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Struggle for Refund of IGST paid for the goods exported out of India

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Struggle for Refund of IGST paid for the goods exported out of India
By: Alkesh Jani
March 1, 2018
  All Articals by: Alkesh Jani       View Profile
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Struggle for Refund of IGST paid for the goods exported out of India.

The exporter plays a vital role in the country’s economy. The Government encourages exporters by various schemes and incentives.  The GST regime has also made an efforts in this direction by granting refund of IGST paid on goods and /or services exported out of India. After passing of 8 months, it is not wise to compare or discuss the erstwhile rules and procedures. Here we shall discuss the issues pertaining to refunds pertaining to goods exported out of India.

2.       The refund of tax paid for the goods exported out of India is governed by Section 54 of CGST Act, 2017 and Rule 96 of CGST Rules, 2017. Moreover, Circular No.17/17/2017-GST dated 15th November, 2017, was issued. The para 2.2 deals with the refund of IGST paid on goods exported out of India the same is reproduced below:-

“2.2 The refund of integrated tax paid on goods exported out of India is governed by rule 96 of the CGST Rules. The shipping bill filed by an exporter shall be deemed to be an application for refund in such cases. The application shall be deemed to have been filed only when export manifest or export report is filed and the applicant has furnished a valid return in FORM GSTR-3 or FORM GSTR-3B, as the case may be. Upon receipt of the information regarding furnishing of a valid return in FORM GSTR-3 or FORM GSTR-3B, as the case may be, from the common portal, the system designated by the Customs shall process the claim for refund and an amount equal to the integrated tax paid in respect of such export shall be electronically credited to the bank account of the applicant. Any order regarding withholding of such refund or its further sanction respectively in PART-B of FORM GST RFD-07 or FORM GST RFD-06 shall be done manually till the refund module is operational on the common portal.”

From above, it is clear that after furnishing of valid return in form GSTR-3 or GSTR-3B the refund is to be sanctioned. The most surprising is, although GST being online, if there is any error or mistake in shipping bill or GSTR-3B, no communication is made to exporter and the exporter runs here and there for refund even after the expiry of sixty days as stipulated under the law. There are refunds pending for the month of July, 2017, the exporter came to know about the errors or mistakes only after visiting the Customs port. Now, the errors and/or mistakes done by exporter, being new to GST regime such as issuance of commercial Invoice, IGST paid in GSTR-3(1)(a) or (c) instead of (b), they are being penalized for this error/mistakes by non sanctioning of refund.

The most interesting and eye catching scenario is, the Circular No. 42/2017-Cus dated 17th November, 2017, Circular No.05/2018-Cus dated 23rd Feb., 2018 and some advisory videos were made available on the portal, they made aware the exporter regarding the errors and/or mistakes, and their indicatives, but nowhere they speak about resolution or they demonstrated for e.g. error code SB003, i.e. the CHA by mistake made wrong or incomplete GSTIN number in the Shipping Bill resulting into GSTIN mismatch, the resolution to this is as stated in GST fliers is

“SB003: GSTIN mismatch

This error occurs when GSTIN declared in the SB does not match with the GSTIN used to fill the corresponding GST Returns. In this case too, the Exporter may be asked to make necessary adjustments in GSTR-1 by use of amendment Form 9A. However, it is to be noted that there is no provision of amendment in the Shipping Bill once the EGM is filed.”

Nowhere, it is demonstrated how to do this and how GSTIN number will match with Shipping Bill GSTIN by amending export Invoice(s)(form 9A). The another one is  with the claim of DBK, although everything is rightly done, and error code SB000 is generated the one of the reason is

“Higher rate of Drawback has been claimed for that SB, thus making the SB ineligible for IGST refund”.

For the above, Para 3 (d) of the Circular No. 05/2018-Cus dated 23rd Feb., 2018 states that “ Once all the invoices pertaining to Shipping Bill are verified by the officer, the system shall calculate the scroll amount against a shipping bill, after subtracting the drawback amount for each invoice where applicable, and display the refund amount to the officer for approval.” While till 15th of Feb., 2018 vide Letter F.No. 450/119/2017-Cus-IV of Director of Customs, enclosing FAQ and at Question No. 19 which states that if the Shipping is with no error is transmitted to Customs but still no refund is sanctioned and the answer to this is that, (iii) at the composite rate of drawback is claimed for that shipping bill during the transitional period between 01.07.2017 to 30.09.2017, thus making the shipping bill ineligible for refund of IGST paid. How far it is just that by granting of 2% of FOB value approx. 18% should be withheld or rejected.

The question arises that If the shipping bill is ineligible for refund of IGST paid, till date why order rejecting (RFD-07) is not issued? Why exporters are deprived of their right to appeal as no order of rejection is passed till date. Further, the 2nd proviso to Section 54(3) of CGST, Act, 2017, is reproduced below:-

Provided also that no refund of input tax credit shall be allowed, if the supplier of goods or services or both avails of drawback in respect of central tax or claims refund of the integrated tax paid on such supplies.”

From above it is clear that drawback in the SB is with regards to DBK rules made under Customs and here it clarifies of drawback in respect of Central Tax means tax paid under CGST Act, further, it also clarifies that refund on account of input tax credit, so there is no mention any where regarding rejection of IGST paid if DBK under Customs Act is availed. If refunds are held up for this reason, it can be said that the exporters are being penalized for exporting the goods out of India. The authority washes their hand vide Circular No. 5/2018-Cus that However, ultimately it is the responsibility of the exporters to ensure careful and correct filing of returns for hassle free sanction of IGST refunds”

Concluding,  it can be said that proper authority shall demonstrate by creating a dummy GSTIN that how to rectify the error and mistakes it in order to help the exporters and other tax payers also, to smoothen the GST regime.

The other experts are invited to en-light  with their valuable views.


By: Alkesh Jani - March 1, 2018


Discussions to this article


I have heard that receipt of refund of CGST and SGST is a two part affair , wherein one submits the relevant refund form to the GST ( Central excise dept )who upon passing the order for refund ,only refunds 50% ( CGST component) and then one has to go to the sales tax department to get the balance 50% paid as SGST , is this the process .. could anyone please clarify on the same

By: Avinash Gopalakrishnan
Dated: 05/03/2018

Sir, Yes it is true in terms of Para 4 of the Circular No.17/17/2017-GST dated 15th November, 2017.

By: Alkesh Jani
Dated: 05/03/2018

Thank you for the prompt reply , much appreciated, ease of doing business in India very clearly reflected in the fact that you need to run to a few more pillars to get your job done

By: Avinash Gopalakrishnan
Dated: 05/03/2018

Honest people suffer because of dishonest people. This is the ground reality. Govt requires to make the rules stringent day by day because of misuse of existing rules by the dishonest people as well as officers. If everybody follow the rules honestly, then there is no need to put extra barriers in the system.

Dated: 05/03/2018

Dear Sir,

How I check my export data transmitted to icegate portal Or validate by customs.

We have filled our GSTR-3B return & GSTR-1 Before due date in the month of Aug & Sept-17.

My Query is, we are export with payment of IGST & the Same we will shown in Table 6A (GSTR-1). But we are missed out to show the IGST payment in GSTR-3B Column No 3.1 (b) Zero Rated supply.

Same IGST Payment will showing in GSTR-3B Column No 3.1 (a) . Request you to Kindly suggest how we can get the refund.

Sir, we have also received November and December-17 refund at stipulated time.

By: akshay d
Dated: 05/03/2018

Dear Akshay,

Please take up your query in the forum section, as the reply to it will benefit the mass.

By: Alkesh Jani
Dated: 05/03/2018

Dear Alkesh Ji,

Send the copy this article to the Chairman, GST Council.

Dated: 03/05/2018


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