Impact of GST on Import and Export

Impact of GST on Import and Export

India is the seventh largest economy in the world. It is the world’s fastest growing economy preceding the major economy of China. The basic tool to evaluate the growth of any country is Balance of Payment (BOP), which comprises the transactions in the Capital account, Current account and the reserves.

Trade is considered as an important determinant of the economical growth. It becomes necessary to keep an eye on the trade performance of India in the domestic market as well as in the International market.

Growth in Import & Export is favorable for a healthy economy internationally. It depicts the growing domestic demand and strengthening of the currency.

However, India various duties levied increase overall value to the Indian Importers & Exporters and decrease the competitiveness in the market. Several schemes have been introduced to promote trade activities and simplifying the procedural chaos. The new proposed bill in the constitution for introducing compliance is GST.

GST (Goods and Services Tax) is the main agenda of the government at the moment. GST, if Implemented in an empirical way will suspend the taxation web and thus secure the loss of tax credit and compliance at different levels.GST is believed to be the revolutionary regime in the history of Indian taxation system.

Implementation of the bill is going to be an event of speculation for almost every Industry in India.

A mandatory constitutional amendment has to be made for levying GST on Imports. It has been proposed that merchandise Imports coming to India will face GST on destination criteria. Duty levied under GST for Import in services will be based on reverse charge method. Indian has signed several trade agreements under which Imports coming from such partner countries are not liable to pay Import duty but with the implementation of GST they will be subjected to CGST and SGST having a national treatment.

Exports would be relieved of the burden of GST by zero rating. As of now, In Foreign trade policy exports enjoy tax exemption at state as well as central level also government have given various incentives for export promotion. Under GST structure Centre and States will separately administer a CGST and SGST respectively. It is known that CGST will subsume Central Excise duty, Service tax and the Additional Customs duties and for State, SGST will subsume VAT and perhaps also Entry tax (at the State level) and other taxes but export duty would not be subsumed. It is probable that service sectors would be required to file multiple refund claims for SGST element in every State, leading to increase in compliance cost and hardships. Moreover, increase in rates would lead to higher accumulation of credits and consequent impact on Company’s cash flows.

Government has to re-evaluate the relative schemes meant for the recovery or exemption of taxes on inputs. The Government must integrate FTP with the ‘Make in India’ agenda. The Government should rationalize the inverted duty structure.

 There is a ray of hope for every Industry if GST comes in practice. Hope it comes as good and great tax system.



26 thoughts on “Impact of GST on Import and Export

  • Please let me known GST implement SAD will not applicable for import trader so they need not to claim SAD and what would be Branch transfer? whether the it will taxable? if taxable who will get the INPUT on the tax?

  • I believe that Imported Goods will become cheaper with Basic Custom Duty and IGST being levied upon it.
    Importers can pass on the IGST Input Credit. Unlike earlier where it was charged with BCD + CVD + SAD(though refunded). This goes against the Make in India Concept.
    Non levy of CVD on Imports would hamper the manufacturers in India as they would lose as compared to the Importers.

    • A supply of goods and/or services in the course of import into the territory of India shall be deemed to be a supply of goods and/or services in the course of inter-State trade or commerce.

      The Integrated Goods and Services Tax (IGST) shall be paid by every taxable person in accordance with the provisions of this Act. Further, the Central Government may, on recommendation of the Council, by notification, specify categories of supply of goods and/or services the tax on which is payable on reverse charge basis.

      Hence, the list of items is to be recommended by the GST Counsel.

      Further, it needs to be considered that as per Sec 9 of Model CGST Law, any person receiving services of value not exceeding ______ rupees in a year for personal use, shall be regarded as taxable person. However the limit is yet to be decided.


      Current State:

      Central Government levy taxes when an article or thing is brought into its territorial limits. The duty is called Basic Custom Duty. It is the tax charged on imports. Along with Basic Custom duty, Countervailing Duties u/s 3(1) and 3(5) are also charged to compensate for the losses of Excise Duties and Sales Taxes as had the goods not been imported, the same had to be manufactured in India giving revenues to the Government in form of Excise and Sales Tax.

      Proposed GST regime:

      Basic Customs Duty will continue to be levied even after the implementation of GST. However, the additional customs duty in the name of CVD u/s 3(1) and CVD u/s 3(5) will be subsumed in the import GST.


      Current State:

      Under existing provisions of Service Tax Laws, where any person (subject to Entry no. 34 of Mega Exemption) imports the service in Taxable Territory, he is liable to pay service tax under reverse charge mechanism. Taxable event is decided as per Rule 7 of Point of Taxation.

      Proposed GST regime:

      Under proposed GST regime, the import of services will be subject to Central GST and State GST on a reverse charge mechanism and the same will be payable by the Importer on a self-declaration basis.

      Place of supply rules will determine which state will have the authority to get the tax.

      However, the taxes so paid will be available as Input Tax Credit and therefore, it would be a revenue neutral.

  • Under the GST How much taxes on imported are to be charged
    against the following Present structure:

    10% BCD + 12.5 CVD + 2% E.CESS + 1% SHE CESS + 4% S.AD. = 29.5% Custo Duty
    15.5% UP VAT
    Thus total Taxes: Custom Duty + UP VAT = 45%

    After GST how much total taxes shall be charged against 45% as above.

  • Hi , What about exports of services for freelancers. Right now freelancers do not need to pay service tax, What about GST?

    I am receiving online payment from USA and AUS. Do I need to pay service tax?

  • In GST Regime, exports are exempted. However there is a requirement in tax return filing (GSTR -1) table 11 under head “Supplies Exported”. There are relevent columns given in this table asking details of taxes (CGST, SGST, IGST).
    If there is no GST on exports, what would be the details required to be shown as CGST , SGST and IGST.

    Please explain and guide

    • As per section 16 of IGST Law:
      A registered taxable person exporting goods or services shall be eligible to claim refund under one of the following two options, namely –
      (a) a registered taxable person may export goods or services under bond, subject to such conditions, safeguards and procedure as may be prescribed in this regard, without payment of IGST and claim refund of unutilized input tax credit in accordance with provisions of section 48 of the CGST Act, 2016 read with rules made thereunder;
      (b) a registered taxable person may export goods or services, subject to such conditions, safeguards and procedure as may be prescribed in this regard, on payment of IGST and claim refund of IGST paid on goods and services exported in accordance with provisions of section 48 of the CGST Act, 2016 read with rules made thereunder.

  • We are manufacturer exporter. 95% of our sales are exported. At present we import raw material against advance licence and export with out paying any duty. The input credit credited from local purchases is used for local sales and accumulated. At present this accumulated amount is refundable in ratio of export sale to local sale.

    What would be scenrio post GST. We understand that no tax on export. GST on imports and local purchases. How do we get refund? Another question How do we carry forward the unutilised Advance licence where some export or import is balance.

  • Imports against ADVANCE LICENCE, what is the taxes we have pay in post GST regime and what is the credit procedure.

  • Dear Sir,
    I want to import used crane from US and I want to know that is GST increased in import duty rate on used crane or decreased.
    Pls. guide me with comparison with previous import duty rate.

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