It is difficult to understand why the government has not yet come out with a circular prescribing the procedures that the exporters have to follow.
Introduction: The recent Supreme Court ruling in the case of Cosmo Films Ltd has brought the issue of pre-import conditions and the payment of Integrated Goods and Services Tax (IGST) to the forefront. While the court has given a six-week window for exporters to regularize their imports and claim refunds or input tax credits, the lack of clear guidelines from the Central Board of Indirect Taxes and Customs (CBIC) is causing confusion and uncertainty among exporters. This blog discusses the need for CBIC to swiftly address this issue and provide the necessary clarity to exporters.
Background: On April 28, the Supreme Court upheld the pre-import condition for imports made between October 13, 2017, and January 9, 2019, without payment of IGST under advance authorizations. The court directed exporters who violated this condition to regularize their imports by paying IGST and claim refunds or input tax credits within six weeks. Additionally, the court instructed the government to issue a circular outlining the procedure to be followed in this matter. However, despite the passing of over five weeks since the court’s directions, no circular has been issued by the government.
The Need for Clarity: The delay in issuing a circular by CBIC is causing confusion and uncertainty among exporters. They need clarity on several critical points. Firstly, exporters require guidance on whether the violation of the pre-import condition can be alleged if they first export finished products and subsequently import the inputs without IGST payment under one advance authorization but utilize them in the manufacturing process. This clarification is crucial as it will determine the eligibility of exporters for refunds or input tax credits.
Furthermore, there is a need to clearly outline the procedure for regularizing the imports, paying IGST, and claiming refunds or input tax credits. Exporters are eagerly awaiting this information as they want to comply with the court’s ruling and avoid any legal consequences. Without explicit instructions, exporters are left in a state of ambiguity, unsure of how to proceed and fearful of potential penalties or financial losses.
The Role of CBIC: The Central Board of Indirect Taxes and Customs (CBIC) plays a pivotal role in providing guidance and ensuring smooth implementation of tax policies. It is imperative for CBIC to act swiftly and issue a circular that addresses the concerns raised by the Supreme Court’s ruling. Clear guidelines will help exporters understand their obligations and take appropriate actions within the stipulated timeframe.
By providing timely clarification, CBIC can instill confidence among exporters, enabling them to comply with the law and complete the necessary procedures efficiently. This, in turn, will facilitate the smooth functioning of the export industry, prevent disruptions, and ensure the overall growth of the economy.
Conclusion: The Supreme Court’s ruling on the pre-import condition and payment of IGST under advance authorizations has created a sense of urgency for exporters to regularize their imports. However, the absence of a circular from CBIC has created confusion and uncertainty, hindering the exporters’ ability to comply with the court’s directions. It is crucial for CBIC to swiftly issue clear guidelines and procedures, outlining the steps exporters need to take to regularize their imports and claim refunds or input tax credits. By doing so, CBIC can provide the much-needed clarity and support to exporters, ensuring the smooth functioning of the export industry and upholding the integrity of the taxation system.
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