IGST and Compensation Cess exemptions on imported goods under FTP 2015-2020 extended till June 30, 2022

Introduction

The government has extended IGST (Integrated Goods and Service Tax) and compensatory cess exemptions for goods procured under various export promotion schemes till June 30, 2022, providing assistance to exporters. The purpose of this article is to provide an overview of the IGST and Compensation Cess exemptions available under the Export Promotion Scheme.

Before going through the exemptions, let’s have a quick look at “What is IGST?” And “What is Compensation Cess?”

What is IGST (Integrated Goods and Service Tax)?

IGST (Integrated Goods and Service Tax), which will be governed by the IGST Act, is a tax levied on all inter-state supplies of goods and/or services under the GST. In both circumstances of import into India and export from India, the IGST will apply to any supply of goods and/or services.

What is Compensation Cess?

The Compensation Cess is a tax that will be levied on certain goods and/or services, or both, until July 1, 2022. The Cess will reimburse states for any revenue losses incurred as a result of the GST adoption. Those who have chosen the compensation levy will not have to pay this Cess.

Information on DGFT Notification

Integrated Goods and Service Tax (IGST) and compensating cess exemptions under the Advance Authorization (AA), Export Promotion Capital Goods (EPCG) scheme, and Export Oriented Units (EOU) scheme have been extended by the DGFT till June 30, 2022.

• The exemption from integrated tax and compensation cess under Advance Authorization under paragraph 4.14 of the Foreign Trade Policy 2015-2020 has been extended until June 30, 2022, according to a notification issued by the DGFT on April 1, 2022.

• Similarly, the EPCG scheme’s exemption from integrated tax and compensation cess under paragraph 5.01 (a) of FTP 2015-2020 has been extended until June 30, 2022, according to the DGFT circular.

• The announcement further said that the EOU scheme’s exemption from integrated tax and compensation cess under paragraph 6.01(d)(ii) of the FTP 2015-2020 has been extended until June 30, 2022.

DGFT has extended the IGST and compensating Cess exemptions under EPS (Export Promotion Scheme)

The Directorate General of Foreign Trade (DGFT) has announced that the existing IGST and Compensation Cess exemptions for imports under certain export incentive programs would be extended until June 30, 2022.

• Export Promotion of Capital Goods Scheme

• Units with a focus on export Scheme

• Advance Authorization Scheme

MSME (Micro, Small, and Medium Enterprise) exporters who have been affected by the Covid-19 pandemic aftershock have breathed a sigh of relief. Exporters will benefit from this exemption because they would not have to pay IGST at the moment of sale. They must pay the indirect tax and then request a refund under the GST framework, which is a lengthy procedure.

Exempts EOUs (Export Oriented Units) from Customs Duty and Integrated GST

The Central Board of Indirect Taxes and Customs extended the basic customs duty and integrated goods and service tax exemptions for export-oriented enterprises by a year until March 31, 2022, in a Notification dated March 31, 2022. The CBIC also mandated that GST taxpayers with a turnover of more than INR 5 crore in the previous financial year include a 6-digit HSN Code on invoices issued for suppliers.

Conclusion

The Integrated Goods and Service Tax (IGST) and compensatory cess exemptions under the Advance Authorization (AA), Export Promotion Capital Goods (EPCG) scheme, and Export Oriented Units (EOU) scheme have been extended by the Directorate General of Foreign Trade (DGFT) until June 30, 2022. MSME pharma exporters dealing with the aftermath of the Covid-19 outbreak have breathed a sigh of relief.

The exemption from integrated tax and compensation cess under the EOU system, as described in paragraph 6.01(d)(ii) of the FTP 2015-2020, has been extended until June 30, 2022, according to the circular.