close
Share with your friends

India: “Pre-import condition” and duty-free exemption schemes

India: Pre-import condition, duty-free exemption scheme

The Gujarat High Court rejected a “pre-import condition” for a business to assert that it was eligible for duty-free imports of inputs under an exemption scheme.

1000

Related content

The foreign trade policy of India’s federal government includes various “exemption schemes” (including an advance authorization scheme) that allow duty-free imports of inputs that are typically incorporated in export products. Guidance issued over a number of years related to the duty-exemption schemes and related advance authorization licenses, and one notice in particular allowed an exemption on imported inputs subject to a “pre-import condition.” A view of this condition was that the goods first had to be imported, followed by manufacture and then export of the final products.

A business challenged this position and also challenged the validity of the “pre-import condition” in the advance authorization exemption scheme. It was asserted that if the pre-import condition standard was accepted, then it would mean that the exemption would not be available in situations of a manufacturer-exporter that undertook to manufacture and export goods in a continuous cycle in situations when the goods were manufactured first and then allowed duty-free import of inputs but imported only after the advance authorization license was received.

The high court found the pre-import condition was contrary to the exemption guidelines. As noted by the court, because the time to complete a cycle from receipt of an export order to transport for export to foreign buyers was approximately six months, if the exporter had to manufacture goods for export only after receiving the advance authorization license, then it would not be possible for the exporter to make delivery to the foreign buyer within the “reasonable” delivery period as agreed to and stipulated in the contract.

Thus, the court held that all proceedings initiated for violations of the “pre-import condition” would no longer survive.

 

Read a March 2019 report [PDF 892 KB] prepared by the KPMG member firm in India

The KPMG logo and name are trademarks of KPMG International. KPMG International is a Swiss cooperative that serves as a coordinating entity for a network of independent member firms. KPMG International provides no audit or other client services. Such services are provided solely by member firms in their respective geographic areas. KPMG International and its member firms are legally distinct and separate entities. They are not and nothing contained herein shall be construed to place these entities in the relationship of parents, subsidiaries, agents, partners, or joint venturers. No member firm has any authority (actual, apparent, implied or otherwise) to obligate or bind KPMG International or any member firm in any manner whatsoever. The information contained in herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation. For more information, contact KPMG's Federal Tax Legislative and Regulatory Services Group at: + 1 202 533 4366, 1801 K Street NW, Washington, DC 20006.

Connect with us

 

Want to do business with KPMG?

 

Request for proposal