Question 1

What export obligation does an EPCG authorisation impose and what happens if it is not met?

Accepted Answer

Under the Export Promotion Capital Goods scheme (FTP 2023, Para 5.01), capital goods are imported at zero customs duty. The authorisation holder must fulfil an export obligation equal to 6 times the duty saved within 6 years from the date of issue (Para 5.04). Non-fulfilment triggers demand of the differential customs duty along with interest under Customs Act 1962, Section 28, and may also attract a penalty under Section 114A.

Question 2

How does Advance Authorisation work and what is the export obligation period?

Accepted Answer

Advance Authorisation under FTP 2023, Para 4.03 permits duty-free import of inputs physically incorporated in the export product, subject to Standard Input Output Norms (SION) notified by DGFT. The export obligation must be fulfilled within 18 months from the date of issue (Para 4.22). Certain sensitive inputs attract a pre-import condition under Customs Notification No. 18/2015-Cus. Failure to export triggers duty recovery under Customs Act 1962, Section 28 plus interest.

Question 3

Can a manufacturer-exporter claim both All Industry Rate duty drawback and IGST refund on the same export?

Accepted Answer

No. Under Customs Act 1962, Section 75 read with Drawback Rules 2017, Rule 3(1)(b), the AIR drawback is not available to the extent that input tax credit has already been claimed or the IGST refund has been availed under CGST Act 2017, Section 54(3) read with Rule 96 of CGST Rules 2017. An exporter must choose one route; claiming both on the same shipment results in demand and recovery by Customs.

Question 4

What is the RoDTEP scheme and which categories of exports are excluded?

Accepted Answer

Remission of Duties and Taxes on Exported Products (RoDTEP) reimburses embedded central, state, and local levies not otherwise refunded, as notified under Customs Notification No. 76/2021-Cus. dated 24 August 2021. Exports made under Advance Authorisation, by EOU/EHTP/STP/BTP units, and exports subject to export duty are excluded from RoDTEP benefits (FTP 2023, Para 4A.06). Eligible credits are issued as transferable electronic scrips in ICEGATE.

Question 5

What are the GST consequences of exporting under LUT versus with payment of IGST?

Accepted Answer

Under CGST Act 2017, Section 16(3) read with Rule 96A of CGST Rules 2017, a registered exporter may file a Letter of Undertaking in Form RFD-11 to export without paying IGST and then claim a refund of accumulated input tax credit under Section 54(3). Alternatively, the exporter may pay IGST and claim a refund of that tax under Rule 96. The LUT route preserves working capital since no tax is paid upfront, but the LUT is treated as cancelled if export proceeds are not realised within the period prescribed under FEMA 1999 (generally 9 months for goods, extendable by the AD bank).

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