Yesterday, The Delhi High Court allowed an export company to import certain goods used as inputs in manufacturing products, without paying the additional levy under the new included Goods and Services Tax.
Narendra Plastic Private Limited, which is in the business of manufacturing and exporting plastic products, approached the Court against a notification issued under the new GST regime that levied an additional tax on imports made after July 1, 2017.
Previous, an Advance Authorisation Scheme was made available to exporters like the petitioner, wherein they were entitled to the duty-free import of the input which was physically incorporated in the export product.
Khaitan & Co Partner Abhishek A Rastogi, appearing for the petitioner, submitted that the main grievance was that the company held export orders placed on it prior to July 1, 2017 for the fulfillment of which, it had to undertake import of inputs. Paying the additional levy of IGST on such imports would cause a working capital blockage.
The prospect of the IGST being ultimately refunded sometime in the future was also of little consolation to the petitioner, who sought liquidity to discharge the additional levy of IGST, failing which its imports will get blocked.
Further, Rastogi submitted that the limited relief sought by the petitioner is only in relation to the applicability of the additional tax to imports required for export orders placed prior to July 1, 2017. He also informed the Court about a representation made by the Commerce Ministry to the Ministry of Finance highlighting the quandary of exporters like the petitioner.
Senior Standing Counsel for the Customs Department Sanjeev Narula stated that the petitioner would be able to seek refund of the IGST after completion of its export obligations and, therefore, the petitioner cannot have any real grievance.
However, the Bench of Justices S Muralidhar and Pratibha M Singh observed,
“The exporter prices the export commodity on the basis of the extant FTP. The Indian exporters, in order to remain competitive in the global market, account for the exemptions/ concessions given to such exporter under the FTP. Export orders are usually placed several months in advance and the price fixed is not variable beyond a point.
If an additional levy is imposed, after the acceptance of such export orders, the resultant burden cannot possibly be passed on by the exporter to the buyers outside India. This might lead to the cancellation of such export orders placing the exporter in a piquant situation.”
The Court held that a prima facie case had been made out and permitted the petitioner to import goods constituting inputs for the fulfillment of its export orders placed prior to July 1, 2017, without paying the additional levy of IGST.
However, this interim direction is subject to the Petitioner furnishing an undertaking by way of an affidavit that in the case of the Petitioner ultimately not succeeding in this writ petition, or failing to fulfil its export obligations, it is liable to pay the entire IGST as was leviable.
Delhi High Court Goods and Services Tax Justice S Muralidhar Justice Pratibha M Singh