FEBRUARY 11, 2025

By D Kalirajan, Associate Partner and Vaishnavi S Nair, Associate at Lakshmikumaran & Sridharan Attorneys

FINANCE Minister Smt. Nirmala Sitharaman, while presenting the Union Budget 2025 on 1st February 2025 announced a series of amendments with an aim to promote good governance and ease of doing business. One of such proposed amendments is the insertion of new Section 18A to the Customs Act, 1962 ('the Customs Act') which seems to be made with an objective to resolve the issues pertaining to voluntary payment of differential Customs duties including IGST not paid or short paid at the time of import, and to facilitate availment of input tax credit of such IGST paid belatedly. This article strives to throw light on the impact of the proposed Section 18A on the documents viz., bills of entry, duty payment challans, etc., based on which the Input Tax Credit ('ITC') can be availed.

Background:

Section 16 of the Central Goods and Services Tax Act, 2017 ('CGST Act') lays down the eligibility and conditions for availing ITC. It inter alia prescribes that ITC cannot be availed unless the taxpayer is in possession of a 'tax invoice or debit note', or 'such other tax paying documents as may be prescribed'.

Accordingly, Rule 36 of the Central Goods and Services Tax, 2017 ('CGST Rules') prescribes the list of documents based on which ITC can be availed. With respect to IGST paid on imports, a bill of entry or any similar document prescribed under the Customs Act or rules made thereunder for the assessment of IGST on imports, is a prescribed document for availing ITC. Unlike the erstwhile CENVAT Credit Rules, 2004 and the present CENVAT Credit Rules, 2017 which expressly allowed availment of ITC based on duty payment challans, the CGST Rules do not expressly cover the duty payment/TR 6 challans for availing ITC.

Accordingly, the importers are uncertain with respect to availment of ITC based on TR 6 challan, which they have been using for over decades in light of the erstwhile CENVAT Credit Rules. Circular No. 16/2023-Customs dated 07.06.2023 issued by the CBIC further fuelled the fear of loss of ITC, as it clarifies that under GST law, bill of entry is the document for assessment of IGST or compensation cess and based on which ITC can be availed by a registered person. The said circular also clarifies that TR-6 challan is not a prescribed document for availing the ITC. Accordingly, the circular suggests reassessment of the relevant bills of entries.

Having said so, there is no uniform and system enabled practice for re-assessment of bills of entry once out-of-charge is issued. So, divergent practices are being adopted among the industries and the Customs departments. It seems that Union Budget, 2025 amendment would resolve such issues on availment of ITC.

Introduction of Section 18A to the Customs Act:

Proposed Section 18A of Customs Act inter alia provides that the importer may revise the entries already made in the bills of entry and self-reassess the customs duties, after clearance of goods for home consumption. The form, manner and timelines would be notified by the Central Government. While Section 17 of the Customs Act requires the importer to self-assess the customs duties under bills of entry at the time of import, Section 18A of Customs Act would enable revision of entries made under such bills of entry post clearance of goods and re-assessment of the Customs duties.

It appears that as a result of introduction of Section 18A of Customs Act the bills of entry concerned itself can be voluntarily revised by the importer, the applicable customs duties including IGST will be re-assessed on the basis of such revised bills of entry or any other form, as may be prescribed by the Central Government.

Post implementation of the provisions under Section 18A of Customs Act, the importer would be in possession of a revised bill of entry or any similar document/form, viz., supplementary bill of entry, etc., based on which the IGST on imports would reassessed/revised. Thus, the same may be considered as a valid document for availing ITC in terms of Rule 36 of CGST Rules.

Parting Remarks…

The proposed amendment would clear the cloud over the issue of documents based on which ITC of IGST, paid post-import, can be availed. However, enabling seamless flow of ITC from ICEGATE portal and GST portal will be the key to its success. Also, issuance of clarity by the Central Government/Board on the manner of handling past transactions would rest the issue in peace, or else it would continue to haunt the industries.

[The views expressed are strictly personal.]