Export Refund, Goods and Services Tax - GST

[Kaustubh Karandikar]

XYZ is having two types of supplies

1) Exporting manufactured goods or goods received from a supplier who is charging full GST which in turn is exported by XYZ.

2) XYZ is acting as a merchant exporter where the supplier of goods is charging 0.1% GST which in turn is exported by XYZ under LUT. Can XYZ pay IGST on exports under first situation and claim refund of the same and also act as a merchant exporter for the second situation or he is not allowed to do the same since prohibited by Rule 96(10) of CGST Rules?

Posts / Replies

[Kiran Tahelani]

Rule 96(10) reads as "The persons claiming refund of integrated tax paid on exports of goods or services should not have" received goods under (rate of 0.1% i.e. merchant exports).

Which means the entire GST registered unit shall not be eligible export with payment of IGST, if they receive supplies under @ 0.1% i.e. merchant export scheme.

not a single consignment/ supply should be under merchant export.

if there is single consignment they are bared from export with payment for entire exports (no such pro rata refund based on export is allowed)

I may be wrong, let other experts give their view.

[Amit Agrawal]

Plain reading of said Rule 96 (10) can indeed create problems for exporter - as explained by my Ld. colleague in earlier post - of same exporter opts for claiming refund by different routes for different situations (as described in Para 2 of the subject query).

In this context, one needs to note Para 13.2 of Circular No. 37/11/2018-GST, which reads as follows:

"It is also clarified that the exporter will be eligible to take credit of the tax @ 0.05% / 0.1% paid by him. The supplier who supplies goods at the concessional rate is also eligible for refund on account of inverted tax structure as per the provisions of clause (ii) of the first proviso to sub-section (3) of section 54 of the CGST Act. It may also be noted that the exporter of such goods can export the goods only under LUT / bond and cannot export on payment of integrated tax. In this connection, Notification No. 3/2018-Central Tax, dated 23.01.2018 may be referred."

I do not see any harm to revenue if exporter opts for claiming refund by different routes for different situations (as described in Para 2 of the subject query). Above Para 13.2 seems to suggest so, where type of input-supplies received is linked to export-route available to the ultimate exporter to export those input-supplies.

However & still, matter is not free from doubt & thereby, litigation-prone & risky for exporter to opt for claiming refund by different routes for different situations (as described in Para 2 of the subject query). Hence and in interest of ease of doing business, it is necessary for revenue to clarify its position in no uncertain terms in this regard.

These are ex facie views of mine and the same should not be construed as professional advice / suggestion.

[Kaustubh Karandikar]

Thanks Amit ji and Kiran ji for your views. In my view,

• As observed from the provisions under Rule 96(10), the word used is ‘Such Goods’ and therefore what is prohibited is when a merchant exporter is procuring the goods at concessional rate, only such goods, he cannot export on payment of IGST under claim for refund and he has to necessarily export the same under LUT. Therefore, there is no restriction on both manufactured goods and traded goods procured at full GST rate, to export the same on payment of IGST and claim refund of the same. Even in para 59 of the Circular no. 125/44/2019-GST [CBEC-20/16/04/18-GST], dt. 18-11-2019 also mentions the word ‘such goods.’ However,
• Since the GST authorities always looks at every aspect from their revenue point of view, there might be an objection for the same from their side.
• It is therefore advisable to intimate the jurisdictional authorities in writing about the entire facts to minimize litigation.
• Also, it is advisable to export the manufactured and traded goods received with full GST rate, on payment of GST having a smaller value to start with and avoid loss of heavy GST amount on account of their objection. Once it gets through successfully, one can start exporting the same regularly on payment of GST and claim refund, to enable to liquidate the accumulated ITC.

[Amit Agrawal]

With due respect, I find that Rule 96 (10) does not use the words 'Such Goods'.

These are ex facie views of mine and the same should not be construed as professional advice / suggestion. I respect contrary views.

[Kaustubh Karandikar]

Amit ji, yes, i agree with you. It is mentioned in Para 59 of Circular No. 125/44/2019-GST [CBEC-20/16/04/18-GST], dt. 18-11-2019. As per Apex Court ruling, Circular is binding on the department but not on the assessee. Your kind views please sir.

[Amit Agrawal]

Dear Shri Kaustubh Ji,

Let me answer your queries in two parts (First, where circular under discussion is binding on Dept and Second, whether said circular "really" states unequivocally the position which we desire OR we are just trying to interpret it in a way favouring assessee in given situation while ignoring how very same circular can be interpreted differently).

For first part of my answer, same are as follows:

A. While it is true that ''as per Apex Court ruling/s, Circular is binding on the department but not on the assessee", it is also held that circulars are not binding on court.

B. Under CGST Act, 2017, we got specific section to deal with Board's circulars / instructions i.e. Section 168 (1) which states that ''The Board may, if it considers it necessary or expedient so to do for the purpose of uniformity in the implementation of this Act, issue such orders, instructions or directions to the central tax officers as it may deem fit, and thereupon all such officers and all other persons employed in the implementation of this Act shall observe and follow such orders, instructions or directions."

B1. The legal position, as summarised in Para A above, needs to be tested again (i.e. issue is open, which will be eventually settled by Apex Court ... one way or other) when any circular is NOT issued using powers of said Section 168 (1).

C. Another disputable issue (i.e. issue is open, which will be settled by Apex Court ... one way or other) is whether any circular / instruction etc. - which is issued by CBEC using powers of Section 168 (1) and NOT similarly issued by jurisdictional state / UT - will be bidning of officers of such jurisdictional state / UT or not & & vis-a-versa?

In summary, I will be reluctant to 'solely' rely of any any circular / instruction etc. specially if same is not issued using powers u/s 168 (1) OR if same is not issued by BOTH - i.e. CBEC ás well as by jurisdictional state / UT.

And, you will notice that Circular No. 125/44/2019-GST [CBEC-20/16/04/18-GST], dt. 18-11-2019 is not issued using powers of Section 168 (1). So, one needs to be careful there before relying solely on it.

These are ex facie views of mine and the same should not be construed as professional advice / suggestion.

[Amit Agrawal]

Now, for second part of my answer, same are as follows:

We are dealing with following part (as highlighted in BOLD) of Para 59 of said circular:

"59. Notification No. 40/2017 – Central Tax (Rate) and notification No. 41/2017 – Integrated Tax (Rate) both dated 23.10.2017 provide for supplies for exports at a concessional rate of 0.05% and 0.1% respectively, subject to certain conditions specified in the said notifications. It is clarified that the benefit of supplies at concessional rate is subject to certain conditions and the said benefit is optional. The option may or may not be availed by the supplier and / or the recipient and the goods may be procured at the normal applicable tax rate. It is also clarified that the exporter will be eligible to take credit of the tax @ 0.05% / 0.1% paid by him. The supplier who supplies goods at the concessional rate is also eligible for refund on account of inverted tax structure as per the provisions of clause (ii) of the first proviso to sub-section (3) of section 54 of the CGST Act. It may also be noted that the exporter of such goods can export the goods only under LUT / bond and cannot export on payment of Integrated tax.""

In my respectful submission, above highlighted part does NOT necessarily resolve dispute under discussion here. It can also be read as follows: It may also be noted that the exporter of such goods ......................cannot export on payment of Integrated tax.

Otherwise, it could have stated only the followings: It may also be noted that the exporter of such goods can export the goods only under LUT / bond (& nothing more).

And this is precisely the problem coming from plain reading of present rule 96 (10).

I feel that said said circular may not necessarily states unequivocally the position which we desire and Revenue will argue that the assessee is interpreting the same self-servingly, specially when same is directly contrary to plain reading of Rule 96 (10).

Consequently, I have said my earlier post at serial No. 2 above that matter is still not free from doubt & thereby, litigation-prone & risky for exporter to opt for claiming refund by different routes for different situations (as described in Para 2 of the subject query). Hence and in interest of ease of doing business, it is necessary for revenue to clarify its position in no uncertain terms in this regard.

These are ex facie views of mine and the same should not be construed as professional advice / suggestion. I respect contrary views.

[Kaustubh Karandikar]

thanks amit ji for your further valuable views / inputs on the issue.