Gujrat High Court has recently dictated the Union government, the GST Council, and the Customs authorities about surcharge and cess levy on duties that are paid through scrip-based incentives by the exporters.
A bunch of exporters reached the doors of Gujrat High Court challenging the legitimacy of the imposition of tax on cess or social welfare surcharge. Here the government is looking forward to extracting the surcharge and also the cess but in cash and not through adjustment in scrips. On this exporters appealed to the court against the new GST circular 
The circular said that the surcharge is to be paid by the exporters via cash which is an issue of concern for the exporters and especially when the constitutional challenge is to be decided on the applicability of the surcharge, said Abhishek Rastogi (partner at Khaitan and Co.). the circular is brought to the court by the exporters so that both the issues could be highlighted at the same time and the exporters could get the relief amidst the economic slowdown.
Cess and surcharge are levied at the time goods are imported and where custom duties are paid by the Exporters through the Merchandise Exports from India Scheme (MEIS) scrips. MEIC are incentives based on scrips that are given to the exporters as per the foreign export policies 2015-20. Scrips could be used by the exporters while paying for custom duties.
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Now basic custom duties are merged with GST and now the cess or surcharge is imposed on such custom duties by the authorities. Petitioners disputed on how the cess or surcharge could be levied on basic Customs duty that is calculated as Zero.
Cess or any surcharge on Customs duty whose value is Zero is technically not payable as anything multiplied by Zero is Zero. The scheme is being replaced by the WTO-compliant Remission of Duties or Taxes on Export Product (RoDTEP) scheme. MEIS scheme was supposed to end from this month but was prolonged till the end of this financial year.
