Exporters were earlier entitled to import raw material without payment of IGST under the AA licence
Exporters were earlier entitled to import raw material without payment of IGST under the AA licence, and pay IGST on exports and claim rebate (refund) paid on exports.
Two high courts (HCs) have served notices on the Union government, the Directorate of Revenue Intelligence, (DRI), and the Central Board of Indirect Taxes and Customs over the issue of denying rebate on integrated goods and services tax (IGST) paid by exporters enjoying the benefits of advance authorisation (AA) licence. Bombay and Punjab & Haryana HCs have issued these notices.
Gujarat HC has stayed the proceedings initiated by DRI to exporters over this issue. An AA licence is issued to exporters to allow them duty-free import of inputs, which are physically incorporated in export products.
Exporters were earlier entitled to import raw material without payment of IGST under the AA licence, and pay IGST on exports and claim rebate (refund) paid on exports. They received the benefits of rebate of IGST initially. However, the government then amended sub-rule (10) of Rule 96 of the central GST through a notification dated September 4, 2018. It denied rebates on IGST on exports if exporters enjoyed AA benefits with effect from October 23, 2017.
Earlier, Gujarat HC had upheld the validity of this rule.
The court also upheld the validity of another amendment to the rule that allows rebates to those who only avail of exemption on basic Customs duty and pay IGST on raw material. This amendment was made effective with retrospective effect.
This means that those who claimed a refund under this option need to pay back IGST on raw material, along with interest and avail of input tax credit. Aggrieved, exporters filed a review petition in Gujarat HC, as well as petitions in the Bombay and Punjab & Haryana HCs.
Meanwhile, DRI issued notices to exporters and initiated proceedings against them over the issue.
“After DRI notices, the matter has been raised afresh in several courts which have issued notices or granted a stay on proceedings. The retrospective amendment is also a subject matter of challenge,” said Abhishek Rastogi, who is arguing a plethora of petitions for exporters.
Offering rationale behind the fresh batch of petitions, Rastogi said while the authorities allege there is twin benefit, there is actually no additional benefit, given the exporters are in any case eligible to a refund of taxes on the input side in some way or the other.