded warehouse under the MOOWR Scheme
IGST is only levied when the goods are ultimately cleared for domestic consumption from the bonded warehouse.
2024-06-01