Circular No. 46/2017-Customs
F.No: 473/10/2017-LC
Govt. of India
Ministry of Finance
Dept. of Revenue
Central Board of Excise & Customs
North Block, New Delhi
Dated 24
th
November 2017
To,
All Principal Chief Commissioners / Chief Commissioners / Principal Commissioners /
Commissioners of Customs
Subject: Applicability of IGST / GST on goods transferred / sold while being deposited
in a warehouse. -reg.
References have been received from the trade regarding levy of IGST/GST on sales of
goods deposited in a customs bonded warehouse.
2. Ch IX of the Customs Act provides for deposit of goods into a customs bonded
warehouse licensed under section 57 or 58 or 58A without payment of duty and the procedures
to be followed with respect to the warehoused goods. Sub-section (5) of section 59 provides
that the importer is at liberty to transfer the ownership of such goods to another person while
the goods remain deposited in the warehouse.
3. It is to be noted that the value of imported goods, for purposes of charging customs
duty, is determined as per section 14 of the Customs Act, 1962 at the time of import i.e. at the
time of filing of the into-bond Bill of Entry. Any costs incurred after the import of goods, such
as, port charges / port demurrage charges or costs for customs clearing or transporting the goods
from the port to the customs bonded warehouse or costs of storage at the customs bonded
warehouse, cannot be added to the value of the goods, for the purpose of levy of duties of
customs at the stage of ex-bonding. Further, clause (b) of sub-section (1) of Section 15 of the
Customs Act provides that the rate of duty or tariff valuation for an ex-bond Bill of Entry shall
be the date on which it is filed. There is no provision to vary the assessable value of the goods
at the ex-bond stage unless they are such goods on which tariff valuation applies. Therefore,
duties of customs (BCD + IGST) shall be paid on the imported goods at the stage of ex-bonding
on the value determined under section 14 of the Customs Act.
4. However, the transaction of sale / transfer etc. of the warehoused goods between the
importer and any other person may be at a price higher than the assessable value of such goods.
Such a transaction squarely falls within the definition of “supply” as per section 7 of the Central
Goods and Services Tax Act, 2017 (hereinafter referred to as, “CGST Act”) and shall be taxable
in terms of section 9 of the CGST Act read with section 20 of the Integrated Goods and Services
Tax Act, 2017 (hereinafter referred to as, “IGST Act”). It may be noted that as per sub-section
(2) of section 7 of the IGST Act, any supply of imported goods which takes place before they
cross the customs frontiers of India, shall be treated as an inter-State supply. Thus, such a
transaction of sale/transfer will be subject to IGST under the IGST Act. The value of such
supply shall be determined in terms of section 15 of the CGST Act read with section 20 of the
IGST Act and the rules made thereunder, without prejudice to the fact that customs duty (which
includes BCD and applicable IGST payable under the Customs Tariff Act) will be levied and
collected at the ex-bond stage.
5. Thus, in respect of goods stored in a customs bonded warehouse, there is a possibility
that certain cases may involve an additional taxable event, if a transfer of ownership of
warehoused goods takes place between the importer and another person, before clearance of
the goods, whether for home consumption or for export.
5.1 In other words, when goods remain deposited in a customs bonded warehouse and are
transferred by the importer to another person, the transaction will be subject to payment of
IGST at the value determined as per section 20 of the IGST Act read with section 15 of the
CGST Act, 2017 and the rules made thereunder and the tax liability shall be reckoned as per
section 9 of the CGST Act, 2017.
5.2 However, it may be noted that so long as such goods remain deposited in the warehouse
the customs duty to be collected shall remain deferred. Further, it is only when such goods are
ex-bonded under section 68, shall the deferred duty be collected, at the value as had been
determined under section 14 of the Customs Act, 1962 in addition to IGST leviable, as
indicated at Para 5.1 above. [Illustrative charts A, B and C are attached to the circular to
facilitate better understanding]
1
.
6. Difficulties in implementation, if any, may be brought to the notice of the Board
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7. Hindi version follows.
(Temsunaro Jamir)
Officer On Special Duty (ICD)
1
Substituted on 06.12.2017 vide F.No. 473/10/2017-LC
ILLUSTRATIVE CHART - A
Goods imported, bonded and sold while in the Bonded Warehouse and clearance thereof:
Box-B Box-C
Box-D
Box-A
Total duty paid: 23.20+36= Rs.59.2
[Note: In this case, when ‘A’ sells the goods to ‘B’, ‘A’ becomes the supplier of the goods as per IGST Act and is therefore liable to pay IGST
under section 5 of IGST Act, as explained in Box-C. ‘B’ in turn becomes the importer and is therefore liable to pay the duties deferred as in Box-
B, on ex-bonding, as explained in Box-D above.]
Importer files an “into bond bill of
entry” and the goods are deposited
in a Bonded Warehouse. BCD and
IGST (Section 3(7) of Customs
Tariff Act 1975) are deferred.
Illustration of duty deferment:
A: Value of goods = Rs. 100
B: say BCD is 10% = Rs. 10 (10%
of Rs. 100)
C: say IGST is 12% = Rs. 13.2
(12% of Rs. 110)
D: Duty Deferred (B+C) = 23.20
“A’ sells the goods to
“B” on 21
st
July 2017
for Rs. 300 and charges
IGST of Rs. 36 @12%
(IGST)
Payment of the above
IGST of Rs. 36 and
filing of return for the
same should be done by
20
th
August 2017.
“B” files an Ex-bond
Bill of entry on 25
th
of
September 2017 and
pays Rs. 23.20 (the
deferred duty, in
addition to duty of Rs.
36 paid earlier as
indicated in Box-C).
Goods imported by
“A” on 2
nd
July
2017. Importer
wants to deposit the
goods in a bonded
warehouse to defer
duty.
The credit of IGST paid
can be availed as per
Section 16(2)(b) of
CGST Act.
The credit of IGST paid
can be availed.
ILLUSTRATIVE CHART - B
Goods imported, bonded and cleared for home consumption and subsequent sale thereof:
ILLUSTRATION
Box-B
Box-A
Box-C
Box-D
Total duty paid: 23.20+36= Rs.59.2
Goods imported by
“A” on 2
nd
July
2017. Importer
wants to deposit the
goods in a bonded
warehouse to defer
duty.
Importer files an “into bond bill of
entry” and the goods are deposited in
a Bonded Warehouse. BCD and IGST
(Section 3(7) of Customs Tariff Act
1975) are deferred.
Illustration of duty deferment:
A: Value of goods = Rs. 100
B: say BCD is 10% = Rs. 10 (10% of
Rs. 100)
C: say IGST is 12% = Rs. 13.2 (12%
of Rs. 110)
D: Duty Deferred (B+C) = 23.20
“A” files an Ex-
bond Bill of entry
on 21st July 2017
and pays Rs. 23.20
(the deferred duty).
Credit of IGST paid
can be availed.
“A’ sells the goods to “B”
on 25th September 2017 for
Rs. 300 and charges GST
@ say 12% = Rs. 36
Credit of which can be
availed.
ILLUSTRATIVE CHART - C
Goods imported and cleared for home consumption and subsequent sale thereof:
Box-A
Box-C
Box-B
Total duty paid: 23.20+36= Rs.59.2
‘A’ can take credit of IGST
paid at the time of
clearance for home
consumption.
Goods imported by “A” on 2
nd
July
2017. Importer clears the goods for
home consumption.
Illustration of duty payment:
A: Value of goods = Rs. 100
B: say BCD is 10% = Rs. 10 (10%
of Rs. 100)
C: say IGST is 12% = Rs. 13.2 (12%
of Rs. 110)
D: Duty paid (B+C) = 23.20
‘A’ sells the goods to ‘B’ for Rs.
300 on 25th September 2017 and
charges GST.
Value of goods= Rs. 300 GST (say
12 %) = Rs. 36
Credit of which can be availed.
