Many Indian exporters approached the Delhi High Court last week to navigate the government’s failure in extending the benefits of EPCG (Export Promotion Capital Goods) scheme to Goods and Services Tax (GST) regime. The exporters claimed that some of the services that were earlier allowed under the EPCG scheme were discontinued under the GST regime. According the exporters, the government has set some conditions if exporters were to claim benefits of the scheme. These amendments meant that some exporters were unable to meet export obligations resulting in losing out on the benefits of the EPCG scheme under which an exporter can import certain amount of capital goods without paying any duty for upgrading technology related with exports.
In October, the government, through an EPCG notification, gave some leeway but created some problems for certain section of the exporters. Directorate General of Foreign Trade extended the timeline for availing benefits of the EPCG scheme by six months through a notification.
The notification meant that exporters were required to make sure that the average export obligation is maintained during a time. The specified services that qualified to meet export obligation have been removed.
Giving respite to several exporters issued notices by the tax department, the Madurai bench of the Madras HC held that pre-import conditions led to absurdity and were not relevant when the exporter had already exported the goods. The issue pertained to the tax treatment of transactions where exporters ship the finished products before import of raw material and then claim the benefits.
Disclaimer:
The information provided in this update is intended for informational purposes only and does not constitute legal opinion or advice. Readers are requested to seek formal legal advice prior to acting upon any of the information provided herein. This update is not intended to address the circumstances of any particular individual or corporate body. There can be no assurance that the judicial/ quasi judicial authorities may not take a position contrary to the views mentioned hereinrra quis.
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