PPMAI demands modified circular with suitable clarification bringing custom bonded warehouse sales under circular 33 high sea sales of cbec

New Delhi, 

The Process Plant and Machinery Association of India (PPMAI), the apex body of capital goods manufacturer’s in the country has urged the Union Ministry of Finance to immediately withdraw or modify the Central Board of Excise and Customs (CBEC)  Circular No. 46/2017-Cus dated 24 November 2017 that clarifies that In simpler terms, imported goods procured under in-bond transfer would be subjected to double taxation, first under IGST Act, 2017 and thereafter, under the Customs Act, 1962.

The CBEC in its circular  no 46 has clarified that the sale / transfer of goods lying in a Customs Bonded Warehouse (in-bond transfer) would attract the Integrated Goods and Services Tax (IGST) at the time of transfer; as well customs duty comprising of basic customs duty and IGST at the time of removal of such goods from the warehouse.

“The CBEC circular has created confusion among capital goods industry  as they have to import certain goods and raw materials to produce high end capital goods in the country . The CBEC circular has led to dual IGST taxation on import of goods and subsequent sale thereof in custom bonded warehouses. The sales of goods at bonded warehouse are considered equal high seas sale (Vide Circular No. 33 of 2017-Cus dated 1.08.2017 (“Circular 33”), “ said V.P. Ramachandran ,Secretary Genersal , The Process Plant and Machinery Association of India (PPMAI ) in his letter to revenue secretary, Ministry of Finance.

“ The CBEC circular 46 mandates dual levy in the case of sales in custom bonded warehouses  A sale in the custom bonded warehouse cannot be treated differently from a high seas sale since both the sales take place before the goods cross the customs frontiers of India. More over the circular 46 is unclear on whether input credit on the IGST paid on sale of goods within custom bonded warehouse can be availed and utilized in discharging the IGST liability at the time of filing Bill of Entry for home consumption and the availability of credit of IGST paid at the time of bill of entry for home consumption.” Said Mr Ramachandran.

“Circular 46 creates undue stress on the working capital management and moves contrary to the stated objective of achieving ease of doing business.  With an output of INR 2,50,000/- crores contributing 2% of the GDP and generating 10 million jobs, this sector is on the cusp of expansion. Recognizing the same, the the Government of India has mandated the Capital Goods Policy with an aim to increase the output to INR 7,50,000/- generation of 30 million jobs by 2025.  As such, the provisions of Circular 46 is contrary to all the aforesaid and creates hurdles in achieving the stated objectives. “ added Mr Ramachandran .

“PPMAI has urged the government to withdraw or modify Circular 46/2017-Cus dated 24.11.2017  with a suitable clarification bringing custom bonded warehouse sales under Circular 33/2017-Cus dated 01.08.2017.  CBEC should also Clarify that the credit of IGST paid on purchase of goods in custom bonded warehouse can be utilized in discharging the IGST liability at the time of filing Bill of Entry for home consumption. More over  The Circular takes a position completely contrary to what the CBEC has clarified on taxability of high sea sale transactions in the recent past. For the ease of reference, the CBEC Circular No. 33/2017 dated 1 August 2017:” he said .

“High sea sales of imported goods are akin to inter-state transactions and subject to IGST;IGST on high sea sale(s) transactions of imported goods (whether one or multiple) shall be levied and collected only at the time of importation;IGST on imported goods is to be levied under section 3(12) of the Customs Tariff Act, 1975.Since In-bond transfer of imported goods are akin to high sea sales transactions, it should be treated equally. Even legal provisions under the IGST Act don’t warrant such interpretation.’ Said Mr Ramachandran

“ In light of the aforesaid, there is an urgent requirement of treating in-bond sales on par with high seas sales thereby removing the dual impact of IGST.” Mr Ramachandran said.


Please enter your comment!
Please enter your name here