Mohan Lavi

Customs duty relief for Covid tangled in red tape

Mohan R Lavi | Updated on May 19, 2021

The on-going second wave of Covid-19 has taken many by surprise including the Central Board of Indirect Taxes and Customs (CBIC). The second wave has hit India so hard that beds in hospitals are hard to get, beds with oxygen are next to impossible and there is a huge shortage of vaccines. Importing these things seems to be the only option.

But, CBIC would levy both Customs Duty and Integrated Goods and Service Tax (IGST) on such imports thereby making the landed cost higher. After a bit of back and forth, CBIC responded. On April 20 and 24, it issued notifications exempting Customs Duty on import of Remdesivir, Beta Cyclodextrin, oxygen and vaccines. However, the threat of these imports attracting IGST remained.

Finally, on May 3, CBIC issued a Notification exempting IGST on such imports. Unfortunately, none of these notifications have considered the urgency for importing these items — there are terms and conditions to be met, forms to be filled and reports to be given.

The IGST exemption Notification is not termed a Notification but an ad-hoc exemption order. It confirms the fact that there would be no IGST levied on all items covered under the earlier Notifications. However, a few conditions should be met. The said goods should be imported free of cost and should be received from abroad for free distribution in India for the purpose of Covid relief. Before clearance of the goods, the importer has to produce to the officers at Customs, a certificate from a nodal authority that the imported goods are meant for free distribution for Covid relief.

Finally, the importer has to produce before the customs authorities, a statement containing details of goods distributed free of cost duly certified by the said nodal authority. If all these conditions are met, the exemption is available till June 30 of next year.

The questions

These notifications raise many questions. Should an ad-hoc exemption order place any terms and conditions on the exemptions? Should there be an expiry date for an ad-hoc exemption order? Considering the position India is in now, many are volunteering their services, so why should the exemption be available only to goods and not to services? Why should there be a condition that the goods should be imported free of cost?

From a cursory look at the terms and conditions, it would appear that the importer would be spending more time in the offices of the Customs Department than with the patient needing oxygen or the vaccine.

Also, each of these notifications have different dates when the exemptions would expire. Customs Duty exemption for Remdesivir is available till October 31, 2021 while the exemption for oxygen and vaccines is on till July 31, 2021. The IGST exemption on all these is exempt till June 30, 2021. CBIC appears to have made up its mind that after July of next year, only Remdesivir would be required in India for a period of three months.

Since no one knows when this wave will end and when another would come (there are already news reports of a third wave), these notifications should have no sunset date and should be in force till the situation improves. For domestic supplies, GST rates on Remdesivir and oxygen cylinders have been reduced from 28 per cent to 12 per cent and dates for compliances such as filing of returns have been extended.

Considering the seriousness of the situation, it would be ideal if a list of Covid-related supplies and equipment are ‘nil-rated’ for at least a year. Willy-nilly, Covid-19 is turning out to be a parameter to measure the performance of the Government and all its machinery. As on date, they have a long way to go.

The writer is a chartered accountant

Published on May 19, 2021

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