GST levy on COVID-19 relief imports challenged

Delhi HC to hear plea against tax on supplies from abroad

An NCR-based firm that imported oxygen cylinders and regulators and donated them to the Delhi government has challenged the Centre’s exclusion of such imports from the ‘ad hoc’ GST exemption for COVID-19 relief material received from abroad.

The Delhi High Court is expected to hear the writ petition against the Finance Ministry, the GST Council and the Delhi government’s Finance Department on Thursday. Oxygen regulators attract an IGST of 5%, while cylinders and the rakes for carrying the regulators for them are liable to 18% IGST.

Last week, a bench of the HC had held that the 12% Integrated GST (IGST) levied on oxygen concentrators imported for personal use is ‘unconstitutional’. The Finance Ministry had told the Court that the issue would be placed before the GST Council that meets on Friday.

On May 3, the Ministry had exempted imported COVID relief material from IGST levies, provided it was received free and donated to State-approved entities for free distribution.

“Several Indian corporates and other entities pitching to help with pandemic relief by importing critical supplies not available locally, at their own cost, are not eligible for this GST relief,” Abhishek A Rastogi, partner at Khaitan & Co. said.

The Gujarat government had, on May 1, notified that the GST on critical COVID-19 imports will be reimbursed to domestic entities who are importing material for free donation in its jurisdiction. On May 17, the Haryana government announced a similar GST refund. Several States have sought GST exemption on all COVID-related supplies, including vaccines.

With no such notification from the Delhi government or the Centre to ensure uniformity in tax treatment, the petition has said that this defeats the purpose of ‘One Nation, One Tax’.

Arguing that there is ‘no intelligible’ difference between the firm’s efforts to import oxygen cylinders or any other ‘authorised person’ doing so, the petition stressed that ‘the benefit in both cases accrue to the government for helping common people’ and the conditions for getting the exemption are ‘arbitrary and onerous’.

The May 3 notification granting exemption of IGST to State Governments and authorised entities invoked “public policy” under “exceptional circumstances” and there is no discernible rationale as to why this cannot apply to corporate entities importing these items for donation to States, said Mr. Rastogi.

“When oxygen supply is suddenly augmented, there is bound to be a shortage of containers, cannisters and cylinders to store the increased volumes of oxygen supplied to a particular State,” the petition pointed out, so States need to enhance their stocks of oxygen cylinders and regulators.

“In this moment of crisis, levying IGST on such imports by the petitioner as against exempted imports for Government and other bodies, is in stark violation of Article 14 of the Constitution. This also deprives right to life of the individuals under Article 21 of the Constitution,” the petition states.

The GST Council, the petition argues, has failed to perform its Constitutional obligations which include recommending to the Union and States ‘any special rate or rates for a specified period, to raise additional resources during any natural calamity or disaster’.

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