New amendments announced to the goods and services tax framework have helped resolve a dispute surrounding the constitutional validity of levying tax on goods sold within bonded warehouses.
Importers who had dragged the government to the Delhi Court over the issue withdrew the petition on Monday, after lawyers representing the government and GST Council told the court about the amendment and how it would resolve the matter .
“This will have a positive impact on all importers who use customs bonded warehouses,” said Abhishek A Rastogi, a partner at Khaitan & Co who is also a lawyer for importers in the case. “It has removed a major irritant.”
Importers filed a writ petition claiming that a 2017 circular that allowed for a levy of integrated GST on sale within the warehouse had led to double taxation — the first one during the import transaction and second when goods were transferred between the customs bonded warehouses.
The amendments in the GST law announced on July 8 have exempted the tax on the second leg of the transaction, when the sale happens within the customs bonded warehouse.
“IGST will now be levied only once at the time of removal from the warehouse at the final value at which the goods are sold. This new circular is applicable to goods deposited in customs warehouses on or after 1 April 2018,” said Rastogi.
The customs law provides for deposit of goods in customs bonded warehouses without payment of duty. The importer can sell goods while they remain deposited in the warehouse. The earlier customs circular stated that customs duty was payable on the value at which goods were imported and deposited into the warehouse but there was an additional clarification that this would also be subjected to IGST as a supply in the hands of the person who deposited goods in the warehouse. This has raised the double-taxation issue.
Source : PTI