Amendments in exemptions from GST on donation of covid relief materials

Aditya Singhania

With the second wave of the ongoing pandemic, Government of India has taken remarkable steps on the war footing basis to make the life-saving materials available in the country from across the globe with the continuous support of all the Ministries and their respective departments and the Corporate houses, Charitable Organisation, NGOs, etc.

Unlike the first wave where even the basic materials were not available like masks, sanitizers, PPE kits, etc., in the current second wave India is equipped with all these, however, with the requirement of life saving materials, adequate and timely steps have been taken to import these materials like oxygen cylinders, oxygen concentrators, vaccines, etc.

From the perspective of taxation, exemptions from taxation have been given by the CBIC from Customs duty, Health Cess and IGST on many such items. Few notifications have been regarding the exemption which has been dealt below along-with the procedural requirement. It is important to note that exemptions have been given on import of only those items whose availability are not in adequate quantity in India, therefore, one may find masks, sanitizers, PPE kits, oximeter, thermometer, Test kit, etc. not been exempted from these taxes.

Customs duty and health cess exemption

Notification No. 27/2021–Customs New Delhi, the 20^th April, 2021: The notification exempts Customs duty &/or Health Cess and is applicable till 31^st October, 2021. The same is applicable on following goods:

• Remdesivir Active Pharmaceutical Ingredients;
• Beta Cyclodextrin (SBEBCD) used in manufacture of Remdesivir, subject to the condition that the importer follows the procedure set out in the Customs (Import of Goods at Concessional Rate of Duty) Rules, 2017;
• Injection Remdesivir.

Notification No. 28/2021–Customs dated 24^th April, 2021 further amended vide Notification No. 31/2021–Customs dated 31^st May, 2021: The notification exempts Customs duty &/or Health Cess and is applicable till 31^st July, 2021 which has been further extended till 31^st August, 2021 as per the decision taken in 43^rd GST Council Meeting. The same is applicable on following goods:

S.No.	Chapter, heading, sub-heading or tariff item	Description
(1)	(2)	(3)
1.	9019 20, 9804	Oxygen concentrator including flow meter, regulator, connectors and tubings.   [Important Note: For commercial use 9804, For personal use (Courier/FPO) 9804]
2.	2804 40	Medical Oxygen
3.	8421 39	Vacuum Pressure Swing Absorption (VPSA) and Pressure Swing Absorption (PSA) oxygen plants, Cryogenic oxygen Air Separation Units (ASUs) producing liquid/gaseous oxygen.
4.	7311	Oxygen canister.
5.	9018	Oxygen filling systems.
6.	7311	Oxygen storage tanks
7.	9018	Oxygen generator
8.	7311	ISO containers for Shipping Oxygen
9.	7311, 8418 or 8419	Cryogenic road transport tanks for Oxygen
10.	7311, 8418 or 8419	Oxygen cylinders including cryogenic cylinders and tanks
11.	Any Chapter	Parts of goods at S.No.1 and 3 to 10 above, used in the manufacture of equipment related to the production, transportation, distribution or storage of Oxygen, subject to the condition that the importer follows the procedure set out in the Customs (Import of Goods at Concessional Rate of Duty) Rules, 2017.
12.	9019	Any other device from which oxygen can be generated
13.	9018 or 9019	Ventilators, including ventilator with compressors; all accessories and tubings; humidifiers; viral filters (should be able to function as high flow  device and come with nasal canula).
14.	9018	High flow nasal canula device with all attachments; nasal canula for use with the device.
15.	6506 99 00	Helmets for use with non-invasive ventilation.
16.	9019	Non-invasive ventilation oronasal masks for ICU ventilators.
17.	9019	Non-invasive ventilation nasal masks for ICU ventilators.
18.	3002	COVID-19 vaccine.
19.	29 or 30	Amphotericin B. [Note: The medicine Amphotericin B required for treatment of Black Fungus has been decided to be included in the exemption list in 43rd GST Council Meeting on 28th May, 2021. Basis which the same has been inserted as Sl. No. 19 vide Notification No. 31/2021-Customs dated 31st May, 2021.]

IGST Exemption

Notification No. 30/2021-Customs New Delhi, the 1^st May, 2021: The notification reduced the rate of tax of IGST to 12% on Oxygen concentrator, imported for personal use and is applicable till 30^th June, 2021. It is worthwhile to note that the levy of GST on import for personal use when received as gift is challenged before the Hon’ble High Courts of Delhi as well as Bombay wherein the former has held that the imposition of IGST on the import of oxygen concentrators as gift for personal use is unconstitutional in the case of Gurcharan Singh vs UOI which was challenged primarily on the grounds of Article 14 and 21 of the Constitution of India and in order to bring a parity with the commercial purpose where the Government has already given adhoc exemption.

Ad hoc Exemption Order No. 4/2021-Customs dated 3^rd May, 2021 read with Instruction No. 09/2021-Customs dated 3rd May, 2021: The notification exempts IGST and is applicable till 30^th June, 2021. It is pertinent to note that the exemption order shall apply to all the such consignments pending clearance from Customs as on date of issue of order, i.e., the 3rd May, 2021.

It is important to note that as per the decision taken in 43^rd GST Council Meeting held on 28^th May, 2021, the said adhoc exemption has been further extended till 31^st August, 2021 vide Ad hoc Exemption Order No. 5/2021-Customs dated 31^st May, 2021.

The same is applicable on goods covered under the said mentioned below subject to the conditions of approval from Nodal Authority appointed in States and its usage:

• Notification No. 27/2021-Customs, dated the 20th April, 2021
• Notification No. 28/2021-Customs, dated the 24th April, 2021

Conditions:

• The said goods are imported free of cost for the purpose of Covid relief by a State Government or, any entity, relief agency or statutory body, authorised in this regard by any State Government.
• The said goods are received from abroad for free distribution in India for the purpose of Covid relief.
• Before clearance of the goods, the importer produces to the Deputy or Assistant Commissioner of Customs, as the case may be, a certificate from a nodal authority, appointed by a State Government, that the imported goods are meant for free distribution for Covid relief, by the State Government, or the entity, relief agency or statutory body, as specified in such certificate.
• The importer produces before the Deputy or Assistant Commissioner of Customs, as the case may be, at the port of import within a period of six months from the date of importation, or within such extended period not exceeding nine months from the said date as that Deputy or Assistant Commissioner of Customs may allow, a statement containing details of goods distributed free of cost duly certified by the said nodal authority of the State Government.

Any ‘relief agency’ authorised by a State can make free distribution of goods so imported anywhere in India.

Exemption order only envisages that relief agency should have been authorised by a State and should have obtained a certificate to this effect. Therefore, even if one State Nodal Agency authorize the relief agency and issue the certificate for compliance of Condition No. 3 of the Annexure to the said Order, the same can be distributed across India.

Specified format for issuing certificate recommending exemption to a relief agency

A format for the said authorization for import is placed on CBIC’s website, under Customs Instruction 9/2021-Customs dated 3rd May, 2021. This format is for facilitation purpose. Certificate in any format containing information as mentioned in format at the above link shall be accepted by Customs. In this regard, few states have reiterated the same format and displayed at their respective State Commercial Tax website like Gujarat. Besides few states have also come up with the online feature filing in the same format like Haryana.

Procedure for certification of the statement containing details of such imported goods distributed free of cost, both if distributed within the state whose nodal authority authorising the importing entity/ relief agency, and if distributed in other states

Condition No. 4 of the Annexure to the said Order requires that a statement containing details of goods distributed free of cost, duly certified by the said nodal authority of the State Government, is to be produced by the importer before the specified Customs officer at the port of importation. The certification of statement shall be done by the nodal authority that authorises the relief agency and issues certificate to relief agency recommending exemption under the adhoc order. There is no prescribed procedure for certification of statement and the States/ State nodal authorities are at liberty to devise their own suitable mechanism as deemed fit, for certification of statement.

Nodal authority will issue the certificate to the entity who will submit the same before the concerned customs authority at the time of clearance of goods.

Condition No. 3 of Annexure to said Order may be referred to and as mentioned therein, the State nodal authority will authorize the importing entity, and the importer will produce the said authorization before Customs at time of clearance for availing the exemption.

Certificate could be issued covering multiple imports by a relief agency

Although a certificate is required to be produced by an importer to Customs at the time of clearance of each consignment, a separate, consignment-wise certificate is not necessary. A certificate issued to a relief agency may cover goods imported under multiple consignments. The certificate should specify port-wise anticipated import by relief agency, in the format as mentioned at S. No. 3 above.

Exemption from IGST is not available if the Covid relief materials are not imported free of cost

In this regard, it is significant to note that Shri Tarun Bajaj, Secretary, Ministry of Finance vide F No. CBIC – 190354/2/2021-TO(TRU-I)-CBEC(Part-I) dated 3^rd May, 2021 has communicated to Chief Secretary stating that exemption from IGST has been given to any entity or charitable organization for free distribution anywhere in India which has been donated/received free of cost from outside India. Further, the same thing has been reiterated by the CBIC vide FAQ last updated on 7^th May, 2021 that Condition No.1 of Annexure to the said Order states that, the said goods are imported free of cost for the purpose of Covid relief by a State Government or, any entity, relief agency or statutory body, authorised in this regard by any State Government. Thus, it is clear that the adhoc exemption order applies only where the importer gets goods free of cost for free distribution. Other instances are not covered by the exemption order. It may be mentioned that in case any corporate buys it and even gives it for free, such exemption will not be available. Hence, the intent of the Government appears not to grant exemption from IGST where the Covid relief materials are bought and then given for free.

In this regard, it is worthwhile to note that the same has been challenged before Hon’ble Rajasthan High Court on the grounds that the end-use in both the cases remains the same i.e. used for free distribution.

Exemption from IGST extended on imports of specified COVID-19 relief material on payment basis also

The exemption from IGST has been given vide Notification No.32/2021-Customs dated 31^st May, 2021 and is applicable till 31^st August, 2021. It is pertinent to note that the exemption order shall apply to all the such consignments pending clearance from Customs as on date of issue of notification, i.e., 31^st May, 2021.

The same is applicable on goods covered under the said mentioned below subject to the conditions of approval from Nodal Authority appointed in States and its usage:

• Notification No. 27/2021-Customs, dated the 20th April, 2021
• Notification No. 28/2021-Customs, dated the 24th April, 2021 as amended by Notification No. 31/2021–Customs dated 31^st May, 2021

Conditions:

• The imported goods are imported free of cost for the purpose of Covid relief by a State Government or, any entity, relief agency or statutory body, authorised in this regard by any State Government.
• The said goods are received from abroad for free distribution in India for the purpose of Covid relief. donated to the Central Government or State Government or, on recommendation of State authority, to any relief agency, entity or statutory body (hereinafter referred as “relief agency”) for free distribution. [In simple words, now the same can be imported by anyone even on payment basis for the purpose of donation].
• Before clearance of the goods, the importer produces to the Deputy or Assistant Commissioner of Customs, as the case may be, a certificate from Central Government or a nodal authority [including as appointed by a State Government for the purposes of Ad hoc Exemption Order No. 4/2021-Customs, dated the 3rd May, 2021 {G.S.R. 316(E), dated the 3rd May, 2021}], that the imported goods are meant for free distribution for Covid relief, as the case may be, by the Central Government, State Government, or the entity, relief agency or statutory body a relief agency, as specified in such certificate as recommended by the said nodal authority in such certificate.
• The importer produces before the Deputy or Assistant Commissioner of Customs as the case may be, at the port of import within a period of six months from the date of importation, or within such extended period not exceeding nine months from the said date as that Deputy or Assistant Commissioner of Customs may allow,

(a) a certificate from the Central Government or State government, as the case may be, that the imported goods were received by them for free distribution; or

(b) in case the imported goods are donated to any relief agency on the recommendation of the nodal authority, a statement containing details of goods distributed free of cost duly certified by the said nodal authority of the State Government.

It is significant to note that the said notification does not the situations wherein the consignments have already been imported, cleared and donated to the State Government for the purpose of Covid relief which becomes a cost to the said person. Ideally, the notification should have been issued with retrospective effect so that such persons could have claimed refund of IGST already paid.

Further, it is important to note that exemption is only on import of Covid relief materials while is the same is procured locally for donation, such exemption is not available which one of the State Government Haryana proposes to reimburse the CGST, SGST or IGST paid on domestic procurements also as mentioned below.

Saving grace announced by few states by reimbursing the GST

It may be mentioned that in case any corporate buys the Covid relief materials and distributes it for free, such exemption will not be available. Hence, the intent of the Government appears not to grant exemption from IGST where the Covid relief materials are bought and then given for free.

However, as most of the corporate houses are importing such materials on procurement, hence, it takes a shape of cost to the organization since the input tax credit of IGST paid on import (CGST, SGST or IGST paid on domestic purchase) is not available on account of the blocked credits envisaged under section 17(5). Further, if such materials are bought from domestic market, there is still neither any exemption nor availability of input tax credit is admissible.

Certainly, as the input tax credit is not allowed on free supplies, however, there is an incentive scheme rolled out by States of Gujarat & Haryana wherein the Department of Health & Family Affairs proposed to reimburse the GST component subject to the condition that the donation of Covid relief materials is given to the States, which may become as an add on at the top of CSR compliance. The place where Haryana gives an add on benefit is that it envisages to reimburse both CGST & SGST as well as IGST component while the Gujarat has proposed to reimburse only IGST on import of such materials.

Government of Gujarat, vide Resolution released by Ministry of Finance, Gujarat vide No. GST-102021-Tax-1-GST Cell dated 1^st May, 2021 valid till 31^st July, 2021 has announced the incentive scheme as mentioned below:

(i) By way of reimbursing / giving grant in aid the IGST leviable under the Customs Tariff Act, 1975 already paid by the recipient on such imported material; or

(ii) By way of upfront payment of applicable IGST leviable under the Customs Tariff Act, 1975 on such imported material.

With the following conditions which aims to strengthen the Covid relief infrastructure of the State of Gujarat:

1) Such imported material shall be donated free of cost to the Government of Gujarat, hospitals run by state government, hospitals run by local authority or any Hospital/lnstitution permitted by state government to receive such material through Commissioner of Health, Government of Gujarat.

2) ln case where permission is granted to hospital/institution not owned by state government or local authority, such imported material cannot be sold or transferred by them without prior permission of the state government.

Besides, Government of Haryana vide Notification No. 28/19/2021-5B&C dated 17^th May, 2021 has also announced similar scheme having validity till 30^th June, 2021.

However, the department does need to ensure that the taxpayer does not avail the input tax credit of the same in the books as well as claims reimbursement from the State.

The tenders by the States for procuring the Covid relief materials from the vendors certainly is the procedure to arrange for the necessary infrastructure. However, with such an incentive scheme, the State is in a position to strengthen the Covid relief infrastructure of the State of Gujarat & Haryana by way of getting these materials as donations from the Corporates, NGOs, etc. merely at the cost of ‘amount of tax to be reimbursed’ to the donors. In similar lines, representation should also be made to other State Governments to come up with identical incentive scheme. The proposal to reimburse the GST component is by the Department of Health & Family Affairs of the Gujarat Government, however, in case of Haryana, the same shall be reimbursed by the Excise and Taxation Department. It’s a high time, corporates, Charitable Organizations, NGOs, etc. should come forward to take an extra leap to serve the society in larger interest of the humanity.

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Disclaimer: The views expressed in this article for the purpose of awareness and readers must refer the relevant Press Release, Notification, Resolutions, Orders, etc. of the Government before taking any action. The author is not responsible or liable for any loss or damage caused to anyone due to any interpretation, error, omission in this article.

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