Gujarat HC admits petition to review its order on IGST benefits

Petition was heard by a special bench that had given earlier order. Matter posted for hearing on April 9

Delhi and Puducherry lock horns with Centre over IGST distribution — The court also upheld the validity of another amendment to the rule that allows refunds to those who only avail of exemption on basic Customs duty and pay IGST on raw material

2 min read Last Updated : Mar 09 2021 | 1:15 AM IST

The Gujarat High Court has admitted a petition to review its verdict of upholding the constitutional validity of amendments in the GST rules by the government to deny integrated goods and service tax (IGST) refunds to exporters who have taken advance authorisation (AA) benefits.

The petition was heard by a special bench that had given the earlier order. It agreed that detailed arguments would have to be heard. The court posted the matter for hearing on April 9, said Abhishek Rastogi, counsel for exporters.

Exporters were earlier entitled to import raw material without payment of IGST under the AA licence, and pay IGST on exports and claim rebate (refund) paid on exports. They received the benefits of rebate of IGST initially.

However, the government then amended sub-rule (10) of Rule 96 of the central GST through a notification dated September 4, 2018. It denied refunds on IGST on exports if exporters enjoyed AA benefits with effect from October 23, 2017, Rastogi, partner at Khaitan & Co, explained.

Earlier, Gujarat HC had upheld the validity of this rule.

The court also upheld the validity of another amendment to the rule that allows refunds to those who only avail of exemption on basic Customs duty and pay IGST on raw material. This amendment was made effective with retrospective effect.

This means that those who claimed a refund under this option need to pay back IGST on raw material, along with interest and avail of input tax credit.

After the verdict, the directorate of revenue intelligence had issued notices to exporters and initiated proceedings against them over the issue.

"The objective of AA is to give working capital benefits to the Indian exporters and in case this restriction of IGST exemption is implemented by the impugned rules in case of those exporters who are exporting after payment of duty, the entire objective of AA benefits gets defeated," Rastogi said.