Govt gets Delhi High Court notice on GST tweaks in import licence

The Delhi High Court on Monday issued notices to the Centre, the indirect tax department, the Directorate General of Foreign Trade, and the Directorate of Revenue Intelligence (DRI) on a clutch of petitions against alleged restrictions on availing of advance authorisation licences.

Importers have moved court against changes in the criteria for availing of the advance authorisation licence, which, they say, has led to the DRI issuing notices to them.

Similar cases are going in the Orissa and the Madras High Courts and importers are planning to file petitions in the Gujarat and the Goa High Courts too. The Delhi High Court had heard a similar case earlier.

The Central Board of Indirect Taxes and Customs (CBIC) has inserted a clause of “pre-import” for exempting imports done on the advance authorisation licence from the integrated goods and services tax (IGST).

These licences are issued to allow duty-free imports of inputs that are used in manufacturing export products. The clause means that imports done after exports will not get exemption from the IGST.

However, advance authorisation is generally used for importing goods after exports are made as against the pre-import condition imposed by the CBIC, argued Abhishek Rastogi, counsel for the petitioners in the Delhi High Court and partner at Khaitan & Co.

The clause was introduced after exemption from the IGST was granted to imports under advance authorisation. Earlier, imports under advance authorisation were subjected to the IGST. This prompted importers to move court. Though the IGST is refundable, the cash flow of exporters was hampered.

Following this, the CBIC came up with a notification exempting these imports from the IGST. However, it inserted the contentious clause of "pre-import" in the notification.

Rastogi argued the petitioners had procured the advance authorisation licences for post-export imports. “Due to the imposition of the pre-import condition, the benefits granted to the petitioners have been curtailed to the extent that they would never be able to get the exemptions as they were promised.”

This has left the petitioners who have advance authorisation licences at the level of those who would import through the normal channel, he said. 

Rastogi said the condition essentially denied IGST benefits to those imports, which happened after exports. “A conspicuous absence of definition and purport of ‘pre-import’ also added to the confusion,” Rastogi said. 

The CBIC had issued the notification, inserting a provision of ‘pre-import’ with effect from October 13. Rastogi said that many such licences had a shelf life beyond October 13, but the benefits under the GST have virtually become redundant because of this pre-import condition. 

He added that the DRI was trying to impose the IGST on imports under advance authorisation licences by using a “loophole”  in the exemption notification.