Following the Ministry of Finance’s announcement that no IGST will be levied on gem and jewellery carried outside of the country for exhibition purposes, Director (Customs) vide Circular No. 21/2019 - Customs has clarified regarding applicability of Notification No. 45/2017 - Customs dated 30.06.2017 on goods, which were exported earlier for exhibition purpose/ consignment basis. Till now, gem & jewellery which was being carried outside of the country even for exhibition/ consignment purpose was attracting IGST at reimport.

This comes into effect after several representations made by the gem & jewellery trade and industry body to the Union Ministry of Finance, Department of Revenue & Central Board of Indirect Taxes & Customs for exemption of IGST for the gems and jewellery carried for exhibition purpose.

The statement from Director Customs clarified that that the activity of sending / taking the goods out of India for exhibition or on consignment basis for export promotion do not constitute as supply as the said activity does not fall within the scope of section 7 of the CGST Act as there is no consideration at that point in time. Since such activity is not a supply, the same cannot be considered as “Zero Rated Supply‟ as per the provisions contained in section 16 of the IGST Act. Also that there is no requirement of filing any LUT/bond as required under section 16 of IGST Act, 2017 for such activity of taking specified goods out of India.

Commenting on this development, Mr Pramod Kumar Agrawal, Chairman, The Gem and Jewellery Export Promotion Council (GJEPC), said, “The Council is really grateful to the Government of India and the Customs Department for the circular clarifying on relief of IGST on reimport of goods after exhibition/consignment. We are especially thankful to Hon’ble Union Commerce & Industries Minister Shri Piyush Goel, Hon’ble Union Finance Minister Shrimati Nirmala Sitharaman, Officials of the Union Ministry of Commerce & Industry, Union Finance Ministry, Customs authorities for their understanding and support. Thank you all for the patience shown as it will be a great relief to the gems & jewellery industry.”

The Circular clarifies that since no integrated tax was required to be paid for specified goods at the time of taking these out of India, the activity being not a supply, hence the said condition requiring payment of integrated tax at the time of re-import of specified goods in such cases is not applicable. It is clarified that such re-import cannot be taken to be falling under situation at Sl. No. 1(d) of the said Notification. Such cases will fall more appropriately under residuary entry at Sl. No. 5 of the said Notification even though those specified goods were exported under LUT, in view of the fact that the activity of sending / taking specified goods out of India is neither a supply nor a zero rated supply.

It is also clarified that, even in cases where exports have been made to related or distinct persons or to principals or agents, as the case may be, for participation in exhibition or on consignment basis, but, such goods exported are returned after participation in exhibition or the goods are returned by such consignees without approval or acceptance, as the case may be, the basic requirement of ‘supply’ as defined cannot be said to be met as there has been no acceptance of the goods by the consignees. Hence, re import of such goods after return from such exhibition or from such consignees will be covered by entry at Serial no. 5 of the Notification No. 45/2017 dated 30.06.2017, provided re-import happens before six months from the date of delivery challan.