Circular No. 16/2021-Customs
F. No. CBIC-190354/96/2021-TO(TRU-I)-CBEC
Government of India
Ministry of Finance
Department of Revenue
(Central Board of Indirect Taxes & Customs)
*****
Room No.156, North Block, New Delhi.
New Delhi, dated 19
th
July, 2021
To,
All Principal Chief Commissioners/ Chief Commissioners of Customs/ Customs (Preventive),
All Principal Chief Commissioners/ Chief Commissioners of Customs & Central tax,
All Principal Commissioners/ Commissioners of Customs/ Customs (Preventive),
All Principal Commissioners/ Commissioners of Customs & Central tax
Madam/Sir,
Subject: Clarification regarding applicability of IGST on repair cost, insurance and
freight, on goods re-imported after being exported for repairs, on the
recommendations of the GST Council made in its 43
rd
meeting – reg.
References have been received seeking clarification on the issues of the applicability of
IGST on repair cost, insurance and freight, on goods re-imported after being exported abroad for
repairs.
2. Notification Nos. 45/2017-Customs and 46/2017-Customs, both dated 30
th
June, 2017,
issued at the time of implementation of GST, prescribe certain concession from duty/taxes on re-
import of goods exported for repair outside India. These notifications, specifically serial No. 2
ibid, clearly specify that goods exported (other than those exported under claim of benefits listed),
when re-imported into India, are exempt from so much of the duty of customs leviable thereon
which is specified in the said First Schedule of the Customs Act, 1962, and the integrated tax,
compensation cess leviable there on respectively under sub-section (7) and (9) of section 3 of the
said Customs Tariff Act, 1975 as is in excess of the duty of customs which would be leviable if the
value of re-imported goods after repairs were made up of the fair cost of repairs carried out
including cost of materials used in repairs (whether such costs are actually incurred for not),
insurance and freight charges, both ways.
3. Therefore, the said notification prescribes that duties or taxes (including BCD, IGST, etc)
at the applicable rates will be payable on such imports, calculated on the value of repairs, insurance
and freight, instead of the value of the goods itself. Similar concession existed in pre-GST period
too, vide notification No. 94/96-Customs, whereby, the customs duty (BCD, additional duty of
customs under section 3 of Customs Tariff Act, 1975, etc.) were payable on the value of repairs
instead of the entire value of goods in such imports.
4. GST rate and exemptions are prescribed on the recommendation of the GST Council. The
Council, at the time of roll out of GST decided to continue the concession as were available under
the said notification No. 94/96-Cus, with only consequential amendment, i.e, replacing additional
duties of customs with IGST and Compensation cess, as discussed in the 14
th
Meeting of the GST
Council. Accordingly, under GST, IGST and Compensation cess were made applicable on the
value of repairs, insurance and freight on re-import of goods sent abroad for repair.
5. Again, during the 37
th
GST Council Meeting, while examining the request to make
available the credit of ITC paid on aircraft engines and parts exported for repairs and later re-
imported, the leviability of IGST on such imports, on the cost of repairs, insurance and freight
charges, was affirmed. In fact, this was never disputed in first place and the request was to allow
credit of the IGST so paid. Similarly, while examining the question of GST rate on maintenance,
repair and overhauling (MRO) services in respect of aircraft, aircraft engines and other
components and parts, the leviability of IGST on such re-imports was again affirmed by the GST
Council in its 39
th
meeting, making it explicitly clear that such goods reimported after repair from
outside India attract IGST on the repair, freight and insurance value. In the said discussion, the
IGST levied on such goods re-imported after being exported abroad for repairs was a significant
factor considered by the GST Council while deciding the rate on MRO services. The above
deliberations of the GST Council leave no doubt that the Council had consciously recommended
for levy of IGST and cess, albeit at the repair, insurance and freight cost instead of the entire value
of goods imports, on the basis of which the said notifications No. 45/2017-Cus and 46/2017-Cus
were issued.
6. Recently, in the matter of M/s Interglobe Aviation Limited versus Commissioner of
Customs, in its Final Order Nos. 51226-51571/2020 dated the 2
nd
November, 2020 {2020 (43)
G.S.T.L. 410 (Tri. - Del.)}, the Hon’ble CESTAT Principal Bench, New Delhi on analysis of
notification No. 45/2017-Customs, has interpreted that intention of legislation was only to impose
basic customs duty on the fair cost of repair charges, freight and insurance charges on such imports
of goods after repair. The Hon’ble CESTAT has thus concluded that integrated tax and
compensation cess on such goods would be wholly exempt. An appeal has been preferred by the
Department before the Hon’ble Supreme Court against the said Order.
7. In the above background, the matter was placed before the GST Council in its 43
rd
Meeting
held on the 28
th
May, 2021. The GST Council deliberated on the issue and recommended that a
suitable clarification, including any clarificatory amendment, if required, may be issued for
removal of any doubt, to clarify the decision of the GST Council that re-import of goods sent
abroad for repair attracts IGST and cess (as applicable) on a value equal to the repair value,
insurance and freight.
8. Accordingly, as recommended by the GST Council, it is clarified that notification Nos.
45/2017-Customs and 46/2017-Customs, both dated the 30
th
of June, 2017 were issued to
implement the decision of the GST Council taken earlier, that re-import of goods sent abroad for
repair attracts IGST on a value equal to the repair value, insurance and freight. Further, in the light
of the recommendations of the GST Council in its 43
rd
Meeting, a clarificatory amendment has
been made in the said notifications, vide notification Nos. 36/2021-Customs and 37/2021-
Customs, both dated 19
th
July, 2021, without prejudice to the leviability of IGST, as above, on
such imports as it stood before the amendment.
9. The contents of this circular may please be brought to the notice of trade and industry
through issue of Trade/ Public notices. The field formations may also be suitably sensitized in this
regard. Difficulty, if any, in the implementation of this Circular may be brought to the notice of
this office.
Yours faithfully,
(Gaurav Singh)
Deputy Secretary to the Government of India
