QUESTION

The Applicant has received the FOC sample through import from their foreign business entity. During custom clearance they have deposited the custom duty and IGST on the value of goods estimated by the custom department during clearance. Is the Applicant allowed to take the Input Tax Credit for the IGST paid by them during the custom clearance?

ANSWER

Facts of the case: The Applicant has received the FOC sample through import from their foreign business entity. During custom clearance they have deposited the custom duty and IGST on the value of goods estimated by the custom department during clearance. Is the Applicant allowed to take the Input Tax Credit for the IGST paid by them during the custom clearance?

Law Applicable: SECTION 16 OF CGST ACT

Provided further that where a recipient fails to pay to the supplier of goods or services or both, other than the supplies on which tax is payable on reverse charge basis, the amount towards the value of supply along with tax payable thereon within a period of one hundred and eighty days from the date of issue of invoice by the supplier, an amount equal to the input tax credit availed by the recipient shall be added to his output tax liability, along with interest thereon, in such manner as may be prescribed:

Reply: The law requires payment of value with the tax amount which is not possible in case of imported goods.
In import, you pay only the value to the supplier and not the tax amount. The tax amount is paid to the customs.
That way you can never take credit because you will never pay the tax amount to the supplier. It means intention of law is not to cover import.
The intention of the law is to curb ITC against bogus invoices and to control non-genuine supply.

Moreover, the import duty(custom + IGST) is paid by the importer and not by the supplier although it is not reverse charge but carry the same nature.

Since the tax is paid by you therefore credit of the same should be allowed. (Reply dt. 28/06/2021)