Delhi High Court Gave Relief from IGST to an Exporter

The Delhi High Court has granted interim relief to an exporter dealing in plastics by allowing to import goods used as inputs in manufacturing products without payment of the integrated goods and services tax (IGST). The relief has been granted on import to the extent allowed by advance authorizations received by him prior to July 1, the date from when GST was enforced.

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 (ASS) was exempt from payment of taxes like basic customs duty, additional customs duty, and education cess.

IGST is being levied since July 1.

Narendra Plastic Private Limited, manufacturer and exporter of 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.

The petitioner had said that this has been 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.

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 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 fulfilment 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.