HC holds GST Compensation Cess is not exempt on import of goods by SEZ


HC holds GST Compensation Cess is not exempt on import of goods by SEZ

This tax alert summarizes a recent decision of the Andhra Pradesh High Court. The issue involved was whether exemption from payment of Compensation cess under Goods and Services Tax (GST) is available on import of goods by Special Economic Zone (SEZ) units.

A conjunctive study of Section 26(1)(a), 2 (zd) of SEZ Act, 2005 and Section 2(15) of Customs Act, 1962 would pellucidly tell us that the phrase ‘duty of customs’ used in Section 26(1)(a) of SEZ Act only refers to duty leviable under Customs Act, 1962 but the said phrase does not include cess under GST Compensation Act.

Therefore, it is difficult to accept the contention that the exemption of duty of customs under the Customs Act, 1962 or the Customs Tariff Act, 1975 or any other law on import of goods encompasses the Compensation Cess also merely because its rate of tariff is mentioned in Section 3(9) of Customs Tariff Act, 1975.

 A cess is a unique type of tax that is added to the current tax and is imposed for a specific reason. A tax raised, such as income tax, sales tax, excise tax, etc., can be used for any public purpose, such as paying salaries, building infrastructure, funding development projects, etc., but a cess is used for a specific purpose, such as education, health, etc.

 {Maithan Alloys Limited – W.P.No.1009 of 2019 and W.P.Nos.2631 & 6216 of 2021 decided on 21.11.2023 – High Court – Andhra Pradesh}



The copy of the order is as under:

Maithan-Alloys-Limited-Vs-Union-of-India-Andhra-Pradesh-High-Court 1



Krishnakant Jakhotia

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Email Id :- taxtalknew@gmail.com