Harried by GST tweak, exporters move court

MUMBAI: Many exporters who had availed of certain duty-free benefits while importing raw material filed a writ petition in the Delhi High Court last week against the government, claiming that the tax department has now refused to adjust pending tax credits.In the past, under the Advance Authorisation Scheme, exporters would import duty-free goods and then re-export after value addition. The only condition for such exemption was that the raw material must be used for exports.Often, exporters would first import the raw material, pay the necessary tax on that and then export the final product. The exporters could pay IGST on the raw material they import and if they were unable to use all of it for exports, they could get back credit, industry trackers said.However, a recent amendment in the GST framework makes this practice untenable. Many exporters who could not meet their targets are not able to get the credit, thus impacting their cash flows.“For holders of advance authorisation licences issued in the pre-GST regime, it is a legitimate expectation of businesses to obtain the same treatment of availing credit upon non-fulfilment of export obligations,” said Abhishek A Rastogi, partner at Khaitan & Co, who is arguing this matter on behalf of the exporters before the Delhi High Court.Earlier too, the Directorate of Revenue Intelligence (DRI), the country’s primary anti-smuggling intelligence agency, had issued notices to exporters for wrongfully availing exemptions in cases where exports preceded imports. The notices asked exporters to pay IGST in cases where raw material is imported only after goods are partially or fully exported. 66834774 “The amendment to rule 96 (10) on claiming refund of IGST on exports is a big blow to the advance authorisation users.It gave relief to some exporters for making their trapped credits available, which is a cash flow issue for businesses, but the amendment in the law would impact credits and consequently the business economics,” said Suresh Nandlal Rohira, partner, Grant Thornton. “While this is the first writ, many such players are struggling throughout the country for this hardship which appears to be an unintended omission.”

from Economic Times https://ift.tt/2r6VaoD