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The Centre has modified existing export incentive schemes removing most exemptions provided on input taxes to align them with the Goods & Services Tax (GST) regime which has rolled in from July 1.
Exporters importing inputs including machinery under popular schemes such as Advance Authorisation (AA) and Export Promotion Capital Goods Scheme without paying import duties (customs duty, countervailing duty and special additional duty) up to a given limit will now have to pay GST on it and later apply for refund.
“Under the GST regime, no exemption from payment of Integrated GST (IGST) and compensation cess would be available for imports under Advance Authorisation. Importers would need to pay IGST and take input tax credit as applicable under GST,” a trade notification issued by the Directorate General of Foreign Trade (DGFT) modifying provisions under the Foreign Trade Policy (2015-20) on Friday night stated.
However, imports under Advance Authorisation would continue to be exempted from payment of basic customs duty, additional customs duty and education cess. Exemptions will also be provided wherever penal duties such as anti-dumping, safeguard and transition product specific safeguard duty are applicable.
The notification added that under the EPCG scheme (Chapter 5 of the FTP), too, importers of capital goods would need to pay IGST and take input tax credit.
Benefits under the Merchandise Export from India Scheme (MEIS) and the Services Export from India Scheme (SEIS), which provides exporters with duty free scrips based on the value of their exports, have also been curtailed. “The scrips cannot be used for payment of IGST and GST compensation cess in imports, and CGST, SGST, IGST and GST compensation cess for domestic procurement,” the notification stated.
Imports by Export Oriented Units (EOUs), which were allowed duty free imports of goods for their authorised operations, will now get exemption on only the customs duty. “Such goods would attract integrated tax and compensation cess. The taxes so paid on imports will be neutralised by ITC (input tax credit),” the notification said.
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