#TaxmannPPT | Automation of Process under Customs IGCR Rules & its Impact on Importers

Automated processes of Customs IGCR Rules and its impact on importers TAXMANN Advisory & Research Support Services March – 2022 1

Background and context. 

Several of the customs duty exemptions and concessions are subject to end use conditions

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In order to ensure that goods imported are used for their intended purpose, the importers need to comply with the procedure laid down in the Customs (Import of Goods at Concessional Rate of Duty) Rules, 2017 (‘IGCR Rules’)

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These Rules are applied to the manufacturer importer, and service providers also

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Till 2022, the procedure under IGCR Rules was not automated

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Budget 2022 has automated the process laid down under the IGCR Rules and certain amendments have been introduced in these rules with effect from March 1, 2022

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The intention of this webinar is to understand the automated procedure and the new amendments in the IGCR Rules.

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Background of IGCR Rules.

Table of Contents  

Sometimes, concessions or exemption from Customs Duty is subject to condition in respect of its endovertime use • Evolution of IGCR Rules • Procedure In order to ensure that goods imported are used for its intended purpose, generally, exemption – PreAmendment notification provides that the importer need to comply the procedure laid down in the Customs (Import – Post -Amendment of Goods at concessional rate of Duty) Rules, 2017 (‘IGCR Rules’)

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• Step-wise automated procedure These Rules are applied to the manufacturer importer and service providers • Time limit for utilization of goods

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Till 2022, the procedure under IGCR Rules was not automated

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Re-Export or clearance for home consumption Budget 2022 has automated the process laid down under the IGCR Rules • Job work •

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Accounts and records

•

Transitional aspects

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Comparative of old v/s new IGCR Rules

•

Open points

•

Annexure

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Evolution of IGCR Rules

• Required interface with customs and excise authorities • Certification process

1996

2016 • Required interface with customs and excise authorities • Intimation process

• Process moved to jurisdictional customs officer • EOUs required to comply to Rule 5

2017

2021 • Job-work specifically allowed • Capital goods allowed to be cleared on depreciated value

• Automation • Specific restriction on utilization of goods within 6 month

2022

For detailed walk through of changes in the IGCR over time refer to the Annexure

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Procedure (Pre-amendment).

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Jurisdictional Customs Officer

Customs Officer (Port of Import)

Forward - Intimation about estimated Qty to be imported, etc.

1 One-time prior intimation - Goods to be manufactured - Process to be undertaken - Bond - Premises, etc.

2A

+

2B

Intimation about estimated Qty to be imported, etc.

Intimation about estimated Qty to be imported, etc.

Importer

5

Intimation about goods received in factory

4 Premises

6

Quarterly statement about utilization, etc.

Clearance of Goods based on BOE with supporting documents

5

Procedure (Post amendment).

Jurisdictional Customs Officer

ICE GATE Portal

Customs Officer (Port of Import)

1 Filing of Part A of IGCR - 1

3B 2 Generation of “IIN”

Physical copy of Bond/Surety

3A Submitting IGCR -1 Part B (Bond Details)

4 File BOE with IIN and bond details

Importer

5 Premises 6

ICGR 2 and ICGR - 3

Clearance of goods 6

New Automated Procedure under IGCR. Step 1 Filing of Part A of IGCR-1 • Provide Part A one-time prior information on the ICE-GATE in Form IGCR-1 • Details filled in Part A can be updated/amended

Step 2

Generation of IIN

• ICE Gate will generate a unique IGCR Identification Number (IIN) • Information made available online: Jurisdictional Customs officer + Customs officer at port of import • It would be unique for each GSTIN • It would be needed for updating Bond details, filing Form IGCR 2 and IGCR 3, etc.

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New Automated Procedure under IGCR. Step 3A Filing of Part B of IGCR-1

• One time continuity Bond details such as amount of the bond etc. to be updated in Part B of Form IGCR-1 • Details filled in Part B can be updated/amended Step 3B Submitting Physical copy of Bond

 Physical copy of such bond (surety wherever applicable) shall be submitted by importer to the Jurisdictional Customs Officer  Upon acceptance, jurisdictional customs officer shall approve bond request on the Customs Automated System (post that it would be visible to importer on ICE Gate portal)  No requirement to give a fresh bond/BG – if it has already been furnished (Jurisdictional Customs officer would enter such details on ICEGATE and generate bond number)

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New Automated Procedure under IGCR. Step 4

Filing of bill of entry

• Importer shall file the bill of entry at port of import specifying the • IIN • Continuity bond number • These details shall be available to the jurisdictional customs officer through the common portal Step 5

Clearance of goods

• Once a bill of entry is cleared for home consumption, the bond submitted by the importer gets debited automatically in the customs automated system • The goods shall then be allowed clearance at a concessional rate of duty.

For Step-wise advisory, Refer : https://www.taxmann.com/research/goods-services-tax/top-story/104010000000098064/advisory-forimporters-to-avail-benefit-of-igcr-rules-import-of-goods-at-concessional-rate-of-duty-cirnot 9

New Automated Procedure under IGCR. Post Import

Filing of Form IGCR 2 • Intimation regarding non-receipt/short receipt of goods imported along with information of duty paid • When-immediately where goods are not not/short received in the premises.

• Payment of duty on short receipt/non receipt- ( Vijay Solvex Ltd 2004 (163) E.L.T. 258 (Tri. - Del.) & ( Jhoonjhunwala Vanaspati Ltd 2004 (166) E.L.T. 369 (Tri. - Del.)

Utilization of goods imported • Imported goods shall be utilized for the intended purpose or re-export the same, within 6 months from the date of import (Detailed implications discussed in later slide) Filing of Form IGCR- 3 • Monthly filing of Form IGCR -3 (details of material utilized etc.) by 10th day of the following month Maintaining accounts and records • The importer shall also maintain an account giving the quantitative details of Imported Goods which will be produced to the Customs officer as and when required 10

Utilization within 6 months.

No condition under erstwhile Rules to use goods within 6 months (though Clarification provided the same) Treatment under New Rules 

Goods imported are required to be utilized for the intended end use within 6 Months

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Unutilized/defective goods can either be re-exported or cleared for home consumption

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Goods re-exported – Declare details in Monthly Statement

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Goods cleared for home consumption – Pay Duty along with interest (Interest from date of import to date of payment)

Treatment where goods are not utilized within 6 months 

Law compels to use goods within 6 months. If not used then either re-export or clear for home consumption (within 6 months)

Time limit of 6 months on Transitional Stock  Requires deeper examination.

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Re-export/clearance for home consumption.

• Option to either re-export or clear such goods for home consumption (defective/unutilized goods) • Details of export documents (shipping bill, date, value, etc.) shall be furnished in monthly statement against imported goods • Clearance for home consumption, duty earlier forgone will be payable with interest • Clearance of capital goods: Pay duty foregone at depreciated value with interest • Currently payment is to made using the manual challan at the port of import (automated system of voluntary payment on ICE Gate is under development)

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Job work (Pre-amendment).

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Jurisdictional Customs Officer

Customs Officer (Job worker)

Forwarding Intimation received (Only when goods sent to job-worker from premises)

1 Intimation about goods sent - Jobworker wise

Importer

3 Goods to Job-worker under challan

4 Received back within 6 months

Job worker

When goods are sent directly to Jobworker from port : Intimation will be sent by the importer directly to Custom officer of Job-worker 13

Job work (Post amendment).  Documentation required for sending goods to job worker: • Invoice / Delivery challan • E-way bill, if required  Intimation: The requirement of an intimation when sending goods for job work, has been done away with  Accounts and Records: The importer shall maintain a record and mention such details in the monthly statement (Form IGCR-3)  Time-limit for job-work Goods can remain with the job worker up to 6 months from the date of invoice/delivery challan or e-way bill.

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Accounts and records.

•

Importer shall maintain the quantity wise details of: – – – – – – –

Goods imported Date of receipt of the goods imported in the relevant premises Goods consumed Goods sent/received from job work, nature of job work carried out; Goods re-exported Goods remaining in stock, according to Bills of Entry Goods sent/received from another unit, manufacturing process undertaken and waste generated, if any

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These accounts shall be produced as and when required by AC/DC having jurisdiction

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Job-worker shall maintain the quantity wise details of: – – –

Goods received Manufacturing process undertaken Waste generated, if any 15

Transitional aspects.

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IGCR -1 is the filled for the units already covered under the IGCR Rules to generate IIN

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Option given to importers to follow earlier process of manual filings at the port till March 13, 2022

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Details of existing bonds shall be entered by jurisdictional officer in custom automated system. Importer should ensure their bonds details have been updated in the system

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System architecture for EOUs is under development. Till the development, existing process to be followed

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Comparative of old v/s new IGCR Rules.

Pre-Amendment

Post-Amendment

 Manual filing of statements/Intimations

 Electronic filing of information at ICEGATE

 Intimation about receipt of goods required with each import

 Intimation about receipt of goods with each import not required (unless there is short receipt)

 Quarterly filing of statement for utilisation

 Monthly filing of statement for utilisation

 No time-limit for utilisation under the IGCR Rules (though 6 months limit mentioned in circular)

 6 months time-limit for utilisation specifically provided in the rules

 Separate intimation required for goods sent to job worker each time

 No such requirements. Details to be furnished monthly in IGCR – 3

 Job-worker to file intimation where good received directly

 Job-works not required to file any direct intimations 17

Open points.

• Implications of information furnished under IGCR 2 (short receipts) requires further examination • Impact of the 6 months time limit on utilization of goods on transitional stock • Under IGCR-1 GSTIN job-worker’s GSIN is a mandatory field. Practical implications to be examined

• IGCR Rules compliance possible in case of contract manufacturing?

• Rectification - No provision for rectification of Form IGCR-2/3 in case of any error or omission • Nil IGCR 3- In case of no transactions being done in a particular month, do Importers still needs to find monthly statement in IGCR-3 • Amendment in IGCR Rules - Transitional provisions are clarified in circular (no corresponding amendments are made in IGCR Rules) • Procurement certificate – confusion amongst field formations (Clearance allowed basis the annexure III details) • System under development - Voluntary payment and system architecture for EOUs

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