Comprehensive Guide to IGST and RCM on Imported Goods & Services
Navigating the complexities of IGST and Reverse Charge Mechanism (RCM) for imports requires precise understanding of compliance requirements. This definitive guide explains the tax treatment, documentation, and reconciliation processes with actionable insights for businesses.
Key Highlights:
- IGST payment process at customs clearance with Bill of Entry
- Reverse Charge Mechanism (RCM) applicability for imported services
- Documentation requirements for ITC claims
- Common reconciliation challenges and solutions
- Best practices for compliance and audit readiness
IGST on Imported Goods
1.1 Customs Clearance and Tax Payment
When importing goods, the following taxes are levied simultaneously at the port of entry:
Bill of Entry Filing
Submit complete BoE through ICEGATE with:
- Commercial invoice
- Packing list
- Import license (if required)
- Country of origin certificates
Duty Calculation
Customs assesses value based on:
- Transaction value method (Rule 3 of Customs Valuation Rules)
- Additions for commissions, royalties, etc. (Rule 10)
- Adjustments for freight and insurance
Payment & Clearance
Must be completed within:
- 30 days of arrival for air shipments
- 45 days for sea shipments
- 7 days for courier shipments
1.2 Input Tax Credit (ITC) Eligibility
Documentation Requirements
- Original Bill of Entry (for physical verification)
- Customs duty payment challan
- Supplier's commercial invoice
- Proof of goods receipt
Time Limits
- Must claim by September of next FY (Section 16(4))
- Annual return filing deadline
- Earlier of the two dates applies
Common Pitfalls
- Missing port code details
- HS code mismatches
- Valuation discrepancies
- Untimely reconciliations
Reverse Charge on Imported Services
2.1 When RCM Applies
Services Subject to RCM
- Consulting services from abroad
- Technical services
- Legal/accounting services
- Online information services
Exempt Services
- Services received for export business
- Inter-company services with full ITC
- Services covered under Notification 9/2017
2.2 Compliance Process
Service Receipt
Date when service is completed or made available
Invoice Due
Foreign supplier should issue invoice within 30 days
RCM Trigger
If no invoice received, tax payable on 61st day
Tax Payment Due
Through GSTR-3B in cash (cannot use ITC)
Reconciliation Framework
| Data Point | Customs Data (BoE) | Supplier Invoice | GSTR-2B |
|---|---|---|---|
| Document Number | BoE No. (7-9 digits) | Invoice No. (supplier format) | Not auto-populated |
| Tax Amount | IGST + Cess | May include other charges | Only if supplier reports |
| Date | Customs clearance date | Invoice date | Supplier filing date |
| HS Code | 8-digit Customs code | May use different system | As per supplier filing |
Monthly Reconciliation Checklist
Compliance Resources
Streamline your import documentation with our free online invoice generator that supports GST-compliant formats with automatic tax calculations.