Centre scraps tax exemption on imports of missile parts amid Adani probe

Kolkata: India has reversed a contentious policy of tax-free imports of missile parts that sits at the heart of an investigation faced by billionaire Gautam Adani's group, according to a notification that is being reported for the first time.

In September, the government said it would free up all such parts, whether for long- or short-range missiles, from import taxes, in a boost for defence companies that use such imports to make equipment for the armed forces, including the Adani group.

But in an October 9 "corrigendum" or correction notification, it dropped the word "missiles" from its relaxed policy, without giving any reason, reinstating older rules that exempt only some parts used in long-range missiles.

"The correction made to the notification takes us back to the earlier regime, where parts of small-range missiles were not specifically exempt from import duties," said Krishan Arora, a partner at consultancy Grant Thornton Bharat.

"This is the first time the government was specifically putting a blanket exemption on all such missile parts from customs duty, but that decision appears to have been reversed."

The notice, posted on a government website, came days after Reuters exclusively reported that Adani Defence was under investigation for evading $9 million in taxes on imports of short-range missile parts.

Adani has previously said it had provided clarifications and documents to authorities about its imports.

Adani Group did not respond to Reuters queries on the October 9 notice.

Th finance ministry and its indirect tax board did not respond to queries on why the correction notice was issued.

Adani Defence Systems and Technologies, one of the smaller businesses of the coal-to-airports conglomerate, turns out defence equipment such as missiles, drones and small arms.

Since January 2024, it has imported $70 million worth of defence parts from countries such as Canada, Israel and Russia.