Re-Export of Imported Goods After Repairs

The goods which are manufactured in India and exported outside India, are sometimes returned back by the foreign customers in India for repairing purpose. In such situation the Indian company will repair the goods and re-export such goods after repair. In this respect there are many questions that usually arise like whether import duty is payable on import of goods which were originally exported? Whether export benefits like refund, RoDTEP etc. would be available on the re-export of goods after repair? What are the conditions for Re-export of goods? Let’s discuss in detail about all these questions.

Section 12 of Custom Act, 1962 states that duties of customs shall be levied on goods imported in to India. Similarly, as per section 20 of Customs Act 1962 the duty shall be leviable if goods are imported into India after export. Hence as per section 20 of the Custom Act 1962, the customs duty should be leviable on re­import of goods after repair which are manufactured in India and exported. However, vide Notification No.158/95-Customs, an exemption from the payment of custom duty & integrated tax has been provided in respect of exported goods which are re-imported into India subject to the conditions specified therein.

The conditions specified in the said Notification are summarised as follows;

1. The said goods are to be re-imported in India for following purposes;
(i) For repairs or reconditioning of goods (other than goods specified in Annexure-A) which were manufactured in India and the parts of such goods are manufactured in India or in Foreign.

(ii) For repairs or reconditioning of goods which are specified in Annexure-A and which were manufactured in India.

(iii) For reprocessing or refining or re-marking or any other similar process and such goods should also be manufactured in India.

2. In the said notification the time limit for re-import of goods and the time limit for re-export of goods after repair, reconditioning, reprocessing etc. are given. Which are as follows;

4. The Assistant or Deputy Commissioner of Customs is satisfied as regards to identity of the goods in all cases.

5. If re-import of goods (whether specified in the Annexure or not) are taken place for the purpose of repairs or reconditioning the importer has to submit a bond undertaking that:
(a) such goods would be exported after repairs or reconditioning within the above time period.

(b) if any of condition of said notification is not complied with, he would be liable to pay the amount of duty saved due to the exemption claimed.

6. However, if re-import of goods are taken place for the purpose of reprocessing or refining or re-marking etc., the importer has to submit a bond undertaking that:

(a) said activity would be carried out in the premises registered under GST or in a Customs bonded warehouse.

(b) shall maintain proper accounts of the use of the said re-imported goods and shall produce the said accounts to the incharge of the factory or the bonded premises.

(c) if any waste or scrap arises, the importer has to either destroy the same before the custom officer or to pay on such waste or scrap the appropriate duties of customs as if such waste or scrap is imported.

(d) that if any of condition of said notification is not complied with, he would be liable to pay the amount of duty saved due to the exemption claimed.

Provided that in case of reprocessing, refining or remaking or similar process, if any loss of imported goods is noticed during such operations, the quantity of such loss shall be exempted from BCD and additional customs duty subject to the satisfaction of the Assistant or Deputy Commissioner of Customs that such loss has occurred during such operations.

Hence from the above detailed discussion it is clear that if goods are manufactured in India and exported thereafter and such exported goods are re-imported back in India for the purpose of repairs or reconditioning, reprocessing or refining or re-marking or any other process which are similar to reprocessing or refining or re-marking. In such situation the import duty & IGST would be exempted vide Notification No.158/95-Customs subject to certain conditions specified therein.

Now the next question that arises here is that when such goods are re-exported after repair or reconditioning, reprocessing etc. there would also be a physical movement of goods which are being repaired whether it would be considered as export of service?

As the goods are re-imported only for the purpose of repair or reconditioning, reprocessing etc. and it should be considered as export of service. But since the export of service is defined sub section 6 of section 2 of IGST Act 2017, hence we have to move towards that definition to check whether such transaction is export of service or not.

As per section 2(6) of IGST Act 2017 "export of services" means the supply of any service when,-

“(i) the supplier of service is located in India;

(ii) the recipient of service is located outside India;

(iii) the place of supply of service is outside India;

(iv) the payment for such service has been received by the supplier of service in convertible foreign exchange; or in Indian rupees wherever permitted by the Reserve Bank of India and

(v) the supplier of service and the recipient of service are not merely establishments of a distinct person in accordance with Explanation 1 in section 8”;

In the situation when the goods after repair are being sent outside India, the supplier is in India and 
the recipient is outside India, hence the first two conditions are satisfied. For determining the place of supply we have to refer section 13 of IGST Act 2017 which talks about the place of supply of service when either the supplier or recipient are located outside India.

As per section 13(3)(a) when the services supplied in respect of goods which are required to be made physically available, the place of supply shall be the location where the services are actually performed.

However, the second proviso to section 13(3)(a) states that said provisions would not be applicable in the case of services supplied in respect of goods which are temporarily imported into India for repairs or for any other treatment or process and are exported after such repairs or treatment or process without being put to any use in India, other than that which is required for such repairs or treatment or process.

Accordingly, the transaction of re-export of goods after repair would fall under residuary clause (2) of section 13 of IGST Act, which states that place of supply would be the location of recipient of service. Hence the place of supply of such transaction would be outside India.

From the above it is clear that the third condition for export of service is also satisfied. Thus it can be concluded that such transaction of re-export of goods after repair, reconditioning, reprocessing etc. would be considered as export of service with physical movement of goods outside India, subject to the fulfillment of fourth & fifth conditions of export of services.

Till now we have understand that if goods are manufactured in India and exported thereafter and such exported goods are re-imported back in India for the purpose of repairs etc. In such situation the import duty & IGST would be exempted subject to certain conditions of Notification No. 158/95-Customs and such transaction of re-export of goods after repair etc. would be considered as export of service which can be done either on payment of integrated tax or under the letter of undertaking (LUT) and refund can be claimed of IGST paid or unutilised ITC as the case may be, as per the provisions of section 54 of CGST Act 2017.

Since it is export of service with physical movement of goods, hence shipping bill is required to be generated as the shipping bill is a mandatory application submitted by exporters to obtain customs clearance for exporting goods from one country to another. As we know that in case of export the export proceeds should be realised within the time limit prescribed under Foreign Exchange Management Act 1999 i.e., within 9 months. In case of re-export of goods after repair the payment would be received only in respect of repairing charges not in respect of the goods which are being repaired, accordingly as clarified in clause (iv) of section A.2 of Master Circular No. 3/2003-04 dated 1/7/2003 of FEMA that the export of goods not involving any foreign exchange transaction directly or indirectly, requires the waiver of GR/PP procedure from Reserve Bank. Thus GR waiver should be obtained from RBI in this regard.

Now the next question that comes in mind is that whether benefit of RoDTEP scheme would be available on such transaction.

Availability of RoDTEP benefit:
In case when the goods originally exported outside India the benefit of RoDTEP can be claimed  subject to the condition that such goods are covered under Appendix 4R.

As we have already discussed that in case when such goods are re-exported after repair, it would be considered as export of service. The RoDTEP benefit is available in respect of export of goods only. Accordingly, the benefit of RoDTEP would not be available for re-exported after repair.

Thus from the above detailed discussion we can conclude that;

Conclusion: If goods are manufactured in India and exported and such exported goods are re-imported back in India for the purpose of repairs etc. In such situation the import duty & IGST would be exempted subject to certain conditions of Notification No. 158/95-Customs and such transaction of re-export of goods after repair etc. would be considered as export of service which can be done either on payment of IGST or under LUT.

Disclaimer: The information given in this article is solely for purpose of understanding the law. It is completely based on the interpretation of the author and cannot be constituted as a legal advise, the author of this article and Lawcrux team is not responsible for any legal issues if arises on the basis of the interpretation given above.