Background
Customs (Import of Goods at Concessional Rate of Duty or for Specified End Use) Rules, 2022 (“IGCR Rules, 2022”), notified under the Customs Act, 1962, supersede the earlier IGCR Rules, 2017. The Rules prescribe the conditions, procedures, and compliance requirements for importers availing concessional customs duty or exemption benefits subject to specified end-use conditions under customs notifications.
The IGCR framework introduces a digital compliance mechanism through the common customs portal, requiring prior registration through Form IGCR-1 and allotment of an IGCR Identification Number (IIN). The Rules also mandate execution of continuity bonds, maintenance of records, monthly filing of Form IGCR-3, and compliance relating to job work, re-export, disposal, and home consumption of goods.
Accordingly, the IGCR Rules, 2022 establish a structured framework for monitoring and ensuring compliance with end-use based customs duty concessions and exemptions.
Applicability
IGCR Rules, 2022 apply to importers availing concessional customs duty or exemption benefits under notifications prescribing specified end-use conditions for imported goods.
The Rules apply across sectors to manufacturers, exporters, service providers, project importers, and other eligible entities importing raw materials, components, consumables, or capital goods under eligible customs notifications. The compliance obligations under the Rules also extend to job workers handling such imported goods for authorised processing or operations.
Compliance Requirement Under the Rules
An importer must file Form IGCR-1 on the common portal prior to import in order to avail the benefit of concessional customs duty under any applicable exemption or concessional notification. The form must include: name and address of the importer and job worker (if any); details of the manufacturing process or goods produced; description of imported goods and their intended usage; applicable exemption or concessional notification; output services (if applicable); premises details for unit transfer; end-use recipient details (if applicable); and intended ports of import. Upon acceptance by the system, a unique IGCR Identification Number (IIN) is generated. Any change in the details furnished in Form IGCR-1 must be promptly updated on the portal. The importer must also execute a continuity bond with customs authorities: for exemption notifications — undertaking to pay differential duty plus interest if conditions are violated; for other cases — a bond equal to the assessable value of the imported goods. An importer who fails to file Form IGCR-1 and obtain an IIN before import shall not be eligible to avail concessional rate or exemption of customs duty under the IGCR Rules.
An importer who intends to avail the benefit of a concessional or exemption notification must mandatorily mention the IGCR Identification Number (IIN) generated under Rule 4(2) and the continuity bond number and its details while filing the Bill of Entry. Where a Bill of Entry is cleared for home consumption, the bond submitted by the importer gets automatically debited in the customs automated system and the relevant details are made available electronically to the jurisdictional Customs Officer for monitoring and compliance verification.
Every importer who has availed the benefit of an exemption notification under the IGCR Rules must maintain an account clearly indicating: the quantity and value of goods imported (bill of entry-wise); the quantity of imported goods consumed in accordance with the provisions of the exemption notification; the quantity of goods re-exported, if any, under Rule 7; and the quantity remaining in stock at all times. The account must be maintained in a manner enabling clear identification and reconciliation of all imported goods, and must be produced as and when required by the Deputy Commissioner or Assistant Commissioner of Customs having jurisdiction over the premises where the imported goods are used for manufacture or for rendering output services.
Every importer availing the benefit of a concessional or exemption notification shall submit a monthly statement on the common portal in Form IGCR-3 by the 10th day of the following month. The statement must report the consumption of imported goods, job work details, re-exports, and balance in stock during the month. An importer may additionally submit details of goods consumed in Form IGCR-3A for immediate recreation of bond — which shall then become a part of the monthly statement of the subsequent month. The benefit of concessional duty is dependent on the use of imported goods for the manufacture of any commodity, provision of output service, or being put to the specified end use as covered by the applicable notification.
The importer must maintain accurate and reconcilable records of all goods sent for job work during each month and must disclose the details of such goods in the monthly statement under Rule 6. The records must enable identification of the quantity and description of goods sent, the job worker’s details, and the status of such goods (returned, used, or in stock at the job worker’s premises). Records must be current and capable of being reconciled with the Form IGCR-3 monthly statement.
An importer dispatching imported goods for job work must send them under a proper invoice or e-way bill (as applicable under GST law) specifying the description and quantity of goods. The documentation must ensure traceability of the goods at all times during their movement to and from the job worker’s premises. Compliance with both the IGCR Rules and the applicable GST law provisions on e-way bill generation and invoicing is mandatory.
Goods sent for job work must be returned to the importer’s premises within six months from the date of the invoice or e-way bill under which they were dispatched. The importer must ensure completion of job work and return or transfer of goods within this 6-month period. Failure to return goods within the prescribed period may give rise to duty implications — including demand of differential duty plus interest — on the goods not returned within the prescribed time.
The importer must establish and be able to demonstrate that goods sent for job work have been used strictly for the purpose declared in Form IGCR-1 under Rule 4. Failure to prove proper usage of the goods as per the declared purpose may result in action under Rule 11 (demand of differential duty) and Rule 12 (penalties) of the IGCR Rules, including recovery of the full differential duty and applicable interest.
An importer shall utilise goods imported under concessional duty strictly in accordance with the conditions of the applicable notification, within the time period specified in the notification or, where no such period is specified, within six months from the date of import. Proper tracking and documentation must be maintained to establish that the goods were used for the specified purpose within the prescribed period. In the event of failure to use goods within the period, duty implications including differential duty recovery and interest shall arise.
Where imported goods remain unutilised or are found to be defective, the importer may re-export or clear them for home consumption within the time period specified in the applicable notification or, where no such period is specified, within six months from the date of import. In case of re-export, proper export documentation including a shipping bill must be prepared and linked to the original import. In case of clearance for home consumption of such goods, applicable customs duty and interest must be paid.
Any re-export of unutilised or defective goods under Rule 10(1) must be recorded by the importer in the monthly statement (Form IGCR-3) by providing the details of the necessary export documents — including the shipping bill number, port of export, and date of export. This recording is mandatory to enable the bond to be appropriately credited in the customs automated system on confirmation of re-export, and to establish regulatory compliance for the period.
An importer who intends to clear unutilised or defective goods for home consumption (instead of re-exporting them) has the option of making voluntary payment of the applicable differential customs duty along with interest on the common portal. The particulars of such clearance and the duty and interest payment must be recorded by the importer in the monthly statement (Form IGCR-3) for the relevant period. This option enables regularisation of imported goods that are no longer required for the specified purpose, without any penal proceedings, provided payment is made voluntarily and promptly.
An importer may clear used capital goods that were imported under concessional duty — after using them for the specified purpose — by paying the differential duty (i.e., the difference between the normal customs duty and the concessional duty already paid) along with interest, calculated on the depreciated value of the capital goods. The depreciation is computed using the straight-line method, applied from the date of import until the date of clearance, at the following rates: 4% per quarter for the 1st year; 3% per quarter for the 2nd year; 3% per quarter for the 3rd year; 2.5% per quarter for the 4th and 5th years; and 2% per quarter thereafter. Interest is payable at the rate notified under Section 28AA of the Customs Act, 1962. This option allows importers to legitimately dispose of used capital goods upon fulfilment of the specified purpose, without triggering full duty demand.
Penalty & Consequences
The following penalty provisions apply across the compliance obligations covered in this blog.
Rule 11 of the Customs (IGCR) Rules — Demand of Differential Duty with Interest
Where imported goods are not used in accordance with the conditions of the applicable exemption or concessional notification, or are not re-exported or cleared for home consumption with payment of duty within the prescribed period, the Deputy Commissioner or Assistant Commissioner of Customs shall issue a demand for the differential duty (i.e., full applicable customs duty minus the concessional duty already paid) along with interest at the rate notified under Section 28AA of the Customs Act, 1962, from the date of import.
Rule 12 of the Customs (IGCR) Rules — Penalty for Contravention
Any importer or job worker who contravenes any of the provisions of these Rules — including failure to file Form IGCR-1 before import, failure to mention IIN and bond number in the Bill of Entry, failure to maintain accounts, non-filing or late filing of monthly statement in Form IGCR-3, improper job work documentation, or failure to utilise goods for the declared purpose — or who abets such contravention, shall be liable to a penalty which may extend to two lakh rupees (₹2,00,000).
Section 112 of the Customs Act, 1962 — Penalty for Improper Importation
Where goods are imported in contravention of the Customs Act or any exemption notification or conditions attached thereto, the importer shall be liable to a penalty not exceeding ten percent of the duty sought to be evaded or five thousand rupees (₹5,000), whichever is greater, in cases not involving wilful mis-statement or collusion. In cases involving wilful mis-statement, fraud, or collusion, the penalty may be equal to the duty sought to be evaded under Section 114A of the Customs Act, 1962.
Section 28 of the Customs Act, 1962 — Recovery of Short-Levied or Erroneously Refunded Duty
Where customs duty has not been levied or has been short-levied or erroneously refunded on account of any mis-statement or non-declaration, the proper officer may, within two years of the relevant date, serve a show-cause notice requiring the person to show why the deficient duty should not be demanded. The period is extended to five years where the short-levy is attributable to fraud, wilful misstatement, suppression of facts, or collusion. In addition to recovery of duty, interest under Section 28AA shall be payable from the first day of the month following the month of import.
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