GST on Import of Goods
Import of goods into India is treated as an inter-state supply and attracts Integrated GST (IGST) in addition to Basic Customs Duty (BCD). The IGST is calculated on the value of imported goods plus customs duty.
Import Value Calculation for GST
Assessable Value = CIF Value + Landing Charges (1% of CIF)
+ Basic Customs Duty (BCD)
+ Social Welfare Surcharge (10% of BCD)
+ Any other applicable duties
= Value for IGST Calculation
IGST is levied on this total value including customs duties.
Customs Duty Structure
| Duty Component | Rate/Calculation |
|---|---|
| Basic Customs Duty (BCD) | Varies by product (0% to 150%+) |
| Social Welfare Surcharge | 10% of BCD |
| Integrated GST (IGST) | 5%, 12%, 18%, or 28% on (Assessable Value + BCD + SWS) |
| Compensation Cess (if applicable) | As notified for luxury/sin goods |
GST on Import of Services
Import of services attracts GST under the Reverse Charge Mechanism (RCM). The recipient of services in India is liable to pay GST.
Conditions for Import of Services Taxability
- ✓ Supplier is located outside India
- ✓ Recipient is located in India
- ✓ Place of supply is in India
- ✓ Supplier and recipient are not merely establishments of distinct persons
Place of Supply for Import of Services
| Nature of Service | Place of Supply |
|---|---|
| General services (B2B) | Location of recipient |
| Services related to immovable property | Location of immovable property |
| Admission to entertainment events | Where event is held |
| Transportation of goods | Location of recipient |
Understanding IGST on Imports
Integrated GST (IGST) is a destination-based tax that applies to inter-state supplies, including imports. The revenue is shared between Central and State governments.
Key Features of IGST
- • Levied on inter-state supplies
- • Applies to both goods and services
- • Collected at the point of import
- • Input tax credit available
- • Revenue shared between center and states
IGST Rates on Imports
- • 5% - Essential goods
- • 12% - Standard goods
- • 18% - Industrial goods, services
- • 28% - Luxury goods
- • Check specific HSN codes for exact rates
Input Tax Credit on Imports
One of the significant advantages of the GST system is that input tax credit (ITC) is available for IGST paid on imports, which can be used to offset output tax liability.
Conditions for Availing Import ITC
- ✓ Possession of Bill of Entry
- ✓ IGST has been actually paid
- ✓ Goods/services have been received
- ✓ GST return (GSTR-3B) has been filed
- ✓ ITC appears in GSTR-2B (auto-populated from customs data)
ITC Availability Timeline
| Scenario | ITC Availability |
|---|---|
| Import of Goods | After goods are received and BOE is filed |
| Import of Services | After invoice is received and payment is made |
| Capital Goods Import | Full ITC available immediately (no restriction) |
Exports - Zero Rating and LUT
Exports are treated as zero-rated supplies under GST, meaning GST is charged at 0% while input tax credit remains available for refund.
Zero-Rated Supply - Two Options
Option 1: Export with LUT/Bond (Recommended)
- • Export without payment of IGST
- • File Letter of Undertaking (LUT) at beginning of FY
- • Claim refund of input tax credit
- • No working capital blockage
Option 2: Export with Payment of IGST
- • Pay IGST at time of export
- • Claim refund of IGST paid
- • Refund processed faster (typically within 7 days)
- • Working capital gets blocked temporarily
Letter of Undertaking (LUT)
| Aspect | Details |
|---|---|
| Form | RFD-11 on GST portal |
| Validity | One financial year (April to March) |
| Due Date | Before commencement of export |
| Who Cannot File LUT | Persons prosecuted for tax evasion > ₹250 lakhs |
Refund of IGST on Exports
Exporters can claim refund of accumulated input tax credit or IGST paid on exports.
| Refund Type | Process | Timeline |
|---|---|---|
| IGST paid on goods export | Auto-refund based on shipping bill | 7-14 days |
| ITC refund on export of goods/services | File RFD-01 on GST portal | 60 days |
Compliance Requirements
For Importers
| Compliance | Requirement |
|---|---|
| Bill of Entry | File with customs; IGST auto-calculated |
| GST Returns | GSTR-3B (claim ITC), GSTR-2B (auto-populated) |
| Payment | IGST paid at time of customs clearance |
| Records | Maintain BOE, invoices, payment proof for 6 years |
Frequently Asked Questions
Can I claim ITC if I don't have the Bill of Entry?
No, Bill of Entry is mandatory for claiming ITC on imported goods. The ITC auto-populates in GSTR-2B based on customs data.
Is customs duty also eligible for ITC?
No, Basic Customs Duty (BCD) and Social Welfare Surcharge are not eligible for input tax credit. Only IGST and Compensation Cess can be claimed as ITC.
What is the time limit for claiming ITC on imports?
ITC must be claimed within the earlier of: (a) Due date of September return following the FY, or (b) Actual date of filing annual return.