The pre-import condition for Advance Authorisation removed by Government, extends exemptions of IGST and compensation cess for specified deemed exports.

Earlier, there were no exemption available for integrated GST (IGST) and compensation cess for imports under advance authorization for deemed exports. However, these elements of customs duties were exempt for imports under advance authorisation for physical exports, subject to the pre-import condition.

Pre-import condition contemplated that raw material imported under advance authorisation is physically incorporated in the final products manufactured in India, which is then exported. Thus, disputes were raised in cases where the authorisation holder imported raw material after exporting the final products.

Recent changes w.e.f 10th January 2019:

To address the issue of ‘pre-import’ and provide impulsion to ‘deemed export’ supplies, the Government of India amended the Foreign Trade Policy by issuing notification no. 53/2015-20 dated 10th Jan 2019 and corresponding changes through customs notifications no. 01/2019 – Customs dated 10 January 2019, effected below:

1. Removal of the condition of pre-import to avail exemption from IGST and compensation cess:

The pre-import condition is removed from prospective effect, subject to the authorisation holder complying with below key conditions, in respect of duty exempted imports made after discharge of export obligation:

1. Imports against authorization made after discharge of export obligation and input tax credit (ITC) availed under GST for manufacture and export of final products ·  The material imported under the Advance Authorisation post exports should be used in the manufacture and supply of taxable goods.

·  The authorization holder needs to furnish a bond with customs binding himself to use the material for manufacture and supply of taxable goods and a certificate from a chartered accountant within six months from the date of import that the imported material has been so used. However, the requirement of bond is dispensed with where the authorisation holder pays IGST and compensation cess at the time of import of materials.

2. Imports against authorisation made after discharge of export obligation and ITC not availed under GST for manufacture and export of final products ·     The authorisation holder needs to furnish proof to the effect that no ITC has been availed for the past inputs used in the manufacture and export of final products.  In that case, no bond is required to be furnished with Customs.

2. Exemption of IGST and compensation cess has also been extended to deemed exports:

Imports under Advance Authorisation are now exempt from IGST and compensation cess for making supplies under following deemed exports categories:

1. Supply of goods by a registered person2 against Advance Authorisation.
2. Supply of capital goods by a registered person2 against Export Promotion Capital Goods Authorisation.
3. Supply of goods by a registered person2 to an Export Oriented Unit.

Comments

The removal of ‘pre-import’ condition will address the issue faced by trade since October 2017 and provide required relief to the authorization holders.  However, as the amendment is prospective, there would not be any relief in case of pending disputes.  Further, as the exemption under the scheme is presently available till 31 March 2019, the relief extended would be for a limited period.

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One Comment

  1. Neelesh Datir says:

    This seems to be of clarification and should be applicable for the entire period. Else, those who have used earlier would be penalized and those who are using now would be benefited. Government must issue clarification in the interest of doing business from India and Make in India schemes.

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