Gujarat High Court struck down GST Provision imposing Pre-Condition on Exports

GST - Gujarat High Court - Taxscan

A two-judge bench of the Gujarat High Court has invalidated a provision in the Central GST Act that restricts utilization of advance authorization licenses. These licenses entitle the holders to import goods duty-free for the purpose of exports. The decision would be a great relief to the exporters.

Earlier, the government had restricted the use of these licenses by imposing condition of “pre imports”. This means that these licenses are valid only if goods have been imported. This also meant that licenses could only be used for only those lots of exports for which imports are made and not afterward.

This condition was not there in the pre-GST tax regime.

Before the High Court, the petitioners challenged the constitutional validity of the provision stating that the same is arbitrary.

Allowing the contentions of the petitioners, the bench comprising Justice Harsh Dewani and Justice A P Tahker struck down the condition as arbitrary, ultra vires and violative of the Constitution.

It was held that the pre-import condition imposed under Serial No. 79/2017-Cus and paragraph 1 of DGFT Notification No. 33/2015-20 both dated October 13, 2017, in respect of imports made under Advance Authorization as violative of the provisions of the Constitution.

Based on the pre-import condition, the directorate of revenue intelligence (DRI) had issued notices to exporters which have used the licenses but have not so far imported goods. This has infuriated exporters as they said the new restrictions defeat the very purpose of the licenses.

As the petitions rose in courts, the government lifted the condition. Similar petitions are pending before the Punjab and Haryana high court, Madras high court, Odisha high court among others.

However, the Centre lifted the conditions from the perspective effect or from January 10, 2019, onwards. The condition of pre-import was effective from October 13, 2017.