Finance Bill, 2023 was passed by the Lok Sabha on March 24, 2023. In addition to amendments relating to the GST Appellate Tribunal (‘GSTAT’) (as discussed in 49^th GST Council meeting), several other amendments have been proposed.

Vide this Outlook, we intend to apprise you about key amendments to the Finance Bill, 2023 as approved by the Lok Sabha (‘amended Finance Bill’).

Payment of IGST on goods stored for manufacturing and other operations in customs-bonded warehouse like under MOOWR Scheme etc.

• Presently, the Customs Act allows deposition of imported goods in warehouse without payment of duties of customs (including IGST and Compensation Cess). Such duties are payable on clearance of goods from warehouse for home consumption. For warehousing imported goods, importer files into-bond Bill of Entry (‘BoE’) / BoE for warehousing. Further, to clear such goods from warehouse, importer files ex-bond BoE / BoE for home consumption and discharges applicable duties of customs on such goods.

• Section 65 of the Customs Act allows manufacture and other operations in customs-bonded warehouse.

• In the amended Finance Bill, Section 65A has been proposed to be inserted which provides for payment of IGST and Compensation Cess while depositing 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.

• Once Section 65A is notified, importer will need to file BoE for home consumption (instead of BoE for warehousing) and pay applicable IGST and Compensation Cess while depositing goods into warehouse.

• Further, Government will prescribe manner and conditions for payment of other duties of customs (like Basic Customs Duty) on removal of goods from warehouse.

• Notably, transfer of warehoused goods from one warehouse to another will only be permitted upon filing of BoE for home consumption and on payment of IGST and Compensation Cess (if duty is not paid earlier).

• Section 65A will only apply to goods warehoused after date of notification of this provision and not to goods already warehoused.

• The Government is empowered to exempt certain categories of goods, importers or exporters or industry sector from purview of Section 65A. 

NITYA Comments: This change will have significant working capital implications for importers having permission to carry out manufacturing and other operations in customs-bonded warehouse like under MOOWR Scheme, warehouses wherein MRP labelling operations are undertaken etc. As importers will need to pay IGST and Compensation Cess upfront while depositing goods into warehouse, this will make MOOWR Scheme less lucrative. Exporters operating under MOOWR Scheme can re-analyze benefit of AA and EPCG vis-à-vis MOOWR Scheme for claiming exemption on IGST and Compensation Cess element. 

Constitution of GSTAT 

Section 109 and 110 of the CGST Act have been substituted to provide for constitution of GSTAT. Key features are as under:

• Principal Bench of GSTAT will be located in New Delhi comprising of President, Judicial Member, Technical Member (Centre) and Technical Member (State). 

• States will have discretion to constitute number of State Benches which shall comprise of two Judicial Members, one Technical Member (Centre) and one Technical Member (State). 

• Qualification criteria of President and Members of GSTAT has also undergone substantial changes. Notably, lawyers are not eligible to become members of the GSTAT. It is noteworthy that the High Court in the case of Revenue Bar Association v. UOI, 2019-VIL-466-MAD recommended for eligibility of lawyers to be appointed as Judicial Members in GSTAT to maintain uniformity between various Tribunals such as ITAT, CESTAT etc. However, such recommendation has not been favorably considered by the Government.

We will share our insights on all changes of the amended Finance Bill in detail once it receives Presidential assent and finally becomes an Act.

Hope you find this an interesting read! Please feel free to share your comments / feedback.