Importing into India involves a complex interplay between the Customs Act, 1962, and the IGST Act, 2017. With the Union Budget 2026 rewriting key compliance mandates, this guide provides a structured breakdown for businesses navigating the current landscape.
A: Import of Services
1. Definition
Under Section 2(11) of the IGST Act, an “Import of Service” is defined as a supply where:
- The supplier of service is located outside India.
- The recipient of service is located in India.
- The Place of Supply (PoS) of the service is in India.
- Related Party Transactions: Import of services from a foreign branch or parent without consideration is a Deemed Supply under Schedule I of the CGST Act and is taxable.
2. Place of Supply (PoS)
The Place of Supply determines the taxability. For imports, Section 13 of the IGST Act applies:
- General Rule: The PoS is the location of the recipient of services (India).
- Intermediary Services (2026 Amendment): Section 13(8)(b) has been strictly amended to limit the scope of “export of services” for commission agents. For most foreign brokerage payments, the PoS is now the Recipient’s Location, making the Indian importer liable for 18% IGST under RCM.
3. Valuation
Valuation is governed by Section 15 of the CGST Act and GST Valuation Rules:
- Transaction Value: Tax is calculated on the actual price paid or payable to the foreign vendor.
- Exchange Rate: You must use the RBI Reference Rate applicable on the date of the invoice or payment (whichever is earlier) for converting the value into INR.
- FOC Imports: Services received “Free of Cost” from related parties must be valued based on the Open Market Value (OMV).
4. Input Tax Credit (ITC)
- Reverse Charge Mechanism (RCM): The Indian recipient must self-assess and pay the tax under RCM.
- Self-Invoicing Mandate: As per Section 31(3)(f), you must issue a “Self-Invoice” immediately upon payment to the foreign vendor.
- ITC Eligibility: ITC can be claimed in the same month of tax payment, provided the self-invoice exists and the tax is paid to the government.
B: Import of Goods
1. Definition
Import of goods is bringing goods into India from a place outside India. Under GST, this is treated as an Inter-state supply, and IGST is levied as a duty of Customs.
2. Place of Supply (PoS)
- Location of Importer: The PoS for imported goods is strictly the location of the importer who files the Bill of Entry.
- Bonded Warehouse: IGST is not payable when goods enter the warehouse; it is triggered only upon clearance for home consumption (de-bonding).
- High Sea Sales: Sales occurring before goods cross customs frontiers are exempt (Schedule III). IGST is paid only by the final buyer who clears the goods through customs.
3. Valuation
For goods, valuation follows the Customs Act, 1962:
- Tax Hierarchy:
- Basic Customs Duty (BCD): Calculated on Assessable Value (CIF).
- Social Welfare Surcharge (SWS): 10% of BCD.
- IGST: Calculated on (Assessable Value + BCD + SWS).
- Exchange Rate: You must use the CBIC Notified Exchange Rate on the date of Bill of Entry presentation (not the bank or RBI rate).
4. Input Tax Credit (ITC)
Capital Goods: ITC is fully available on the import of machinery and plant equipment used for business purposes.
ITC Availability: While BCD and SWS are costs, IGST paid at customs is 100% available as ITC for your business.
GSTR-2B Sync: Ensure your GSTIN is correctly mentioned on the Bill of Entry. The data is transmitted from the ICEGATE portal to your GSTR-2B for seamless credit matching.
Budget 2026 Duty Rate Changes (Goods)
The 2026 Finance Bill introduced targeted cuts to boost manufacturing:
| Item | New Duty Rate | Impact |
| Mobile Phone PCBA/Parts | 10% (Reduced) | Cheaper to assemble phones in India. |
| Specified Cancer Drugs | Nil (Exempt) | 3 life-saving drugs fully exempt. |
| Critical Minerals (Li, Co) | Nil (Exempt) | Huge relief for EV battery makers. |
| Solar Glass | Nil (Exempt) | Supports solar panel manufacturers. |
Input Tax Credit (ITC) Rules
Claiming ITC on imports requires precision.
- Document: The Bill of Entry (BOE) is your primary document. Ensure your GSTIN is correctly mentioned on the BOE.
- GSTR-2B: Import data flows from ICEGATE to your GSTR-2B. Do not claim ITC until it appears in GSTR-2B (Table 4(A)(1)).
- Tip: If it’s missing, use the “Search BOE” feature on the GST Portal to fetch it manually.
- Blocked Credit: ITC is not available for:
- Goods used for CSR activities.
- Goods used for Personal consumption.
- Gifts/Samples (if no GST is paid on output).
Don’t let cross-border taxes eat your margin.
Need Expert Help?
See the Lastest: GST Rate List 2026
Also Read: Mandatory QCO List 2026 (Updated):
