Sanitiser makers move court over typo in GST rules

MUMBAI: Companies that were importing a key raw material used in manufacturing sanitisers and disinfectants have dragged the government to court following inability to avail benefits over an apparent typing error in the Goods and Services Tax (GST) framework. Importers of ‘denatured ethyl alcohol’, a raw material used in hand sanitisers and disinfectants, have been paying a lower or concessional rate of customs duty, over the years as this was categorised as ‘excisable goods’. Under the new tax framework however this part—excisable goods—was injected in the new regulations and that is causing confusion, say tax experts.The customs department said that since excise is not part of GST, the importers must pay additional taxes as per the existing regulations.“There appears to be an unintended omission with respect to the usage of the words ‘excisable goods’ instead of ‘taxable goods subject to tax under GST laws’ and hence judicial review is important at this stage,” said Abhishek A Rastogi, partner at Khaitan & Co, who is arguing a writ petition before the Bombay High Court.The customs department in the last one month has been slapping notices and conducting raids claiming that since there is no “excise duty” under GST law, these companies should cough up additional taxes. The companies in their writ petition in the Bombay High Court argued that this is a typo and what the tax department actually meant while copy pasting was “taxable goods” and not “excisable goods”. Till recently these importers have been only paying 2.5% duty on all their imports. Now, they have been asked to cough up an additional 2.5% duty on these imports.Some of the companies have approached the courts and claimed that the original intention of the government was to apparently extend the benefit even in the new tax framework.The raw material importers have come under the scanner as their imports grew during the Covid pandemic. Initially some of the companies were merely asked to furnish provisional duty bonds—an instrument which promises to pay up a certain amount in future.Most importers paid 2.5% while the remaining duty was furnished through provisional duty bonds.This was mainly done to safeguard the government revenue and also avoid adverse impact on importers’ cash flows. However, in the last few weeks, several importers and companies were asked to cough up the additional amount.“The furnishing of provisional duty bonds at the time of effecting clearances of imported denatured ethyl alcohol is not clearly a solution and hence there is a request that courts must direct to cancel the previous bonds furnished,” said Rastogi.

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