Integrated Tax Circular 03/2018 – Applicability of Integrated Goods and Services Tax (integrated tax) on goods supplied while being deposited in a customs bonded warehouse-reg.

Integrated Tax Circulars

To,

The Principal Chief Commissioners/ Chief Commissioners/ Principal
Commissioners/ Commissioners of Central Tax (All)/ The Principal Directors
General/ Directors General (All)

Madam/Sir,

Subject: Applicability of Integrated Goods and Services Tax (integrated tax) on
goods supplied while being deposited in a customs bonded warehouse-reg.

1. Attention is invited to Circular No. 46/2017-Customs dated 24.11.2017 whereby
   the applicability of integrated tax on goods transferred/sold while being
   deposited in a warehouse (hereinafter referred to as the “warehoused goods”)
   was clarified.

2. Various references had been received by the Board on the captioned issue
   which has now been re-examined by the Board.

3. It is seen that the “transfer/sale of goods while being deposited in a
   customs bonded warehouse” is a common trade practice whereby the importer
   files an into-bond bill of entry and stores the goods in a customs bonded
   warehouse and thereafter, supplies such goods to another person who then files
   an ex-bond bill of entry for clearing the said goods from the customs bonded
   warehouse for home consumption.

4. It may be noted that as per sub-section (2) of section 7 of the Integrated
   Goods and Services Tax Act, 2017 (hereinafter referred to as the “IGST
   Act”), the supply of goods imported into the territory of India, till they
   cross the customs frontiers of India, is treated as a supply of goods in the
   course of inter-State trade or commerce. Further, the proviso to subsection (1)
   of section 5 of the IGST Act provides that the integrated tax on goods imported
   into India would be levied and collected in accordance with the provisions of
   section 3 of the Customs Tariff Act, 1975 (hereinafter referred to as the
   “CTA”). Thus, in case of supply of the warehoused goods, the point of levy
   would be the point at which the duty is collected under section 12 of the
   Customs Act, 1962 (hereinafter referred to as the “Customs Act”) which is at
   the time of clearance of such goods under section 68 of the Customs Act.

5. It may also be noted that sub-section (8A) has been inserted in section 3 of
   the CTA vide section 102 of the Finance Act, 2018,with effect from 31st
   March, 2018,so as to provide that the valuation for the purpose of levy of
   integrated tax on warehoused imported goods at the time of clearance for home
   consumption would be either the transaction value or the value as per
   sub-section (8) of section 3 of the CTA (i.e. valuation done at the time of
   filing the into-bond bill of entry), whichever is higher.

6. 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. 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.

7. This Circular would be applicable for supply of warehoused goods, while
   being deposited in a customs bonded warehouse, on or after the 1 stof April,
   2018.

8. It is requested that suitable trade notices may be issued to publicize the
   contents of this Circular.

9. Difficulty, if any, in implementation of the above instructions may please
   be brought to the notice of the Board. Hindi version would follow.