Considering GST on Insurance in the Calculation of Customs Duty

This query is : Resolved

Saravanan (Querist)
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15 February 2023 When the Customs duty is calculated, should we consider GST on Insurance premium also to arrive at Assessable value ?

Example 1 :
Insurance sum assured - Rs 30 Crores
Premium paid - Rs 10 lakhs
GST paid @ 18% - Rs 1.8 Lakhs
% of insurance - (Rs 10 lakhs / Rs 30 crores) X 100
- 0.0033 %
C & F price - USD 100
Insurance - 0.0033 ( 0.0033 % of USD 100)
CIF price / Assessable value - USD 100.0033

Example 2 :
Insurance sum assured - Rs 30 Crores
Premium paid - Rs 10 lakhs
GST paid @ 18% - Rs 1.8 Lakhs
Premium paid and GST - Rs 11.8 Lakhs
% of insurance - (Rs 11.8 lakhs / Rs 30 crores) X 100
- 0.0039 %
C & F price - USD 100
Insurance - 0.0039 ( 0.0039 % of USD 100)
CIF price / Assessable value - USD 100.0039

My opinion :
Since the Input tax credit is availed for GST portion of Insurance premium, it need not be considered for arriving Assessable value. So, Example 1 is correct.

Kindly advise.

Asha Kanta Sharma

Asha Kanta Sharma

(Expert)
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06 July 2024 In customs valuation, the assessable value is determined based on the transaction value of the imported goods, which includes all costs incurred up to the place of importation, including insurance and freight (CIF value). Here's how GST on insurance premium typically factors into the assessable value calculation:

1. **Insurance Premium for Customs Valuation**:
- The insurance premium paid is part of the CIF value (Cost, Insurance, and Freight). It represents the cost incurred to insure the goods during transit from the seller's location to the buyer's location.
- GST paid on insurance premium forms part of the total cost of insurance.

2. **Impact on Assessable Value**:
- For customs valuation purposes, the assessable value (CIF value) includes the insurance premium paid and any taxes associated with it (like GST).
- Input tax credit (ITC) availed on the GST portion of the insurance premium does not exclude the GST amount from being included in the assessable value. The assessable value is based on the actual costs incurred by the importer up to the point of importation.

3. **Examples Clarified**:
- In both examples provided, the assessable value (CIF price) would include the total cost of insurance premium paid and the GST on it. This is because customs duty is calculated on the total CIF value, which encompasses all costs incurred to bring the goods to the place of importation.

4. **Conclusion**:
- Your understanding in Example 1 is incorrect in the context of customs valuation. The GST on the insurance premium should be included in the assessable value for customs duty calculation purposes, irrespective of whether ITC has been availed on it or not.
- Therefore, Example 2 is more accurate in terms of how customs valuation and assessable value are determined.

In summary, for customs valuation, the assessable value (CIF value) includes the insurance premium paid and the GST on it. This ensures that the customs duty is calculated based on the total costs incurred up to the point of importation, as per international customs valuation principles.