In Brief
The Supreme Court upheld notifications imposing a 'pre-import condition' on IGST and compensation cess exemptions for goods imported under Advance Authorisation (AA) schemes. The condition required inputs to be imported before exports to claim duty-free treatment. The Gujarat High Court had struck down this condition as arbitrary and unreasonable. The Supreme Court reversed, holding that no constitutional obligation exists for new tax legislation to perpetuate prior exemptions unchanged. The GST overhaul fundamentally restructured the tax system; requiring payment and subsequent refunds, though inconvenient, does not render the condition arbitrary. The 'pre-import condition' aligns with the AA scheme's core object of physical incorporation of imported inputs and was authorized under Foreign Trade Policy. Courts afford deference to fiscal policy in economic matters. The court allowed exemptions to be withdrawn and conditions imposed without retrospective effect.
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