Delhi HC allows exporter to import without paying IGST

Advance authorisation issued prior to July 1 to set limit; relief specific to export order before GST roll-out

The Delhi High Court has granted interim relief for an exporter, to import goods without payment of the integrated goods and services tax (IGST) to the extent allowed by advance authorisations received by him prior to July 1, when GST was enforced.

Advance authorisation is issued for exporters to allow duty-free import of inputs which are physically incorporated in export products. The relief given relates to export orders placed on the petitioner, an exporter of plastic products, before July 1. The next hearing in this case is on February 22.

Prior to GST, import under the Advance Authorisation Scheme was exempt from payment of basic Customs duty, additional Customs duty, education cess, etc. A major change since July 1 is additional levy of IGST. While upfront exemption is extended to basic Customs duty, exporters are required to pay IGST on import and central, state or Union Territory GST (as the case applicable) on domestic procurement; thereafter, they may claim a refund.

The petitioner in this case had contended that such a mechanism adversely affected his working capital, impacting export orders got prior to July 1, for the fulfilment of which he had to undertake import of inputs. One such export order placed on the petitioner by Walmart Inc, USA, was cited. The petitioner said with the change brought about by the GST regime, he would have no option but to pay IGST out of own sources, causing a working capital blockage. As the petitioner had already used up the overdraft limit with banks, borrowing would have to be done.

Counsel for the Customs department said the petitioner could seek refund of the IGST after completion of the export obligation. Hence, there was no ground for a real grievance. The petitioner replied that the prospect of IGST being ultimately refunded was little consolation — he required liquidity to discharge the additional levy of IGST, failing which the import would get blocked.

Abhishek Rastogi of Khaitan & Co, the petitioner’s counsel, said while the order was specific to the petitioner, it did lay down the foundation for benefits that should go to exporters.

After GST implementation, he said, the commerce ministry had asked the finance ministry to ensure export benefits continued as these were prior to GST. The finance ministry had not acted on this representation, resulting in exporters’ loss of working capital on a large scale.

The interim relief, he added, was a “beginning for the two ministries to pave a clear path for exporters”.