Advance Authorization

[Kaustubh Karandikar]

Vide Notification No. RE 53 under Foreign Trade Policy (Ministry of Commerce), restriction of exemption on IGST for Import under Advance Authorization only if it is imported First Is removed.

1) Does this mean that there is exemption even if you Export first and Import later?

2) If that is correct, can we Export first paying IGST and claim refund of IGST paid and later Import under Advance Authorization without payment of IGST? Is this Permissible?

[KASTURI SETHI]

Dear Sir, . Query wise reply is as under :-. 1. Yes. 2.Yes.

[Kaustubh Karandikar]

Respected Sethi Ji

Thanks for your valuable advice. your answer to my Query No. 2, In my view, the notification does not say that the provision applies only if goods were exported without payment of IGST. Hence what you say seems technically possible. However, not sure what department will do or take a view. Therefore, since the notification has come only yesterday, let’s expect and wait for some clarification / circular on the same.

[KASTURI SETHI]

Dear Sir,. It makes no difference whether any person exports goods with or without payment of duty for the purpose of benefit under Advance Authorisation The department is concerned with export performance only. The department's revenue is not at stake if the goods are exported first and thereafter import benefit under Advance Authorisation is availed.There is no possibility of adverse view by the department.

[YAGAY andSUN]

Removal of Pre-import condition & Inclusion of deemed export supplies

As you are aware, pre-import condition for exemption of IGST on import under Advance Authorization/ EPCG has been a long-standing issue amongst the exporters. The various council had regularly taken up this issue with all the concerned authorities for deletion of the pre-import condition. Taking cognizance of the representations of the council/trade, the O/o Directorate General of Foreign Trade, New Delhi has issued Notification No 53/2015-20 dated 10/01/2019 regarding Amendment in Para 4.14 and 4.16 (ii) of the Foreign Trade Policy 2015-20 .

As an effect of this notification, Para 4.14 of FTP 2015-20 is amended to remove pre-import condition to avail exemption from Integrated Tax and Compensation Cess and exemption from Integrated Tax and Compensation Cess is also extended to deemed supplies. For further details, please refer DGFT Notification No. 53 Dt. 10.01.2019 as attached herewith.

Further, the Department Of Revenue, Ministry Of Finance has also issued its corresponding Notification No.01/2019 Dt. 10.01.2019 Seeking to remove pre-import condition and include specified deemed export supplies for exemption from integrated tax and Compensation cess for materials imported against Advance Authorizations and Advance Authorizations for Annual Requirement.

The assesse in such case (Post-import) would be required to submit of Bond before the Customs Authority and also to submit CA certificate within six months from date of Bill of entry clearance for usage of the imported goods in manufacture of Taxable goods.

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[KASTURI SETHI]

Really comprehensive and crystal clear reply by M/s.YAGAY AND SUN, Sirs. I was eagerly waiting for your intervention. Thanks.

[Kaustubh Karandikar]

thanks for the detailed reply YAGAY andSUN. But my apprehention is about whether it will be allowed if the goods are exported on payment of GST and refund is claimed of the IGST paid. The notification is silent on that and therefore we can only presume that it is allowed since not prohibited.

[Kishan Barai]

Yea, youareallowed if the goods are exported on payment of GST and refund is claimed of the IGST paid.

[YAGAY andSUN]

The Central Board of Indirect Taxes and Customs (CBIC) had issued a notification removing pre-import conditions and included specified deemed export supplies for exemption from integrated tax and Compensation cess for materials imported against Advance Authorization and Advance Authorizations for Annual Requirement. As per the Notification issued in 2015, Advance Authorization and/or materials imported there under will be with actual user condition. It will not be transferable even after completion of export obligation. However, Authorization holder will have the option to dispose of product manufactured out of duty-free inputs once export obligation is completed. In case where CENVAT credit facility on inputs have been availed for the exported goods, even after completion of export obligation, the goods imported against Advance Authorization shall be utilized only in the manufacture of dutiable goods whether within the same factory or outside (by a supporting manufacturer), for which the authorization holder shall produce a certificate from either the jurisdictional Central Excise Superintendent or Chartered Accountant, at the option of the exporter, at the time of filing application for EODC to RA concerned. The notification issued by the Board last day said that the Certificate of Chartered Accountant is mandatory even if the credit is not availed after completion of export obligation, the goods imported against Advance Authorization. The present Notification inserted a new provision in (vi)(a) of the earlier notification that “in respect of imports made after the discharge of export obligation in full, if facility of input tax credit under relevant Goods and Services Tax law on inputs used for manufacture and supply of goods exported has been availed, then the importer shall, at the time of clearance of the imported materials, furnish a bond to the Deputy Commissioner of Customs or Assistant Commissioner of Customs, as the case may be, binding himself, to use the imported materials in his factory or in the factory of his supporting manufacturer for the manufacture and supply of taxable goods (other than nil rated or fully exempt supplies) and to submit a certificate from a chartered accountant within six months from the date of clearance of the said materials, that the imported materials have been so used.” This is subject to a condition that if the importer pays integrated tax and the goods and services tax compensation cess leviable on the imported materials under sub-section (7) and sub-section (9) respectively of section 3 of the said Customs Tariff Act on the imported materials but for the exemption contained herein, then such imported materials may be cleared without furnishing a bond specified in this condition.

[CA Hemanth Kumar]

Dear Members,

This amendment would be of prospective in nature as it does not specify retrospectively. Therefore from 13.10.2017 to 10.01.2019, pre-import, physical export conditions would apply and the imports made after meeting the export obligations (replenishment) from 13.10.2017 to 10.01.2019 would not be eligible for IGST exemption. Such IGST need to be reversed along with interest. Further, eligibility of ITC depends on facts of each case.

[Kumar Kedia]

Sir,

I was wondering that what shall be the impact of the CA certificate in relation to imports only to be used in taxable supply. can't refund of ITC in case of export of exempted goods be claimed by the exporter in this case?

[Raghunandhaanan rvi]

Dear Sir

Advance authorization is to allow import of inputs for export production including replenishment.

Customs duty other than IGST exempted in both cases

IGST exemption was available only if pre-import condition is imposed on the licence.

In other cases - IGST payable

Notification 53 dated 10^th January 2019 is to remove “pre-Import condition” in order to avail IGST exemption for imports under all types of Advance Authorization.

In my view - IGST exemption is available for both queries

AI Summary

IGST exemption without pre import condition allowed, subject to bond and CA certificate if input tax credit was availed. Removal of the pre import condition allows IGST and compensation cess exemption on imports under Advance Authorization (including specified deemed exports) even when imports follow export. The Advance Authorization remains subject to actual user and non transferability conditions. If the importer availed input tax credit for inputs used in exported goods, a bond to Customs and a Chartered Accountant certificate (within six months of clearance) are required to use imported materials in manufacture of taxable goods; payment of IGST and cess at clearance obviates the bond requirement. The amendment appears to operate prospectively, raising retrospective eligibility concerns.