Exemptions To Multilateral Agencies Will Continue After GST Rollout

Select multilateral institutions will continue to be exempt from import duties after the Goods and Services Tax (GST) is implemented, a senior finance ministry official told BloombergQuint on the condition of anonymity. The government will issue a list of such agencies soon, he added.

Projects financed by the World Bank and the International Monetary Fund are currently exempt from levies like Countervailing Duty (CVD) and Special Additional Duty (SAD) under the United Nations (Privileges and Immunities) Act, 1947. Once implemented, the GST will subsume indirect levies like CVD and SAD.

The government had earlier decided to include exemptions for UN-backed institutions and the Asian Development Bank in the Central GST Bill, but later decided to notify a list of agencies instead, the official said.

If the United Nations (Privileges and Immunities) Act is amended in future to tax multilateral institutions, a separate exemption list will make it easier for the government to change the rules, he added. Including these in the GST Law would mean that the government would have to seek Parliament's approval.

Also Read: Central GST Bill: The ‘Reverse' Charge And 3 Other Key Changes

CVD and SAD are imposed to create a level-playing field between domestic and foreign producers of a commodity. Foreign producers can generally sell the same product at a lower price because of the sops they receive from their governments, which has a negative impact on Indian companies.

India is a signatory to the Convention on the Privileges and Immunities of the United Nations, and privileges given to multilateral agencies should continue even after GST is implemented, Amit Sarkar, head-indirect tax, BDO India, a tax advisory, told BloombergQuint.

Such exemptions will not be required under GST as it allows companies to claim offset on levies like basic customs duty and special additional duty, he said. Current rules do not allow any such offset.

Himanshu Tewari, partner at BMR Advisors, a tax advisory, however, said since these agencies are generally at the end of consumption chain, exemption from IGST “would not break the credit chain”.

The government is looking at rolling out GST from July 1. All four supporting legislation: Integrated GST, Central GST, Union Territory GST and compensation bill, have been cleared by both the houses of Parliament. State governments will now have to clear the State GST Bill.