The Orissa High Court has instructed tax authorities not to take any substantial action against importers on the issue of advance authorization licenses for GST.
Various courts had been approached earlier by importers regarding restrictions imposed and issues being faced in availing advance authorization licenses. The change in rules and conditions made the revenue intelligence directorate to send notices to exporters. The case will now be heard by Madras High Court on Friday.
The Central Board of Indirect Taxes and Customs (CBIC) had recently made some changes by adding a “pre-import” clause to exempt imports made via advance authorization licenses from IGST.
The advance authorization licenses are issued to certain importers allowing them to import duty-free materials, which go on to be incorporated in making export products. The clause also meant that imports done after a product has already been exported will not be exempted from integrated good and services tax.
The conflict arises when importers have to import goods after exports, which is the general case for the use of advance authorization. However, the condition ruled by the CBIC provides tax relaxation only on pre-imports, which is not very beneficial for the importers, said Abhishek Rastogi, counsel of importers.
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The IGST exemption to imports under advance authorization was granted earlier this year, after which the CBIC decided to include the ‘pre-import’ clause to limit the benefits. Before that, IGST was also applicable to imports under advance authorization. Even though there was a clause to refund IGST, it severely affected the cash flow of exporters, which prompted them to seek the help of courts in the matter.
Goods and Services Tax (GST) was implemented in India on 1 July 2017. The GST Council, the official authority for the GST system, had initially released a fixed number of tax slabs for taxable goods and services under GST. However, the tax rates have been regularly updated since to match with the market demand and the convenience of consumers. Imports in India from out of the country are taxable under Integrated GST, apart from the imports duty. IGST paid on imports can be claimed back by dealers when exporting the final product.
