The Directorate of Revenue Intelligence (DRI) is likely to re-send notices to exporters who are found guilty of availing inapt GST exemptions on exports preceded imports. The credit goes to the Supreme Court who put a stay on the order by the Gujarat High Court which earlier favoured the exporters by suppressing the notification allowing DRI to impose penalties on exporters wrongly availing GST exemptions on their exports preceded imports.
Many exporters are now under the ambit of investigations by DRI and sooner or later will be liable to pay Integrated Goods and Service Tax (IGST) on exports and penalties on the notices extended by the tax department. The exporters alleged of counterfeiting for GST exemptions have first exported goods and then imported raw materials but claimed export benefits in the form of the tax allowance.
Approx 1000 cases are in the limelight by now and notices have been extended by the department for such exporters. Exporters will now require a legal remedy and need to move to the respective courts for obtaining a stay on such show-cause notices, declared Abhishek A Rastogi partner at Khaitan and Co. and representative of exporters in the case.
Apart from facing heavy penalties, exporters are now asked to pay IGST as per amended foreign policies. IGST levied on such exports is 18%, 12% and for very few, it is 5%. Industry players say that the tax system prior to the GST regime and foreign trade policy together allowed tax-free export of final goods for which raw materials were imported (exports preceded imports).
The current tax governance has led down some parameters for exporters to avail benefits. As per the notification by the revenue department, raw materials cannot be imported after the export of final goods. Exporters accused of being involved in such unworthy practices will have to pay penalties and IGST as per notices extended by DRI.
As per the law exporters need to abide by the rules set on ‘pre-import’ conditions. Availing GST exemption on exports preceded imports is not legal and proper.
“Stay on the order by Supreme Court does not mean that the other exporters must pay the amount towards pre-import,” said Abhishek Rastogi.
