Again the high court’s intervention has been requisitioned by the big section of Indian exporters. This is due to the abbreviation of the benefits of the EPCG (Export Promotion Capital Goods) scheme under the (goods and services tax) GST regime.
Under the GST regime, the discontinuation of some of the perks under EPCG scheme led the exporter made an appeal in the Delhi high court, the previous week, as a move against the government for not extending the EPCG benefits under GST era.
This is the second time that the exporters approached the court after some advantages available prior GST, were terminated under GST.
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The exporters took this step because according to them, the government has fixed sine qua non for the exporter to claim the advantages under the scheme. However, a section of exporters could not meet export obligations as a consequence of which they could not claim the benefits of the EPCG scheme.
Under this scheme, an exporter is eligible to import a fixed amount of capital goods for upgrading and advancement in export-related technology, without paying any tax on it.
“The incentives announced prior to GST have been curtailed in some form and may be unintentional in various cases, thereby raising the situation of court intervention. It is impossible to meet the obligation for the EPCG licence issued prior to GST regime, the principle of supervening public interest will have to be tested,” argued Abhishek A Rastogi, partner at Khaitan & Co.
The government very well understands the problems, exporters are facing under the new taxation system and to sort that out, the government in October last year green signalled the continuation of benefits under the EPCG scheme in the GST era also. Directorate General of Foreign Trade notified the extension in the time period by six months for claiming the benefits of the EPCG scheme. But at the same time, some preconditions were also laid to avail these goodies and there is where some obstructions arose for a particular squad of exporters. According to the notification, the exporters were needed to confirm that the average export obligation is taken care of during the period. The stated services which are competent to meet export obligation have been abandoned.
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“Various issues of notification have been a subject matter of judicial review on various legal parameters,” said Rastogi.
The issue is related to the treatment of taxes on transactions when exporters have already exported finished goods before importing the raw material and claiming the benefits on it. According to the Madurai bench of the Madras HC, the fixation of pre-import conditions were not relevant when the exports went ahead of imports.
An Anti-smuggling intelligence agency of India – The Directorate of Revenue Intelligence has begun issuing show-cause notices to exporters for unlawfully claiming exemptions when exports took place before imports.
