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Applicability of Section 16(4) for availing ITC for Imports on the basis of Bill of Entry

It is commonly understood that in the scheme of GST one can avail ITC pertaining to a Financial Year up to 30 November of next Financial Year in terms of Section 16(4) of the CGST Act.


Now Question arise whether it will also be applicable to the availment of ITC of IGST paid at the time of Import of Goods. Answer will surprise you. In this article, we will discuss the issue comprehensively.


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Legal Provisions regarding Payment of IGST on Import


First of all question comes why IGST is payable at the time of imports in addition to the normal custom duties. This is to create equal ground for the Domestic Industry. For instance, if importer actually purchase those goods from Domestic Industry, Domestic Industry would be required to charge GST (whether Intra or Inter) on such supply. Therefore, to create equal footing, liability of IGST is created on importer.


As per Section 7(2), Import of Goods imported in India would be considered as Inter-State Supply.


Further in terms of Proviso to Section 5(1), IGST needs to be paid on Import of Goods in accordance with Provisions of Section 3 of the Customs Tariff Act, 1975 on the value determined under said Act at the point when duties of customs are levied on said goods under Section 12 of the Customs Act, 1962.


Furthermore, as per Section 3(7) of the Customs Tariff Act, 1975


Any article which is imported into India shall, in addition, be liable to integrated tax at such rate, not exceeding forty percent as is leviable under section 5 of the Integrated Goods and Services Tax Act, 2017 on a like article on its supply in India, on the value of the imported article as determined under sub-section (8) 9 [or sub-section ( 8A ), as the case may be].


From this, it appears that IGST paid at the time of import is actually a Custom Duty for administration purpose and any shortfall in such payment need to be demanded (like issuance of SCN) as per the Provisions of the Custom Act and not as per GST Act.


Further, as it is like import Duty, IGST need to be paid through Cash only. (ITC can not be utilised for payment of IGST payable at the time of Import).


Note: For distribution between Centre and State, IGST paid on import will form of GST Pool.


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Legal Provisions regarding Availment of ITC of IGST paid at the time of Import


Now Question comes, when IGST is paid as custom duty, whether ITC can be available against payment of IGST on import. For this, as discussed above, it is just to create equal footing for Domestic Industry.

Like if Importer purchase goods from Domestic Industry, he would be eligible for ITC on such purchases. Similarly, Importer should be allowed to avail ITC for IGST paid at the time of import. Therefore, definition of Input Tax as per Section 2(62) includes:


"input tax" in relation to a registered person, means the central tax, State tax, integrated tax or Union territory tax charged on any supply of goods or services or both made to him and includes-

(a) the integrated goods and services tax charged on import of goods;......



Further for availing Credit of Input Tax, Section 16(2)(a) prescribes that:


he is in possession of a tax invoice or debit note issued by a supplier registered under

this Act, or such other tax paying documents as may be prescribed


Further, Rule 36(1) provides that:


(1) The input tax credit shall be availed by a registered person, including the Input Service

Distributor, on the basis of any of the following documents, namely,-


(a) an invoice issued by the supplier of goods or services or both in accordance with the provisions of section 31;

(b) an invoice issued in accordance with the provisions of clause (f) of sub-section (3) of section 31, subject to the payment of tax;

(c) a debit note issued by a supplier in accordance with the provisions of section 34;

(d) a bill of entry or any similar document prescribed under the Customs Act, 1962 or rules made thereunder for the assessment of integrated tax on imports;.......


Accordingly, ITC of IGST Paid at the time of Import is available to the Taxpayer subject to other conditions prescribed in law.


Now, we will discuss the prime question i.e. whether condition of time limit as prescribed in Section 16(4) is applicable for Availing ITC pertaining to IGST paid at the time of Import.


Applicability of Section 16(4) to IGST paid the time of Import


Section 16(4):

(4) A registered person shall not be entitled to take input tax credit in respect of any invoice or debit note for supply of goods or services or both after the thirtieth day of November following the end of financial year to which such invoice or debit note pertains or furnishing of the relevant annual return, whichever is earlier.....


Here Section 16(4) puts the restriction only with respect to Invoice and Debit Notes. Further, Invoice is defined in Section 2(66) as :


"invoice" or "tax invoice" means the tax invoice referred to in section 31.


Further, Debit Note is defined in Section 2(38) as :


"debit note" means a document issued by a registered person under subsection (3) of section 34;


From above, it appears that Invoice and Debit Notes does not include Bill of Entry. The same can also be inferred from Rule 36(1)(d) as discussed above where Bill of Entry has been specified separately in addition to Invoice and Debit Note prescribed in Rule 36(1)(a) & (b) respectively.


Accordingly, in our considered opinion, though intention of Law may be to cover the ITC pertaining to IGST paid at the time of import under time limit prescribed under Section 16(4), however language of Section 16(4) does not support it.


Therefore, in our opinion, it appears that condition of Section 16(4) is not applicable to availment of ITC pertaining to IGST paid at the time of import based on "Bill of Entry".


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Disclaimer: We have taken due care to the best of our knowledge while explaining the provisions surrounding the issue purely for informational & academic purpose for students. It should not be considered as professional advice or consultancy to be relied upon. While due care has been taken by Fab Gyan in preparing this article, certain mistakes and omissions may creep in. The Fab Gyan or its Author does not accept any liability for any loss or damage of any kind arising out of any inaccurate or incomplete information in this document nor for any actions taken in reliance thereon.

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