SHARE

| Jun-10-2021

No Relation Between Section 8 of Fema and Section 16 of Igst Act for Realization of Foreign Exchange for Export of Goods

The Hon’ble Delhi High Court (“HC”) in Vandna Pharma Industries v. Commissioner of Goods and Service Tax (“GST”) [W.P. (C) No. 5228/2021 decided on May 07, 2021] noted that nothing has been shown to the Court by the Revenue Department which would connect the provisions of Section 8 of the Foreign Exchange Management Act, 1999 (“the FEMA”) with Section 16 of the Integrated Goods and Services Tax Act, 2017 (“the IGST Act”). Further, held that the matter requires further examination and listed the matter on August 25, 2021.

Facts:

Vandna Pharma Industries (“the Petitioner”) asserts that its application for refund of input tax credit with respect to tax paid on purchase of goods, which were utilized in turn for the manufacture of goods that were ultimately exported, has been wrongly rejected. The Petitioner also seeks a direction for payment of interest by the Revenue Department (“the Respondent”). The Petitioner’s aim for refund is pivoted on the provisions of Section 16 of the IGST Act. The Respondent stated that the rejection of the Petitioner’s refund-claim is in order as the bank realization certificates were not produced, the order of rejection ought not to be disturbed. In support of his plea, the Respondent relied upon Section 8 of the FEMA.

Issue:

Whether there is a connection between Section 16 of the IGST Act and Section 8 of the FEMA for realization of foreign exchange for export of goods?

Held:

The Hon’ble Delhi HC W.P. (C) No. 5228/2021 decided on May 07, 2021 held as under:

  • Observed that, Section 8 of the FEMA calls upon the concerned person to take “reasonable steps” for realization and repatriation of foreign exchange proceeds. Consequently, the realization and repatriation of foreign exchange involve proceeds from goods exported by the Petitioner
  • Noted that, nothing has been shown to the Court by the Respondent which would connect the provisions of Section 8 of the FEMA with Section 16 of the IGST Act
  • Held that, the matter requires further examination
  • Directed that, the Petitioner can place the correspondence and other relevant material on record, which would show that reasonable steps have been taken by the Petitioner to realize the export proceeds. If any such material is sought to be placed on record, the same will be supported by an affidavit. A copy of the said affidavit along with the material appended thereto will be furnished to the Respondent
  • The matter is now listed on August 25, 2021.

Relevant provisions:

Section 8 of the FEMA: 

“8. Realization and repatriation of foreign exchange

Save as otherwise provided in the FEMA Act, where any amount of foreign exchange is due or has accrued to any person resident in India, such person shall take all reasonable steps to realize and repatriate to India such foreign exchange within such period and in such manner as may be specified by the Reserve Bank.

Section 16 in the IGST Act

“16. Zero rated supply

(1) “Zero rated supply” means any of the following supplies of goods or services or both, namely:

(a) Export of goods or services or both; or

(b) Supply of goods or services or both to a Special Economic Zone developer or a SEZ unit.

(2) Subject to the provisions of sub-section (5) of Section 17 of the Central Goods and Services Tax Act, credit of input tax may be availed for making zero-rated supplies; notwithstanding that such supply may be an exempt supply

(3) A registered person making zero rated supply shall be eligible to claim refund under either of the following options, namely:

(a) He may supply goods or services or both under bond or Letter of Undertaking, subject to such conditions, safeguards and procedure as may be prescribed, without payment of integrated tax and claim refund of unutilized input tax credit; or

(b) he may supply goods or services or both, subject to such conditions, safeguards and procedure as may be prescribed, on payment of integrated tax and claim refund of such tax paid on goods or services or both supplied, in accordance with the provisions of Section 54 of the CGST Act or the rules made thereunder.”

DISCLAIMER: The views expressed are strictly of the author and A2Z Taxcorp LLP. The contents of this article are solely for informational purpose. It does not constitute professional advice or recommendation of firm. Neither the author nor firm and its affiliates accepts any liabilities for any loss or damage of any kind arising out of any information in this article nor for any actions taken in reliance thereon.

Similar reads

Placement of Medical Instruments Without Consideration in Hospitals Is a Supply of Service

The AAR, Kerala, in Abbott Healthcare Pvt. Ltd. [Advance Ruling No. KER/97/2021 decided on June 07, 2021] held that the placement of specified medical instruments to unrelated customers like hospitals

  Jun-10-2021

Read More

Recent GST Notifications for Joint Development Arrangement – Too Little Too Late

The occasion for writing this article arises from the recently concluded 43rd GST Council meeting and subsequent notifications issued to give effect to the decisions taken at such meeting.

  Jun-10-2021

Read More

Parallel Proceedings Cannot Be Initiated by State Gst Authorities on the Same Subject Matter

The Hon’ble Calcutta High Court in Raj Metal Industries & Anr. v. UOI & Ors. [W. P. A. 1629 of 2021, dated March 24, 2021] stayed the summons issued and proceedings initiated thereunder against assess

  Jun-10-2021

Read More

No Service Tax Can Be Levied on Food Served as “take Away” or “parcels”

The Hon’ble Madras High Court (“HC”) in Anjappar Chettinad A/C Restaurants v. Joint Commissioner [W.P. Nos. 13469 of 2020, 28789 & 28095 of 2019 and 1748 & 5935 of 2021 decided on May 20, 2021] held

  Jun-10-2021

Read More

Horse Race Clubs Liable to Pay GST Only on Commission and Not Entire Bet Amount; Rule 31A(3) of CGST Rules Ultra Vires

The Hon’ble Karnataka High Court (“HC”) in Bangalore Turf Club Limited and ors. v. Union of India [WP No. 11168/2018 and WP No. 11167/2018 decided on June 02, 2021] held that Goods and Service Tax

  Jun-10-2021

Read More