Overview of VAT on Imports

• VAT is applicable to imported goods when they are brought into a state for sale, use, or consumption
  
• Although Customs Duty and Countervailing Duty (CVD) are levied at the national level, VAT is imposed by the state
  
• VAT is charged on the value of goods including basic customs duty and other import duties
  
• Imported goods are treated at par with locally purchased goods for VAT purposes
  
• The importer must be a registered dealer to claim input tax credit on VAT paid on imports

Calculation of VAT on Imported Goods

• VAT is calculated on the assessable value, which includes CIF value + customs duties + landing charges
  
• The applicable VAT rate depends on the nature of goods and the state’s VAT schedule
  
• For example, electronics may be taxed at 12.5%, while basic items may be taxed at 4% or 5%
  
• The VAT amount is added to the cost of imports, which then becomes part of the selling price
  
• If the importer is not registered, the VAT paid becomes non-creditable, increasing the cost

VAT Registration and Compliance for Importers

• Importers must obtain VAT registration in the respective state to legally import and sell goods
  
• They must issue tax invoices when reselling imported goods within the state
  
• VAT returns must include details of imported goods, tax paid, and credits claimed
  
• Importers must keep proper records such as bill of entry, customs invoice, VAT challans, and transport documents
  
• Non-compliance can result in penalties, disallowance of input tax credit, or confiscation of goods

Input Tax Credit on Imported Goods

• Registered importers are eligible to claim input tax credit (ITC) on VAT paid at the time of import
  
• The credit can be adjusted against output VAT payable on local sales
  
• If the goods are used for exempt sales or exports, input VAT may not be creditable
  
• Input credit is not allowed if the importer fails to produce valid documents and tax invoices
  
• Proper bookkeeping and matching of purchase records are essential to claim ITC successfully

Post-GST Changes and Relevance of VAT on Imports

• After GST was introduced in July 2017, VAT on imports was replaced by IGST (Integrated GST)
  
• IGST is now applicable on imports and is creditable across states, unlike VAT which was limited to the importing state
  
• However, VAT still applies to imports of alcoholic liquor, petroleum products, and certain local goods
  
• Historical VAT rules remain relevant for old assessments, audits, and refunds prior to the GST era
  
• Understanding VAT treatment on imports is important for settling legacy obligations and legal disputes