New Delhi, Aug. 4 -- The Public Accounts Committee (PAC) of Parliament has expressed deep concern regarding the lack of clarity in the implementation of the IGST exemption on imported pharmaceuticals due to inadequate coordination within the tax department and poor dissemination of information related to tax notices. In its 53rd report presented to the Parliament on Tuesday, the parliamentary panel assessed the steps taken by the Ministry of Finance regarding the recommendations made by it in the previous report about the improper exemption of IGST on pharmaceutical imports. While appreciating the government for adhering to all four recommendations in the original report, the committee highlighted the need for further clarity and technology support in the taxation system.
During the audit process, two cases were found, wherein some importers had benefited from the IGST exemption for drugs and pharmaceutical goods imported through customs in Mumbai during the period between November 2017 and March 2018. While one customs authority agreed with the results of the audit and started recovering the dues, the other upheld the exemption, thereby making a different interpretation of the laws.
The dispute arose after the implementation of the GST system in July 2017, which saw several changes made in the tax structure concerning imports of publicly funded research institutions and other scientific bodies.
It was observed by the parliamentary panel that the repetitive issuance of notifications and clarifications by the finance ministry was due to poor coordination between different wings of the department. It was further observed with deep regret that even after the Tax Research Unit (TRU), which is the only entity authorised to issue customs as well as GST notifications, is the only authority to do so, there is still much confusion at the implementation stage.
It is pertinent to note here that the PAC strongly advocated that every notification be supported by illustrative examples to eliminate ambiguity from it. Furthermore, the PAC suggested the development of a searchable repository containing all the relevant notifications, circulars, judicial precedents, and clarifications. It also suggested the setting up of an online portal wherein assesses can get instant clarification on technical aspects.
In response to these observations of the committee, the finance ministry has said that all notifications, rules, circulars, and guidelines are already accessible on the CBIC's portal for tax information, and the recommendations have been noted for compliance. But then, the committee observed that the government had not taken any steps with regard to making a platform for dealing with queries of field officers.
The report discusses the history of the taxation system for imports of scientific and technical equipment by the publicly funded institutions for research. Before the introduction of GST, the importation of such equipment was exempted from certain additional customs duties as per Notification No. 51/96.
However, post GST, the government made a change in the notification so that the exemptions could be availed even for IGST. Moreover, it has been observed that in 2022, the government removed the exemption offered to publicly funded institutions, universities, Indian Institutes of Technology (IITs), the Indian Institute of Science, and certain other institutes recommended by the GST Council.
The parliamentary panel also maintained that the research institutions that are engaged in research in sciences, technologies, and medicine have an important contribution to make in furthering public good and deserve some financial assistance. This especially applies to institutions doing research in cancer and medicines that save lives.
Published by HT Digital Content Services with permission from Millennium Post.