Changes in FTP with the implementation of GST

The Dollar Business Bureau

The DGFT has issued a notification giving details of the changes in the FTP with the implementation of the GST regime.These changes have been mentioned chapter wise. Given below are the changes made in the FTP as prescribed in the notification no. 11/2018 dtd June 30, 2017.

With effect from July 1, 2017, the term “Central Excise Authority” used in Foreign Trade Policy 2015-20 and Foreign Trade procedures 2015-20 will be read as “Jurisdictional Customs Authority”. 

Chapter 2: Changes in IEC have already been notified through Trade Notice No.09/2018 dated 12.06.2017

Under Chapter 3 The Duty Credit Scripps cannot he used for payment of IGST and GST compensation cess in imports, and CGST, SGST, IGST and GST compensation cess for domestic procurement.

In Chapter 4 the following changes have been implemented in the FTP:

• Under the GST regime, no exemption from payment of Integrated GST and Compensation Cess would be available for imports under Advance Authorisation.
• Importers would need to pay IGST and take input tax credit as applicable under GST rules.
• However, imports under Advance Authorisation would continue to be exempted from payment of Basic Customs Duty, Additional Customs Duty specified under Section 3(1), 3(3) and 3(5) of the Customs Tariff Act, Education Cess, Anti-dumping Duty, Safeguard Duty and Transition Product-Specific Safeguard Duty, wherever applicable.
• Applicable GST would need to be paid while making local procurement, using an invalidation letter of Advance Authorisation/DFIA. Recipient of goods can take Input Tax Credit (ITC) of the GST paid on such local procurement. This Input Tax Credit can be utilised as per GST rules.
• Advance Release Order facility shall not be available for procurement of inputs under Advance Authorization scheme except for inputs listed in Schedule 4 of Central Excise Act, 1944 read with The Taxation Laws (Amendment) Act 2017 No.18 of 2017, with effect from July 1, 2017. Regional Authorities are directed not to issue ARO except for Schedule-4 items as stated above.
• Imports/exports under the replenishment schemes for the Gems and Jewellery sector covered under Chapter 4 of FTP and HBP shall be subject to Customs Notification issued/ to be issued in this regard.

Under Chapter 5 the FTP has the following changes:

• Importers would need to pay IGST and take input tax credit as applicable under GST rules.
• ARO facility shall not be available for sourcing of Capital Goods manufactured indigenously

Chapter 6

The following changes have been implemented in the FTP in relation to Imports

Export Oriented Units(EOU)/Electronics Hardware Technology Park (EHTP)/, Software Technology Park (STP)/ or Bio-Technology Park (BTP)

• EOU's are allowed duty-free Imports of goods for their authorised operations. In GST regime, the import of goods covered under GST would be exempted from the whole of the duty of customs specified under the First Schedule to the Customs Tariff Act, 1975 (BCD) enabled by Notification no.52/2003-Cus. But such goods would attract integrated tax and compensation cess leviable under sub-section (7) and (9) of the said Act. The taxes so paid on imports will be neutralised by ITC.
• The import of goods covered under Fourth Schedule of the Central Excise Act would be exempted from the whole of the duty of customs specified under the First Schedule to the Customs Tariff Act, 1975 (BCD) and also from the additional duty leviable under sub-sections (1), (3) and (5) of section (3) of the said Act (CVD & SAD) enabled by Notification no.52/2003-Cus.

Domestic procurements:

• For the indigenous procurement of goods covered under GST, the EOU will not get ab-initio exemptions. Such supplies would be on payment of CGST/SGST/UTGST/IGST. The taxes so paid will be neutralised by ITC. For the indigenous procurement of goods covered under Fourth Schedule, the EOU will continue to get ab-initio exemptions from central excise duty.

DTA clearances of finished goods covered under GST

• EOUs would be required to pay only CGST & SGST or IGST, as the case may be, besides paying back of whole of the duty of customs specified under the First Schedule to the Customs Tariff Act, 1975 (BCD) exemptions, if availed, on inputs used in the manufacture of such finished goods.
• The DTA clearances of finished goods covered under Fourth Schedule of the Central Excise Act, 1944, the EOUs would be required to pay central excise duty equal to the aggregate of duties of customs in view of proviso to Section 3(1) of the Central Excise Act, the effective rate of such duties being covered by Notification no.23/2003-CE  

Inter unit transfer/supply for EOU to other EOUs

• Applicable GST would be payable on the transfer/supply of goods from one unit of EOU/EHTP/ STP/BTP to another

Chapter 7

Supplies made prior to the date of the operationalization of GST:

• The supplies made to different deemed exports categories till the date prior to the date of the operationalization of GST, the benefits would be available as per the provisions existed till the date of the operationalization of GST.

Supplies after the date of the operationalization of GST:

• Advance Authorization benefits under Chapter 4 shall be available for supplies under Chapter-7. The duty exemption benefits under AA would be limited to exemption from basic customs duty only. The exemption for items under Central Excise would be available for the items which continue under Schedule 4 of Central Excise Act, 1944 provided the items are eligible under the Advance Authorization. 

Deemed Export Drawback:

• The drawback as provided under Chapter 7 would be limited to the refund of basic customs duty only. In respect of eligible items covered under Schedule 4 of Central Excise Act, 1944 refund would also be covered under the drawback provided the item is eligible for such supply.

The TED refund:

• TED refund would be available only if exemption is not available in respect of items covered under Schedule 4 of Central Excise Act, 1944 provided the items are eligible for supply under the said category of deemed exports