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Rule 86(4B) of the CGST Rules 2017, Goods and Services Tax - GST

Issue Id: - 118753
Dated: 14-9-2023
By:- Vasudev Mehta
Rule 86(4B) of the CGST Rules 2017

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Respected Sir/Madam,

For the period 2018-19 to 2021-22, The Company was availing the benefit of notification under Notn 78/2017. The Company claimed refund under Rule 89(4) instead of Rule 89(4B). The Company is exporting as well as selling goods locally. The Department is contending that this is erroneous refund and seeks recovery of refund since the company has not filed under any other category. According to Circular 125/44/2019 only merchant exporter is required to file application under Rule 89(4B) under the category of Any Other who are availing benefit of Notification No 40/2017 and 41/2017. hence, i feel the contention of department is completely incorrect and this is not erroneous refund since the calculation will be same under both Rule 89(4) or Rule 89(4B). Further Circular cannot override the Act. No where in the Act it is mentioned that the refund application has to be done under Any Other Category. I seek experts views on this.

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Showing Replies 1 to 4 of 4 Records

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1 Dated: 15-9-2023
By:- Amit Agrawal

Calculation of eligible refund amount under both Rule 89(4) or Rule 89(4B) will NOT be same, specially when the taxpayer is exporter of goods as well as domestic supplies. And said tax-payer has availed benefit of "no IGST payment" while importing inputs under notification No. 78/2017-Customs, dated the 13th October, 2017.

Rule 89(4) deals with "Net ITC" which means "input tax credit availed on inputs and input services during the relevant period other than the input tax credit availed for which refund is claimed under sub-rules (4A) or (4B) or both;". It is worth noting here, that there is no likange that such inputs / input services (whose ITC is claimed as refund u/r 89(4)) should be used in making such export of goods eligible for refund u/r 89(4).

But, rule 89(4B) deals with refund of input tax credit, availed in respect of inputs received under the said notifications for export of goods (i.e. no IGST and hence no ITC, in given case under discussion i.e. import under notification No. 78/2017-Customs, dated the 13th October, 2017) and the input tax credit availed in respect of other inputs or input services to the extent used in making such export of goods, shall be granted.

What is worth noting here u/r 89(4B) is that refund is allowed only for ITC against specified inputs & input services (i.e. to the extent used in making such export of goods) and this is very different that what is allowed as refund u/r 89(4).

Claiming refund using wrong category may be technical / procedural lapse, if quatum of eligible refund amount under correct category is same. BUT, claiming & getting excess refund (i.e. excess than permitted under law), by hiding relevant fact/s & choosing of wrong category, is nothing but a case of 'erroneous refund'.

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

2 Dated: 15-9-2023
By:- Vasudev Mehta


What is definition of specified inputs and input service to the extent used in export? The words are not defined and hence it is assumed that both are used for making local and export sales

3 Dated: 16-9-2023
By:- Padmanathan Kollengode

I agree with Amit Ji. The quantification of refund can vary.

The underlying logic behind the formula under 89(4B) I believe is that in case of supply received from Merchant exporter, it is assumed as fully exported (as it is the basic condition for availing the benefit of the notification).

Whereas, in Rule 89(4) the ITC is apportioned based on turnover of zero rated and others.

Therefore, if you had claimed refund under 89(4) instead of 89(4B) then the chances are that you would have claimed a lower amount than you were eligible for (Since the supplies from merchant exporter will also get apportioned based on TO). Hence, there may not be revenue loss for the Government and demand will not stand.

4 Dated: 17-9-2023
By:- Shilpi Jain

Is the entity an EOU?

Also there is no formula prescribed for 89(4B). So a reasonable means should be adopted to calculate input tax credit, availed in respect of other inputs or input services used in making zero-rated supply. In which case the formula under 89(4) could be used.

However, entire ITC cannot be regarded for the computation but only those which have played some role in the export can be considered.

Irrespective of the fact whether 89(4) or 4B results in same refund, merely because refund computed under wrong category, cannot be denied if the refund eligibility u/r 89(4) is not disputed.

Page: 1

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