Some GST issues need clarifying

The absence of any provision to take input tax credit of additional duties of customs paid towards regularisation of defaults under advance authorisation remains a major unresolved issue

Since introduction of the goods and services tax (GST), exporters have been subjected to several difficulties. Among these are delays and costs in getting refunds, unrealistic conditions for getting Integrated GST (IGST) exemption on import of their inputs and capital goods, and several amendments with retrospective effect on refunds.

These problems have been highlighted many times, without a fully satisfactory response from the government. However, the travails of exporters who want to forgo the IGST exemption availed of on import already made under advance authorisation, and regularised by making payment of IGST, have not got enough attention.   

Rule 36 of the Central GST Rules, 2017, does not prescribe a challan as a valid enough document for the purpose of taking input tax credit. Sub-rule (d) of the said Rule prescribes a bill of entry or any similar document prescribed under the Customs Act or rules for the assessment of integrated tax on import as a valid document. So, exporters approach the Customs and get their bills of entry reassessed and take credit on the basis of the reassessed bills of entry. This is additional cost to get the reassessment done.

The Central Board of Excise and Customs (CBEC) circular 11/2015-Cuss, dated April 1, 2015, has recognised the issue of increased interest cost for exporters who apply for regularisation of  bona fide default on the export obligation under the Advance Authorisation or Export Promotion Capital Goods schemes but have to wait for the detailed calculations in this regard before being able to deposit the duty involved. It had prescribed a procedure for payment of customs duties through a challan enabling quicker payment, thereby reducing the avoidable interest cost for such exporters. 

Under the Cenvat Credit Rules, 2004, a challan or any other similar document evidencing payment of a differential amount of additional duty leviable under section 3 of the Customs Tariff Act, 1975, was prescribed as a valid document on the basis of which credit could be taken. Incorporation of similar provisions in the GST laws will help exporters avoid going for reassessment, by making the IGST payment on their own initiative and taking the input tax credit on the basis of the challan. 

Another issue is limitation for taking the input tax credit. Under Section 16 (4) of the Central GST Act, 2017, a registered person shall not be entitled to take input tax credit in respect of any invoice or debit note for supply of goods or services or both after the due date for furnishing the return under section 39 for the month of September, following the end of the financial year to which such invoice or invoice relating to such debit note pertains or furnishing of the relevant annual return, whichever is earlier. Although this provision makes no mention of a bill of entry, there is widespread doubt on whether input tax credit may be taken on the bills of entry of the earlier financial year, reassessed after furnishing the returns for September of the next year. 

Finally, the absence of any provision to take input tax credit of additional duties of customs paid towards regularisation of defaults under advance authorisation or EPCG authorisation remains a major unresolved issue. 

The Central Board of Indirect Taxes and Customs should issue clarifications on these issues. 

Email: tncrajagopalan@gmail.com