The Finance Ministry has rejected India Inc’s request for an IGST (Integrated Goods and Services Tax) exemption on Covid content imported from abroad and distributed freely in India. It also stated that only agencies authorised by the State Government will be excluded.
The IGST is levied on the procurement of goods and services in both import and export situations. It’s placed on interstate supplies. The Finance Ministry granted an ad hoc exemption from IGST on imported relief materials on May 3, but only under certain conditions. The Central Board of Indirect Taxes and Customs (CBIC) stated in a collection of frequently asked questions (FAQ) that a number of references have been received informing that several organisations, including Corporates, plan to source Covid relief material from abroad and distribute it freely, taking advantage of the IGST exemption under the said Order.
“It may be mentioned that in case any corporate buys it and even gives it for free, such exemption will not be available,” CBIC said. It is also available when said products are imported free of charge for the purpose of Covid relief by a State Government or any individual, relief agency, or statutory body approved in this regard by a State Government. The CBIC is the Finance Ministry’s apex policymaking body for indirect taxes.
According to a Finance Ministry notification dated May 3, the Central Government had received a range of representations from charitable organisations, corporate bodies, and other Associations/entities outside India requesting exemption from IGST on the import of Covid-19 relief material (already exempt from customs duty), donated/received free of cost from outside India for free distribution. As a result, the Central Government has given exemption from IGST on imports of such products received free of cost for free distribution for covid relief, according to a statement issued by the Ministry. Furthermore, since customs duty is already excluded, these imports would not be subject to any customs duty or IGST.
This exemption will be in effect until June 30. This would also include products that had already been imported but were awaiting clearance at the time the exemption was granted. There will be a few requirements attached to the exemption. For the purposes of this exemption, the state government shall designate a nodal authority in the state. The nodal authority will authorise the free distribution of such Covid-relief material to any individual, relief agency, or legislative body. The aforementioned products can be imported free of charge by a State Government or any entity/relief agency/statutory body allowed in this regard for free distribution throughout India.
Another issue concerned the use of imported materials in more than one state, and which nodal agency will be in control. The CBIC responded that any “relief agency” approved by a state can make free distribution of goods imported in this manner anywhere in India. The exemption order only requires that the relief agency be approved by a state and obtain a certificate to that effect. As a result, in this case, either State A or State B can authorise the agency and issue the certificate, it explained.