BCD, CVD, and SAD paid for non-fulfillment of EPCG export obligations cannot be claimed as GST input tax credit

The AAR, Tamil Nadu ruled that BCD, CVD, and SAD paid due to non-fulfillment of EPCG export obligations cannot be claimed as input tax credit under GST. The case involved imports made before GST implementation (01.07.2017) where the applicant paid additional duties for failing to meet export obligations under the EPCG scheme. The AAR held that GST law only allows input tax credit for IGST on imported goods, not for CVD and SAD which were subsumed into GST. Since the payment was made for non-compliance with export obligations rather than regular import duties, no GST input tax credit was permissible.

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Issues involved:
The issues involved in this legal judgment include the admissibility of input tax credit under the GST Act for payment of Basic Customs Duty (BCD), Countervailing Duty (CVD), Special Additional Duty (SAD) made on non-fulfillment of export obligation under the EPCG scheme.

Details of the Judgment:

Admissibility of Input Tax Credit:
The applicant, a partnership concern engaged in the manufacture of printed poly packing materials, imported machinery under the EPCG Scheme and availed concessional duty benefit. Due to unforeseen circumstances, they could not fulfill the export obligation and subsequently remitted the duty amount along with interest. The applicant sought a ruling on whether the payment of BCD, CVD, SAD made on non-fulfillment of EPCG obligation could be claimed as Input tax credit under GST.

State Jurisdiction Officer's Remarks:
The State Jurisdiction Officer highlighted that the applicant did not provide essential details such as filing revised returns, status of machinery, and details of depreciation claimed. The officer also emphasized the need for analysis of the nature and usage of imported machinery to determine the admissibility of CENVAT credit.

Central Tax Authority's Response:
The Central Tax Authority did not report any pending proceedings against the applicant regarding the issue raised, indicating no ongoing investigations.

Applicant's Submissions:
During the personal hearing, the applicant's representatives reiterated their application submissions but failed to provide requested documents such as DGFT obligations, Bill of Entry, and detailed activity write-up.

Discussion and Findings:
The Authority for Advance Ruling found the application admissible under Section 97(2)(d) of the GST Act. The ruling focused on whether BCD, CVD, SAD paid on non-fulfillment of EPCG obligation could be considered as Input tax credit under GST.

Ruling:
The judgment concluded that the payment of BCD, CVD, SAD made on non-fulfillment of export obligation under the EPCG scheme cannot be claimed as Input Tax Credit under the GST Act, 2017.

Conclusion:
The legal judgment clarified the admissibility of input tax credit in the context of duty payments related to the EPCG scheme, providing a clear ruling on the specific issue raised by the applicant.

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