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Exporters have filed various writ petitions in Gujarat High Court, Punjab High Court, Bombay High Court and Madras High Court. Some of the courts have decided to hear the exporters’ plea and in some cases the notices’ have been put on hold.
Tax experts say that this could be a temporary relief for several exporters.
DRI had started issuing notices to exporters for wrongfully availing GST exemptions in cases where exports preceded imports.
“The objective of providing the working capital benefits to the Indian exporters gets defeated by the rule which goes beyond the statute. Applicability of interest would result in a great setback to the Indian exporters and the need for judicial intervention is must”, responded Abhishek A Rastogi, partner at Khaitan & Co.
The exporters were asked to pay IGST first as the foreign trade policy has been amended and several notifications were issued in the last few months. The IGST rate in these cases is 18% on the average, while for some products it is 12% and 5% for very few. Industry trackers say that under the earlier tax regime and foreign trade policy (FTP), there was no duty if imported raw materials were used for exports, even when exports preceded imports.
The current GST framework has laid down certain conditions for exporters to avail certain benefits. A revenue department notification said raw materials cannot be imported after export of the final product. The government introduced an amendment in the GST framework that led to DRI chasing down the exporters.
The amendment spoke mainly of a “pre-import condition” that every exporter needs to follow to avail duty exemptions on imports. “In cases where exports preceded imports, availment of exemption does not seem legal and proper. This office has initiated an inquiry in wrongful availment of exemption,” a notice read.
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