IGST & Compensation Cess Exemption Extended Till 30 June 2022

The Government extended IGST & Compensation Cess Exemption Extended Till 30 June 2022 on COVID-related imports. Learn what’s covered, who benefits, and how Cretum Advisory helps ensure compliance.

Not only did the COVID-19 pandemic pose a threat to public health, but it also severely affected the worldwide supply chain, particularly for necessities in medicine and healthcare.  The Government of India first granted IGST and Compensation Cess exemptions for certain COVID-related imports in response to the urgent demand and to lessen the import burden, as advised by the GST Council.

This exemption was solely designed to provide temporary assistance.  However, due to long pandemic waves and rising medical demand, the government extended this exemption until June 30, 2022.

Let’s first look at its scope, eligibility requirements, required documents, and the continued need of GST compliance.  The Justification for Creating This Exemption.

All imports into India are normally subject to the Integrated items and Services Tax (IGST) Act, which also levies Compensation Cess in some circumstances (particularly for items like coal, tobacco, vehicles, etc.).
However, with the second COVID-19 wave in 2021, India lacked the following:

• Oxygen concentrators
• COVID test kits
• Ventilators
• Medicines like Remdesivir, Tocilizumab, Amphotericin B
• PPE kits and gloves
• Other essential medical devices

The GST Council suggested exemptions from IGST and cess for free imports intended for government or charitable distribution in order to guarantee that these items may be imported swiftly and reasonably.

Originally time-limited, this incentive was extended by multiple GST notifications until June 30, 2022.

What Was Covered Under the IGST & Compensation Cess Exemption Extended Till 30 June 2022 ?

Goods Eligible for IGST & Cess Exemption:

• COVID-19 Vaccine
• Remdesivir, Tocilizumab, and Amphotericin B
• Concentrators, cylinders, and medical-grade oxygen
• Oxygen generation plants
• Pulse oximeters
• PPE kits, N95 masks, gloves
• COVID-19 testing kits
• Ventilators and other ICU equipment

 Conditions to Claim Exemption:

1. Imports must be made for free distribution.
2. The importing entity must be:

• A State Government, Central Government, or UT Authority, or
• An authorized relief agency or charitable trust

3. Proper documentation, including certification of intended use, must be maintained.

It’s important to understand that commercial importers or private companies could not claim this exemption unless importing on behalf of a qualifying government or charitable institution.

Legal Basis for the Exemption

This exemption was granted under:

• Originally issued on April 20, 2021, Notification No. 27/2021-Customs was Subsequently broadened through
• Notification No. 29/2021-Customs and ensuing circulars.
• Later extended via Notification No. 29/2021-Customs and subsequent circulars

These notifications formed the legal ground for the exemption but also came with strict compliance expectations.

Compliance Isn’t Optional – It’s a Legal Requirement

Just because IGST and Cess were waived for qualifying imports, it doesn’t mean you skip filings. A major myth among importers was assuming “no tax = no need to declare.” That’s a mistake.

Even if you’re claiming exemptions, you must:

• Report all exempted imports correctly in GSTR-2A and GSTR-3B
• Keep supporting documents like shipping bills, bill of entry, donation certificates, and utilization records
• Show evidence of distribution (free of cost) to avoid anti-profiteering actions
• Reconcile books of accounts with exemption claims

Failure to comply may trigger:

• GST audit notices
• Reversal of exemption
• Interest and penalty under Section 50 and 122 of CGST Act
• Scrutiny under Anti-Profiteering Rules

Common Pitfalls Faced by Businesses

Many importers who acted quickly during the pandemic now face retrospective scrutiny. Some of the typical issues seen:

• Goods were not fully distributed free of cost
• Imports were in the name of a trust but used for private purposes
• Documentation is incomplete or missing
• No evidence of matching import declarations in GSTR

If you’re in this situation, it’s important to get a compliance health check done before any tax demand hits your desk.

Important Lessons (With Data & Statistics)

• Validity of exemption: till June 30, 2022
• Over ₹5,000 crore worth of IGST exemption claims were made in FY 2021–22
• Applies only to specific COVID-related goods and not for resale
• GST notices have already been issued in multiple states for misused exemptions
• Section 36 of the CGST Act requires businesses to keep records for 6 years.
• Why This Will Matter in 2024 and Later: Proper reporting, audit trails, and reconciliation essential are

The concerns for compliance persist even if the exemption terminated in the middle of 2022.GST audits often cover past financial years (up to 5 years), and departments are now actively issuing notices for past irregularities.

Also, if you’re importing any items under concessional rates or exemptions now—be it under EPCG, Advance Authorisation, SEZs, or charity imports—you need to be proactive about documentation and compliance.

How Cretum Advisory Can Support You?

At Cretum Advisory, we specialize in helping businesses and non-profits navigate the complex GST ecosystem, especially in areas like:

• Exemption validation
• Import reconciliation & documentation
• GST audit readiness
• Legal response to show cause notices
• Advisory on IGST applicability on imports
• GST Return Filing and system audits

Whether you’re a hospital, a trust, a logistics company, or a D2C healthcare importer—our team ensures your GST records are airtight and error-free. One mistake can cost you lakhs in penalties. One consultation can save you from it.

The Final Thought

The extension of IGST and Compensation Cess exemption till 30 June 2022 was a necessary lifeline for many sectors during the pandemic. But exemptions come with rules—and those rules are now under strict enforcement.

If you availed these exemptions or plan to import under any concessional scheme, now’s the time to do a compliance audit and ensure your house is in order. Cretum Advisory is here to guide you with experience, accuracy, and complete GST Compliance support. Book your free consultation today.

Frequently Asked Questions (FAQ)

1.What was the purpose of the exemption from the Compensation Cess and IGST?

To lower the cost of imports for necessary COVID-19 medical items and enable government agencies and nonprofits to freely distribute them.

2. What products fell under this exemption?

Amphotericin B, ventilators, oxygen concentrators, personal protective equipment (PPE) kits, COVID test kits, and COVID-19 vaccinations are among the life-saving medical products.

3. Who could claim the exemption?

Only State Governments, Central Government, Union Territories, or authorized charitable organizations importing for free distribution.

4. Were commercial or private importers eligible for the exemption?

No, unless they fulfilled all documentation criteria and were importing on behalf of a legitimate government agency or nonprofit.

5. What was the deadline for using this exemption?

The exclusionary period concluded on June 30, 2022.

6. If the exemption was granted, is it still need to submit for GST?

Yes.  Businesses are still required by GST regulations to maintain correct records and report exempt imports in GSTR-2A and GSTR-3B.

7. What happens if exemption conditions were not properly followed?

The business may receive GST audit notices, face demand for IGST + interest + penalty, and could be investigated under anti-profiteering rules.