Understanding the abolishment of IEC under GST

In this blog, we will discuss the change in IEC with the inception of GST with effect from (notified date). IEC (import and export code) registration is requisite for a person for importing or exporting goods. 

It is a ten-digit code based on PAN, as on the data PAN has a one-to-one correlation with IEC issued by DGFT (director general of foreign trade) foreign trade (development and regulation) act,1992. All the businesses that have been involved in the import and export of goods need import export licence in India that comes with lifetime validity. 

After the inception of the GST regime;

With the inception of GST (goods and services tax) with effect from (notified date), GSTIN will be used for the following objectives;

– IGST’s credit flow on import of goods.

– IGST’s refund and rebate concerning the export of goods.

Under the GST registration number, that is known as GSTIN. It is 15 digits alphanumerical code, with PAN prefixed by the state code and suffixed by three-digit details of PAN holder’s business verticals. In this context, it has been decided that exporter/importer would require to declare only GSTIN (whenever registered with GSTN) when export and import of goods. In totality, data at the PAN level would automatically occur in the system.

GSTIN is not mandatory;

GST would be applicable only when the turnover of the business goes beyond Rs. 20 lacs (limit is Rs. 10 lacs for the NE (north-eastern) states). Earlier, this limit was Rs. 10 lacs and Rs. 5 lacs for NE states).

Nonetheless, the following categories of individuals have to register mandatorily regardless of the threshold limitations (section 24 of CGST act, 2017, mandatory registration in several cases).

– Individuals making any inter-state taxable supplies.

– Casual taxpayers.

– Individuals who are needed to pay tax under reverse charge.

– Non-resident taxable individuals.

– Individuals who are needed to deduct tax under section 37.

– Individual who supplies goods or services on behalf of other registered taxable individuals, whether as an agent or otherwise.

– Input service distributor.

– Individual who supplies goods or services, except branded services, via an electronic commerce operator.

– Every electronic commerce operator.

– An aggregator who supplies service under his/her trade name or brand name.

– Such other individuals might be stated by the central government or a state government on the council’s recommendation. As acquiring GSTIN is not mandatory for all exporters/importers below a threshold limit of turnover, all exporters/importers might not register with GSTIN (except mandatory registration in several cases as given in section 24 of the CGST (central goods and services tax) act, 2017, (12 of 2017) or in cases where either credit is claimed of IGST). That’s why GSTIN will not become universal, as IEC is for export and import business.

DGFT acknowledges only the corporate entity.

There is no acknowledgment for individual transactions; as a way to ease of doing business, it has been determined to keep the identity of entity uniform across the departments/ministries. That’s why, with the advent of GST registration, the entity’s PAN will be used for the objectives of IEC such as IEC would be issued by the DGFT with the distinction that it has to be alphanumerical instead of ten-digit numeric as it is presently and would be same as the entity’s PAN.

For new applicants, with effect from notified date, IEC applications will be made to DGFT, and the PAN of the applicant would be authorized as IEC. For residuary categories under para. 2.07 of HBP 201520, the IEC would be either UIN issued by GSTN and sanctioned or DGFT or any other common number to be stated by DGFT.

For migration of existing IEC holders.

Requisite changes in the system are being conducted by the DGFT so that their PAN becomes their IEC. DGFT system would carry out this migration, and the existing IEC holders will not have to carry out any additional exercise in this regard. IEC holders are obliged to specify their PAN (in place of existing IEC) in all their future documentation with effect from the notification date.

The legacy data that is based-on IEC will be converted into PAN based in the future.

Source-trade notice no. 9/2017, dated on 12th of June, 2017 by the ministry of commerce and industry.

You should take assistance from experts before taking any step.

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Christophe Rude

Christophe Rude

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