15 February 2019
1. We are a 100% EOU - Listed in BSE/NSE - and operating in the Granite Industry 2. We currently operate two factories In India - one factory in South india is a 100% EOU and the other in rajasthan is a SEZ 3. The factory in South India was constructed in the year 2000 and consists of two separate distinct business lines that are connected with granite business. UNIT Slab – is predominantly concentrated on the polishing and processing of Granite Slabs. Unit Tiles – is predominantly concentrated on the polishing, processing and cutting of Granite tiles. 4. The production capacity as permitted by our nodal authority MEPZ SEZ Development Commissioner is as follows: Product Name HSN Code Permitted capacity Granite Slabs 2516-1200 640000 Sq. Meters Granite Tiles 360000 Sq. Meters Quartz (Artificial and engineered stones) 2506-2090 95000 Sq Meters.
5. Even though we are a 100% EOU we are permitted to sell in DTA (Domestic tariff Area) – 50% of our NFE of the previous year. 6. We have been able to get good prices with certain specific Domestic Customers and hence we currently undertake DTA sales to these customers. 7. Prior to GST implementation – for our dtA sales we were charging the following tax components (Example only) DTA Sale value 100000 Add BCD @ 20% 20000 Less: % exemption vide notification 10/2008-cus dt 01.03.2008 10000 Net BCD 10000 Add 12.5% CVD on 110000 13750 Add Cess SHE 3% 713 Total Customs duty 24463 Add: CST 14.5% on 124463 18047 Total Invoice Value 142510
8. Post implementation of GST – for our DTA sales we are charging the following tax components: DTA Sale value 100000 Add BCD @ 10% 10000 Add: social Welfare Surchage 10% on above 1000 Total Customs duty 11000 Add 18% IGST 19800 Total Invoice Value 130800
9. The rationale for charging BCD on DTA sale is drawn from Para 6.08 a(i) of Foreign Trade Policy (2015-2020) as amended in DECEMBER 2017. This is basically reversal of customs duty exemption availed on inputs for manufacturing such finished goods.
10. In detail with regard to availing exemption of BCD on imports
A. Import of Consumables and spare parts I. After Issue of po to vendor schedule of delivery intimated to our Commercial team II. Commercial team initiates the procurement of certification of the declaration under Annexure III forming part of the Import of goods under customs (Import of goods at concessional rate of duty) rules, 2017. III. Our commercial team member visits the customs office in Coimbatore and gets this annexure certified by the JC or DC of customs. (Copy of the same given) IV. Once material is received at the port of discharge –the certified ANNEXURE III is sent to clearing agent who files the same with the customs at the port of discharge and based on this filing the imported item is not charged any customs duty.
B. Import of Plant and machines / Capital goods I. After Issue of Capital goods PO to vendor- schedule of delivery intimated to our Commercial team II. Permission for import of Capital goods is taken from MEPZ SEZ Dev. Commissioner. III. Company executes a Bond in B-17 with the commissioner of Central excise for procurement of the above capital goods without payment of Duty (Nil rate of duty) vide notification no. 52/2003(I-1) and the said Excise department issues a certificate for import of the capital items without payment of customs duty. IV. Once material is received at the port of discharge –the certificate above is sent to clearing agent who files the same with the customs at the port of discharge and based on this filing the imported Capital goods is not charged any customs duty.
11. This is the basic tax structure and regime under which we currently operate and the same is also applicable when we sell scrap of consumables and steel in DTA from our manufacturing process.
12. Two types of scrap is generated by our company – a. Used diamond wires which are both Imported (without payment of duty) and local (payment of GST) b. Steel blades used in gangsaw machines that are used to cut the granite blocks. Steel blades are 100% imported from Italy without payment of Customs duty.
13. Based on the above we are seeking your professional opinion on the applicability of the Charging of BCD on DTA invoice. The queries that we would like to be answered in this professional opinion are as follows: Based on an interpretation of the current applicable indirect tax laws on both our EOU and SEZ units: a. Whether we are required to charge BCD on all our DTA sales (Both normal granites + Scrap) b. If BCD is to be charged – then kindly explain the applicable rates at which we need to charge the BCD and the manner of payment / method of payment of BCD to the credit of the Central government c. If BCD is not to be charged – a detailed legal analysis with reference to the applicable laws/acts/notifications that supports the non-charging of BCD. Also advise us on the amount of BCD so far collected but not remitted to the credit of the Central government? Whether we can reverse the same and credit our P&L. If we need to remit the above BCD collected to credit of Central Government the manner of payment / method of payment of BCD to the credit of the central government. d. Whether we are required to charge GST on All our DTA sales i. If yes – the rate at which GST is to be charged ii. Whether it is IGST only or in case of within the state sale – SGST + CGST iii. Rate at which it is to be charged. e. DTA sale of Scrap – what duties and taxes are to be charged i. For Scrap of Imported consumbles/Steel blades on which no Customs duty has been paid ii. For Scrap of Consumables procured locally on which GST has been paid
12 July 2024
Based on the information provided about your business operations as a 100% EOU (Export Oriented Unit) listed on BSE/NSE, operating in the Granite Industry with two factories (one in SEZ and one in South India), and the queries related to DTA (Domestic Tariff Area) sales and scrap sales, here are the responses to your queries:
### Query Responses:
**a. Charging BCD on DTA Sales:**
- **Granite Products:** Based on the current regulatory framework and your operations, if you are importing inputs under exemption or at concessional rates for manufacturing granite products (such as slabs and tiles), the reversal of customs duty exemption (BCD) on DTA sales aligns with Para 6.08 a(i) of the Foreign Trade Policy (2015-2020). This means you would need to charge BCD on DTA sales of granite products.
- **Scrap Sales:** For scrap generated from your manufacturing process (e.g., used diamond wires and steel blades), whether imported (without duty) or locally procured (with GST paid), you may need to charge appropriate duties and taxes as per the nature of the scrap.
**b. Applicable Rates and Payment of BCD:**
- The applicable rate of BCD would depend on the specific category of goods being sold in DTA. You would need to refer to the Customs Tariff Act and relevant notifications for the exact rates applicable to granite products and scrap.
- BCD collected needs to be remitted to the credit of the Central Government as per customs regulations. The method of payment involves depositing the collected BCD through designated banks or online portals specified by customs authorities.
**c. Non-Charging of BCD:**
- If there are specific exemptions or notifications that exempt certain categories of goods from BCD when sold in DTA, a legal analysis of these exemptions would be necessary. You should consult with a customs expert or legal advisor to verify if any exemptions apply and the process for reversing BCD already collected but not remitted.
**d. GST on DTA Sales:**
- **Rate and Applicability:** GST is applicable on all DTA sales. The rate of GST (whether IGST for interstate sales or CGST + SGST for intrastate sales) depends on the nature of the goods sold and their classification under HSN codes.
- **Calculation:** Determine the correct GST rate (5%, 12%, 18%, or 28%) based on the goods sold (granite products or scrap) and the nature of the sale (interstate or intrastate).
**e. DTA Sale of Scrap:**
- **Imported Scrap (No Customs Duty Paid):** For scrap imported under exemptions (e.g., used diamond wires, steel blades), customs duty was not paid initially. When selling this scrap in DTA, you may need to charge appropriate duties and taxes as per the customs regulations and GST.
- **Locally Procured Scrap (GST Paid):** Scrap generated from locally procured consumables where GST has been paid should attract GST at the applicable rate when sold in DTA.
### Conclusion:
Given the complexity of customs and GST regulations concerning EOUs, SEZs, and DTA sales, it is advisable to consult with a qualified customs and indirect tax expert who can provide precise guidance tailored to your specific operations. They can assist in interpreting applicable laws, notifications, and exemptions to ensure compliance and optimize tax efficiency in your business operations.
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