Industry And Cluster | News & Insights

Exporters Draw DRI Wrath for Alleged GST Violations.

Published: October 14, 2019

About 1,000 cos get notices for availing tax benefits where exports preceded imports

The country’s primary anti-smuggling intelligence agency has begun resending notices to exporters for availing GST exemptions where exports preceded imports.

The Directorate of Revenue Intelligence (DRI) move followed a Supreme Court stay on a Gujarat High Court order favouring the exporters. The high court had quashed a revenue department notification allowing DRI to penalise exporters for allegedly not following “pre-import condition” and availing wrongful goods and services tax exemptions.

Many exporters will now have to cough up Integrated Goods and Services Tax (IGST) and penalties as these notices mean that the tax department will not wait for another apex court directive. These companies had first exported goods and then imported raw materials but still claimed export benefits in the form of tax leeway. About 1,000 exporters have been issued such notices.

“The exporters will have to opt for the legal remedy of moving to the respective high courts for obtaining a stay on such show-cause notices,” said Abhishek A Rastogi, partner at Khaitan& Co, who is representing some of the exporters in the case. The exporters have been asked to pay IGST first as the foreign trade policy has been amended and several notifications were issued in the last few months’ notice issued to an exporter on October 10, while the Supreme Court stay was ordered on October 4.

The IGST rate in these cases is 18% on the average, while for some products it is 12% and 5% for very few. Industry trackers say that under the earlier tax regime and foreign trade policy (FTP), there was no duty if imported raw materials were used for exports, even when exports preceded imports.

The current GST framework has laid down certain conditions for exporters to avail certain benefits. A revenue department notification said raw materials cannot be imported after export of the final product. The government introduced an amendment in the GST framework that led to DRI chasing down the exporters.

The amendment spoke mainly of a “pre-import condition” that every exporter needs to follow to avail duty exemptions on imports.

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