Tax Taxation

India’s Food, Cosmetics Importers To Get Excess GST Refund  

Unsold inventory of imported chocolates, confectionery and cosmetics, which attracted 28% Integrated Goods & Services Tax (GST) during inbound shipments but are now retailing with an 18% levy, can claim refunds on the excess tax paid.

A report sourced from Economic Times quoted a senior official of the country’s Central Board of Excise and Customs (CBEC) as saying that the  Board had “told importers that if they have imported goods at 28% and are selling them at 18%, they can claim a refund,” said. “They will, however, have to submit proof. We understand they have issues related to stickers.”

Under the new GST tax regime, all imports face customs duty and IGST (CGST+SGST), unless specifically exempted. Last month, the GST Council had slashed tax slabs on 178 products, including chocolates, confectionery, deodorants and shampoo, from 28% to 18% and almost all Indian firms have dropped prices in relevant categories after the cut.

Commenting on the fiscal measure, the Chief Financial Officer at Dabur, which operates retail chain NewU and sells both Indian and imported cosmetics and personal-care products, Lalit Malik, said: “The reduction in GST rates for products imported at a higher rate may have some short term working capital impact on the importer. However, this can be adjusted against future sales.”

Some of the imported products retailed at DaburBSE 1.08 % chains include Beauty Formula from UK and Spice Island from Sri Lanka.

A leading importer of chocolates was also quoted in the report as saying that importers of chocolates “are continuing to sell at 28% as of now, and awaiting fresh stocks with revised MRPs. Unlike local manufacturers, our import cycles are dependent on international producers.”

According to Economic Times report, while Indian vendors are in the process of manufacturing stocks with revised prices on packaging, importers say they are saddled with inventories because their import cycles extend anywhere between three and six months.

Meanwhile, the government has allowed companies to put stickers on unsold stock, printing the new maximum retail prices (MRP) as long as the earlier MRPs are also visible. This facility, available until December 31, applies to both locally manufactured and imported products.

“Many importers are putting stickers with revised MRPs. Some others, however, are facing issues with international clearances on revised stickers from the importing countries, said an official representing a large cosmetics importer”, the report added.

Partner, indirect tax at PricewaterCoopers (PwC), Dharmesh Panchal, noted that “even if IGST was 28% at the time of import, if at the time of sale GST is 18%, then the benefit has to be passed on to customers. However, in such cases, the importer might have a working capital issue as the input IGST might take longer to liquidate, particularly if margin is thin.”


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