Submission requesting for extension of upfront exemption from IGST on import of capital goods by STPI and EOU

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Submission requesting for extension of upfront exemption from IGST on import of capital goods by STPI and EOU

Tejasvi

@tejasvi

March 19, 2021

Public Policy

The Information Technology (IT) sector has greatly benefitted from Software Technology Parks of India (STPI) and Export Oriented Units (EOUs) schemes introduced by the Government of India. The schemes, governed by Foreign Trade Policy, have contributed substantially to India’s growth and its GDP. IT/ ITeS sector revenues have grown from contributing 1.2% of the GDP in 1998-1999 to around 8% 2020-21.

In order to provide boost to STPIs and EOUs, the government, vide notification no. 16/2020-Customs dated March 24, 2020 extended the benefit of upfront exemption from IGST on import of capital goods from March 31, 2020 to March 31, 2021.

Post March 31, 2021, the option to claim IGST exemption will no longer be available. This would put undue strain on the finances of companies engaged in 100% exports as they have huge investments by way of capital expenditure. It would also result in huge financial burden on the Micro, Small & Medium Enterprises (MSMEs). Further, the amendment proposed in Finance Bill 2021 restricts availability of refund of IGST paid on exports (i.e., rebate option) to a class of persons engaged in export of class of goods or services, which are yet to be notified by the Government. With this amendment, taxpayers will not be able to opt for zero rated supplies on payment of integrated tax, which was a seamless system and worked well for three years since implementation of GST.

In this regard, NASSCOM made a representation to GST Policy Wing and Central Board of Indirect Taxes and Customs (CBIC) on March 17, 20201 requesting for extension of the benefit of upfront exemption from IGST on import of capital goods by STPI/EOU units without any time limit. Further, the benefit should also be extended for domestic procurement, in the absence of which such units would resort to imports for availing upfront exemption.

Hope you will find the update useful. We will keep you posted on further developments in this regard.

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Tejasvi