IT Company Challenges IGST Provisions for Export in Delhi High Court

The constitutionality of a rule under the Integrated Goods and Services Tax (IGST) regime which requires a bank guarantee to be furnished for claiming refund of tax, has been challenged through a writ petition in the Delhi High Court..The petition filed by Aphro Ecommerce Solutions Private Limited through Advocates Udit Gupta and Anup Jain was heard yesterday by a Division Bench of Justices S. Muralidhar and Pratibha M. Singh which proceeded to issue notice to the Central government. Advocate K Parameshwar appeared for the petitioner..The petition states,.“Section 16(3)(a) of the Integrated Goods and Services Act, 2017 prescribes an option for claiming refund which can be availed if the supply of goods & services or both are either made under the bond or under the letter of undertaking..However, the rules if read with FORM GST RFD-11 prescribes furnishing of bank guarantee in case if refund of integrated tax is being claimed through the bond route.”.The petition also challenges the constitutionality of a July 7 notification which categorizes a registered person in two different classes, one eligible for submission of letter of undertaking and another not so eligible..It is stated that in the petition,.“the said distinction introduced not only runs contrary to the constitutional mandate of Article 14 but also at the same time de-hors the provisions of Section 16, which in no terms classifies a registered person for the purposes of claiming refund of integrated tax in a manner which has been illegally, unjustifiably and unconstitutionally done by this notification.” .It is further contended that a reading of notification lays down that an exporter is eligible for submission of letter of undertaking without furnishing any bank guarantee if they have received a minimum of one crore rupees in the preceding financial year as due foreign inward remittances or are status holder under the Foreign Trade Policy 2015-2020..This is rule is termed as being advantageous to the big players in the market,.“The big players in the business of export are placed in an advantageous position as there is no requirement of Bank Guarantee/Bond for them, whereas the Petitioner herein is compelled to furnish a Bank Guarantee of maximum 15% of the bond amount.”.It is argued that this shall lead to the working capital of the petitioner company getting blocked which in turn shall affect its competing capability. It is also argued that such restrictions go against the “Make-in-India” policy promoted by the Government itself..The Central Govt sought time from the Court to seek clarity on the contentions raised in the plea and file a response..The matter will be next heard on September 13..Read the Petition below.