Last updated: September 22nd, 2022 11:18 AM

Extension of IGST & Compensation Cess exemption under Export Promotion Scheme

Giving relief to exporters, the government has extended IGST (Integrated Goods and Service Tax) and compensation cess exemptions for goods procurement under specific export promotion schemes till June 30, 2022. The present article briefs the IGST & Compensation Cess exemption under Export Promotion Scheme.

DGFT extends IGST, compensation Cess exemption under Export Promotion Scheme

The Directorate General of Foreign Trade (DGFT) has issued a notification to extend the existing exemption of IGST and Compensation Cess for imports under the specified export incentive schemes till June 30, 2022

• Advance Authorisation Scheme
• Export Promotion of Capital Goods Scheme
• Export-oriented units Scheme

This has provided a sigh of relief to MSME exporters reeling under the Covid-19 pandemic aftershock. This exemption will relieve exporters as they do not have to pay IGST at the initial point. In the GST regime, they have to pay the indirect tax and then seek a refund, which is cumbersome.

The Gist of DGFT Notification

DGFT has extended Integrated Good and Service Tax (IGST) and compensation cess exemption under the Advance Authorization (AA), Export Promotion Capital Goods (EPCG) scheme, and Export Oriented Units (EOU) scheme up to June 30, 2022.

• According to a notification issued by DGFT on April 1, 2022, exemption from integrated tax and compensation cess under Advance Authorization under Paragraph 4.14 of Foreign Trade Policy 2015-2020 is extended up to June 30, 2022
• Similarly, exemption from integrated tax and compensation cess under the EPCG scheme under paragraph 5.01 (a) of FTP 2015-2020 is also extended up to June 30, 2022, stated the DGFT circular.
• The notification further stated that exemption from integrated tax and compensation cess under the EOU scheme under paragraph 6.01(d)(ii) of FTP 2015-2020 is extended up to June 30, 2022.

Advance Authorisation Scheme

Advance Authorisation Scheme allows duty-free import of inputs physically incorporated in an export product. In addition to any information, packaging material, fuel, oil, and catalyst consumed/utilized in the production process of export products are also allowed.

Export Promotion of Capital Goods Scheme

Export Promotion Capital Goods (EPCG) scheme allows the import of capital goods, including spares for pre-production, production, and post-production, at zero duty subject to an export obligation of 6 times of duty saved on capital goods imported under the EPCG scheme to be fulfilled in 6 years reckoned from Authorization issue date.

Export-oriented units Scheme

The Export Oriented Units (EOU) scheme was introduced to boost exports, increase foreign earnings, and create employment in India. EOUs have a permit to procure raw material or capital goods duty-free, either through import or through domestic source and EOUs are eligible for reimbursement of GST;

CBIC extends customs duty and integrated GST exemptions to EOUs

The Central Board of Indirect Taxes and Customs (CBIC), vide a Notification dated March 31, 2022, extended the essential customs duty and integrated goods and service tax exemptions for export-oriented units by a year till March 31, 2022. The CBIC also made it mandatory for a GST taxpayer having a turnover of more than Rs 5 crore in the preceding financial year to furnish six digits HSN Code on invoices issued for supplies. The official notification about the extension of customs duty and integrated GST exemptions to EOUs is as follows:

Import Export Code

The Import Export Code is a primary document necessary for commencing Import-export activities. The IE code is to be obtained for exporting or importing any goods or services.IEC has numerous benefits for the growth of the business. Indeed, you cannot ignore the necessity of IE code registration as it is mandatory. You can apply for an Import Export code through IndiaFilings and obtain it within 6 to 7 days.