IT has come to be accepted that integrated tax as defined in section 2(12) of the IGST Act 2017 is leviable on the goods imported into India. However, as will be demonstrated in the following paragraphs, a closer scrutiny of the provisions of law in this regard leaves no doubt that there is indeed no legal provision to levy integrated tax (as defined in S.2(12) of the IGST Act) on the goods imported into India and the convoluted drafting of the legal provisions in this regard has resulted in this unintended consequence.
2. The general belief that integrated tax (as defined in S.2(12) of the IGST Act) is leviable on goods imported into India seems to arise on the basis of the following legal provisions :
(i) Subsection (2) of section 7 of the IGST Act (which states that supply of goods imported into the territory of India till they cross the customs frontiers of India shall be treated to be supply of goods in the course of interstate trade or commerce); and
(ii) Proviso to subsection (1) of section 5 of the I GST Act.The said subsection (1) along with the proviso thereto is reproduced below:
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S. 5. (1) Subject to the provisions of sub-section (2), there shall be levied a tax called the integrated goods and services tax on all inter-State supplies of goods or services or both, except on the supply of alcoholic liquor for human consumption, on the value determined under section 15 of the Central Goods and Services Tax Act and at such rates, not exceeding forty per cent., as may be notified by the Government on the recommendations of the Council and collected in such manner as may be prescribed and shall be paid by the taxable person: Provided that the integrated tax on goods imported into India shall be levied and collected in accordance with the provisions of section 3 of the Customs Tariff Act, 1975 on the value as determined under the said Act at the point when duties of customs are levied on the said goods under section 12 of the Customs Act, 1962. |
It is evident from the above-quoted proviso that the integrated tax (as defined in S.2(12) of the IGST Act) is to be levied and collected in accordance with the provisions of section 3 of the Customs Tariff Act, 1975. The relevant portion of the said section 3 is reproduced below :
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Section 3. Levy of additional duty equal to excise duty, sales tax, local taxes and other charges – (1) Any article which is imported into India shall, in addition, be liable to pay duty (hereafter in this section referred to as the additional duty) equal to the excise duty for the time being leviable on a like article produced or manufactured in India and if such excise duty on a like article is leviable at any percentage of its value, the additional duty to which the imported article shall be so liable shall be calculated at that percentage of the value of the imported article : ***** **** (7) Any article which is imported into India shall, in addition, be liable to integrated tax at such rate, not exceeding forty per cent as is leviable under Section 5 of the Integrated Goods and Services Tax Act, 2017 on a like article on its supply in India, on the value of the imported article as determined under sub-section (8). |
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3. The term "integrated tax'is not defined under the Customs Tariff Act 1975 and it is well settled that the definition of a term given in one Act cannot be automatically read into another Act. However there is a general belief that the integrated tax mentioned in subsection (7) of S.3 of the Customs Tariff Act is the same as the integrated tax (as defined in S(. 2(12) of the IGSST Act) and is levied under the authority of the said Act (i.e. IGST Act). This belief is legally untenable and totally incorrect for the following reasons:
(i) Section 2(12) of IGST Act in effect states that "In this Act , unless the context otherwise requires, integrated tax means the integrated goods and service tax levied under this Act.' This clearly means that the said definition of integrated tax is applicable only to IGST Act.
(ii) Integrated tax as defined in section 2 (12) of the IGST Act is to be levied under the authority of IGST Act while the integrated tax mentioned in S. 3(7) of the Customs Tariff Act is levied in terms of that subsection under the authority of the Customs Tariff Act 1975 and not under the authority of the IGST Act 2017. As per the proviso to Section 5 (1) of the IGST Act, integrated tax as defined in section 2 (12) of the IGST Act on the goods imported into India is to be levied and collected in accordance with the provisions of Section 3 of Customs Tariff Act. But there is no provision in Section 3 of the Customs Tariff Act to collect integrated tax (as defined in section 2 (12 of the I GST Act) in pursuance of the said proviso or otherwise . It becomes even more obvious from the fact that the levy of the integrated tax mentioned in subsection (7) of section 3 of the Customs Tariff Act is totally independent of the proviso to section 5(1) of the IGST 2017. In other words, the integrated tax mentioned in subsection (7) of section 3 of the Customs Tariff Act would be leviable even if the proviso to subsection (1) of section 5 of the IGST Act did not exist.The point being made is that the integrated tax leviable under Subsection (7) of Section 3 of the Customs Tariff Act is NOT the integrated tax leviable under the IGST Act or because of the said proviso to Section 5(1) of the IGST Act.
(iii) Section 3 (7) of the Customs Tariff Act makes a reference to the IGST Act, 2017 only for the purpose of determining the rate of tax to be applied to levy tax under that subsection (i.e. subsection (7) of section 3 of the Customs Tariff Act).
(iv) The wordings of sub-section (1) and sub-section (7) of section 3 of the Customs Tariff Act are similar in the sense that just like sub-section (1) levies duty equal to excise duty leviable on a like article, subsection (7) levies tax at the rate as applicable to a like article under section 5 of the IGST Act. It deserves reiteration that the reference to IGST Act in sub-section (7) of section 3 of the Customs Tariff Act is only for the purpose of determining the rate of tax. It is pertinent to mention here that the duty leviable under section 3 (1) of the Customs Tariff Act is not treated to be excise duty and it was for this technicality that in Rule 3(1) of the Cenvat Credit Rules, apart from the duties of excise, the additional duty leviable under section 3 of the Customs Tariff Act was specifically included in the list of duties eligible for cenvat credit. If the additional duty leviable section 3(1) of the Customs Tariff Act was to be treated as excise duty, there was no need to specifically include the additional duty equal to excise duty leviable under section 3 of that Act in the list of duties eligible for cenvat credit. Exactly, similarly, the integrated tax mentioned in subsection (7) of section 3 of the Customs Tariff Act cannot be treated as integrated tax as defined in section 2 (12) of the IGST Act.
It is thus clear that the integrated tax on an imported article under subsection (7) of section 3 of the Customs Tariff Act is levied under the authority of the Customs Tariff Act and is not the "intergrated tax' as defined in section 2 (12) of the IGST Act nor is it levied under the authority of the IGST Act.
4. From the foregoing paragraphs, it is obvious that although proviso to sub-section (1) of S. 5 of the IGST Act stipulates levy and collection of integrated tax (as defined in section 2 (12) of that Act) in accordance with the provisions of section 3 of the Customs Tariff Act, the said section 3 (of the Customs tariff Act) is conspicuously devoid of any corresponding provision to operationalise the same.
5. The sum total of what has been demonstrated in the preceding paragraphs is that (i) the integrated tax mentioned in sub-section(7) of section 3 of the Customs Tariff Act is levied under the authority of the Customs Tariff Act and that integrated tax (levied under S. 3(7) of the Customs Tariff Act) is not the integrated tax as defined in section 2 (12) of the IGST Act nor is that tax levied under the authority of the IGST Act, and (ii) there are no provisions of law, the combined reading of which, would give rise to an authority to levy and collect integrated tax (as defined under section 2 (12) of the IGST Act) on the imported goods.
Q.E.D
[P.S: The aforesaid analysis applies mutatis mutandis to the cess levied under section 3(9) of the Customs Tariff Act vis-à-vis the cess leviable under the GST (Compensation To States) Act, 2017.]
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