Finance Bill, 2023 was passed by the Lok Sabha on March 24, 2023. One of the key amendment related to customs act is insertion of a new section 65A.
Currently, the Customs Act allows storing of the imported goods in warehouse without payment of duties of customs under MOOWR. Such duties are payable on clearance of goods from warehouse for home consumption.
As per Section 65 of the Customs Act allows manufacturing and other operations in customs-bonded warehouse. In the amended Finance Bill, Section 65A has been proposed to be included which provides for payment of duties like IGST and compensation cess while storing the goods in warehouse for carrying out manufacturing and other operations under Section 65. However, other duties (like Basic Customs Duty) shall continue to be not payable on warehousing such goods.
If Section 65A comes into force, importer will need to file BoE for home consumption instead of BoE for
warehousing and pay applicable IGST and Compensation Cess while storing the goods into warehouse.
While the above amendment seems to have been introduced considering credit of IGST is allowed in majority of sectors but will surely impact cash flows however, it would severally impact sectors where GST credit is not allowed (Oil and Gas) or sectors where accumulation of credit is a problem.
The Government may exclude and exempt certain categories of goods, or class of importers or exporters, or a specific sector from the above amendment and they would continue to enjoy the exemption of IGST and compensation cess. This gives an opportunity to respective sector specific associations to make representation to Government if the said amendments would adversely impact the business operations.
SW Point of View:
While the above amendment seems to have been introduced considering credit of IGST is allowed in majority of sectors but will surely impact cash flows however, it would severally impact sectors where GST credit is not allowed (Oil and Gas) or sectors where accumulation of credit is a problem.
The power to exempt gives an opportunity to respective sector specific associations to make representation to Government if the said amendments would adversely impact the business operations.
