MUMBAI: Many exporters who had availed of certain duty-free benefits while importing raw material filed a writ petition in the Delhi High Court last week against the Government, claiming that the tax department has now refused to adjust pending tax credits.

 

In the past, under the Advance Authorisation Scheme, exporters would import duty-free goods and then re-export after value addition. The only condition for such exemption was that the raw material must be used for exports. Often, exporters would first import the raw material, pay the necessary tax on that and then export the final product. The exporters could pay IGST on the raw material they import and if they were unable to use all of it for exports, they could get back credit, industry trackers said.

 

However, a recent amendment in the GST framework makes this practice untenable. Many exporters who could not meet their targets are not able to get the credit, thus impacting their cash flows.

 

“For holders of advance authorisation licences issued in the pre-GST regime, it is a legitimate expectation of businesses to obtain the same treatment of availing credit upon non-fulfilment of export obligations,” said Abhishek A Rastogi, partner at Khaitan & Co, who is arguing this matter on behalf of the exporters before the Delhi High Court.