Aggrieved exporters likely to get relief from GST Council on Friday

The goods & services tax (GST) Council at its meeting on Friday is likely to give relief to the exporters who were denied refunds due to changes in the Export Promotion Capital Goods (EPCG) scheme.

The scheme allows import of capital goods at zero duty, subject to an export obligation. Integrated GST (IGST) paid on imports is refunded. However, recently an amendment was carried out in Rule 96 under the Central GST and State GST Acts withdrawing the benefit of refund of IGST to exporters even when a small import has been done against the scheme.

Punjab Finance Minister Manpreet Singh Badal raised the issue in the previous GST meeting, saying the amendment has introduced an “avoidable” complexity for exporters.

The Council has also been told that the changed rules were causing hardship to exporters, especially those who have imported capital goods and machinery under EPCG scheme. It has also been represented that it was not clear whether the earlier rule prevented an exporter, who was importing capital goods, machinery under the EPCG scheme, from claiming refund of IGST paid on export of goods.

Several exporters availing benefits of the EPCG scheme have received refunds of IGST while many have been denied similar refund.

The Council had referred the matter to its legal committee which had recommended that the amendment be withdrawn. The recommendation will be taken up on Friday, sources said.

Aggrieved exporters have meanwhile filed petitions in the Bombay High Court, demanding withdrawal of the changes.

Abhishek Rastogi, counsel for exporters in the court and partner at Khaitan & Co, said their petitions will become infructuous if the GST Council addresses the issue and the exporting community will substantially gain, he said. 

The petitions basically say that the amendment is arbitrary and defeats the rebate scheme.