FEBRUARY 07, 2025

By D Kalirajan, Associate Partner, Saumya Raj, Associate and Vaishnavi S Nair, Associate at Lakshmikumaran & Sridharan, Bangalore

Introduction:

THE Union Government has made various industry-friendly proposals and amendments as part of Budget 2025. One of such amendments is under the Import of Goods at Concessional Rate of Duty or for Specified End Use Rules, 2022 (for brevity, IGCR Rules '). The IGCR Rules, in gist, prescribe, certain conditions and procedures to avail the benefit of certain end-use based duty exemptions and concessions under the Customs Law. With an objective to reduce the compliance burden and to facilitate better inventory management, the IGCR Amendment Rules, 2025, have been notified w.e.f. 02.02.2025.

Tackling Industry Challenges vide IGCR Amendment Rules 2025

According to the unamended Rule 10 read with Rule 11 of the IGCR, 2022 an importer was required to utilise the imported goods within a period specified in the concerned notification, and where no period is specified, it shall be utilised within a period of 6 months which can be further extendable up to 3 months, from the date of import. Failing which, the importer shall either re-export the goods or surrender the exemptions and concessions claimed with applicable interest.

In view of such restrictive period of utilisation, the industries faced lot of challenges, such as, they could not source the materials in bulk to avoid risk of supply chain disruptions, vendor delays, price fluctuations, cost-effective/discounted price, etc. Delay in sales and export orders further exacerbated the issue, preventing industries from meeting the six-month utilisation period deadline. It also led to surrender of customs duty exemptions, though the substantial condition of utilization was fulfilled . As a result, the objective of Central government behind extending such exemptions and concessions could not be achieved.

Industries have time and again flagged the challenges in fulfilling six-month utilization period restriction. It also forced the bona fide importers to approach the courts to litigate the subject issue.

IGCR Amendment Rules, 2025

The Hon'ble Finance Minister, in her budget speech, acknowledged the said issues and addressed as below:

"133. For industry to better plan their imports, I propose to extend the time limit for the end-use of imported inputs in the relevant rules, from six months to one year. This will provide operational flexibility in view of cost and uncertainty of supply. Further, such importers will now have to file only quarterly statements instead of a monthly statement."

These proposals are made effective w.e.f. 02.02.2025 vide the said IGCR Amendment Rules, 2025 [ NOTIFICATION NO. 07/2025-CUSTOMS (N.T.), dated 1 st February 2025], as follows.

a. Period of utilisation of imported goods extended from six months to one year.

b. Periodicity of filing IGCR-3 returns increased from monthly to quarterly.

c. Job-work period has also been increased from six months to one year.

Parting remarks

While the said utilisation period extension and procedural relaxations would provide the businesses with more flexibility and reduce the business risk due to factors like supply chain disruptions and production delays, it may open few transitional issues such as, whether the extension of timeline would apply to goods for which the existing timeline of 6 months has extinguished on the date of notification?; also to goods for which the existing timeline of 6 months is continuing on the date of the notification? Therefore, to ensure smooth transition and to avoid confusion, a necessary clarification may be issued addressing these key issues.

It appears that one big unanswered question of Industry remain is, should there be any period of utilisation under the IGCR 2022, when the relevant exemption notification does not prescribe any utilisation period, especially to ensure meeting the Central government's objectives behind such exemption and concession and to avoid denial of exemptions and concessions on procedural delay in utilisation.

[The views expressed are strictly personal.]