TMI Blog2019 (11) TMI 160X X X X Extracts X X X X X X X X Extracts X X X X ..... fication No. 40/2017-Central Tax (Rate), dated the 23rd October, 2017 has been availed, and not related to the individual transactions. If the person has utilized the benefit of the said notification on his inward supplies, then he would not be eligible to the scheme of paying IGST on the export of goods and then claiming the entire amount of IGST paid as refund on such goods being exported. But this does not amount to denial of refund of input tax credit and he can always avail the benefit of zero-rated supplies on the basis of LUT. The scheme of Merchant Exports was brought into effect by Notification No. 40/2017 - Central Tax (Rate) dated 23.10.2017 and also other allied GST Notifications of State, which together allowed a registered exporter to procure goods at a concessional rate of 0.10 % GST. The applicant is intending to utilize the benefit of this notification to procure goods for exports. Hence sub-rule (10) of rule 96 has come into effect from 23.10.2017 which is also the date of effect of Notification No. 40/2017 - Central Tax (Rate) dated 23.10.2017. Hence there is an alignment of the Merchant Export scheme and the refund of IGST paid on exports - Hence it is cle ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssional rate of 0.10% GST under Merchant Export Scheme as provided under Notification No. 40/2017- Central Tax (Rate)? 3. The applicant furnishes some facts relevant to the stated activity:- a. The applicant states that he is engaged in the purchase and resale of various goods falling under Harmonised System of Nomenclature ( HSN ) 8703, 8708, 8706 and 8466 to buyers located outside the country. b. The applicant is at present purchasing goods such as Motor Cars, Automobile Parts, Chassis fitted with engines and parts and accessories from registered domestic suppliers on which full GST at applicable rates is being charged, and exporting the same under Legal Undertaking ( LUT ) without payment of IGST. The applicant is availing input tax credit (ITC) on such purchases along with input services and capital goods. c. The applicant now proposes to undertake both the following activities,- i. Export on payment of applicable IGST The applicant wants to export on payment of IGST without LUT a portion of the above goods on which full GST paid at the time of procurement. Since, such exports are treated as zero-rated supplies und ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... entral Tax (Rate) dated the 23rd October, 2017 published in the Gazette of India, Extraordinary, Part II, Section 3, Sub-section (i), vide number G.S.R. 1320 (E) dated the 23rd October, 2017 or notification no. 41/2017- Integrated Tax (Rate) dated the 23rd October, 2017 published in the Gazette of India, Extraordinary, Part II, Section 3, Sub-section (i), vide number G.S.R. 1321 (E) dated the 23rd October, 2017 or notification No. 78/2017 -Customs dated the 13th October, 2017 published in the Gazette of India, Extraordinary, Part II, Section 3, Sub-section (i), vide number G.S.R. 1272 (E) dated the 13th October or notification No. 79/2017-Customs dated the 13th October, 2017, published in the Gazette of India, Extraordinary, Part II, Section 3, Subsection (i), vide number G.S.R. 1299 (E) dated the 13th October, 2017 . (emphasis supplied) e. The above Rule has been substituted vide notification No.39/2018- Central Tax dated 04.09.2018 retrospectively with effect from 23.10.2017 as below: (10) The persons claiming refund of integrated tax paid on exports of goods or services shall not have,- (a) received supplies on which the benef ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) Whether the above restriction prohibits claim of refund of IGST paid in its entirety even on exports where the goods have been procured on payment of full rate of GST by the person who procures only a small quantity of goods at concessional rate of 0.10% GST under Merchant Export Scheme as provided under Notification No.40/2017 - Central Tax (Rate)? (iii) In case of (ii) above is held as the restriction as applicable under Notification 3/2018 - Central Tax amending Rule 96(10) of the Central GST Rules 2017 (later substituted by Notification 39/2018- Central Tax dated 04.09.2018 retrospectively with effect from 23.10.2017), what is the period for which such restriction shall apply? 4. The applicant has submitted that the intent behind the introduction of Rule 96(10) of the Central GST Rules, 2017 is to ensure that the exporter does not utilize the input tax credit availed on other domestic supplies received for making the payment of IGST on export of goods. The implication of the said sub-rule has also been clarified by the Government in paragraph 7 of Circular No.45/19/2018- GST dated 30.05.2018 issued by the Central Board of Indirect Taxes and Customs. He ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ub-rule (10) of Rule 96 of the Central GST Rules, 2017 and has been exporting goods under LUT without payment of tax. Now the applicant proposes to export those goods on payment of IGST which have been procured without any concessions or exemptions as aforesaid. The payment of IGST is proposed to be made by utilising the available input tax credit or in cash, as the case may be. Thereafter, the applicant proposes to claim refund of such IGST paid, in accordance with the provisions of Section 16 of the IGST Act, 2017 and the CGST Rules, 2017. Further, the applicant additionally wishes to procure some of its goods at concessional rate of GST @ 0.10% complying with procedures as prescribed vide Notification No. 40/2017 - Central Tax (Rate) and export such goods under LUT without payment of IGST. Hence, in the same tax period, the applicant would be:- (a) procuring goods at concessional rate of GST under Notification No. 40/2017 - Central Tax (Rate) which are exported under LUT without payment of IGST, and (b) also procuring of other goods on which no concession or exemption are availed which are exported on payment of IGST. 4.3 The applicant further subm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... No.40/2017 -Central Tax (Rate) would be a grossly narrow and erroneous interpretation of the law, which is against the principles of justice. Such an interpretation would be against the very basic and settled principle that exports must be zero-rated and taxes should not be exported since the goods or services are consumed outside the country. GST being a consumption based tax, the goods exported by the applicant would be consumed outside the country and hence should not be taxes and denial of refund on all exports would be against the very basic essence of GST and as such unconstitutional. 4.6 Further, the applicant argues that even assuming but not admitting that the law maker intends to restrict the option of exporting goods on payment of IGST immediately upon procuring even a small portion of goods at concessional rate under Notification No.40/2017 - Central Tax (Rate), the fact that the law does not provide for a time limit upto which such restriction on the option to export on payment of IGST applies makes implementing such an interpretation absolutely unviable and impractical. Hence it corroborates the interpretation as aforesaid that the restriction on export with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d the 13th October, 2017 or notification No. 79/2017-Customs, dated the 13th October, 2017, published in the Gazette of India, Extraordinary, Part II, Section 3, Sub-section (i), vide number G.S.R 1299 (E), dated the 13th October, 2017 except so far it relates to receipt of capital goods by such person against Export Promotion Capital Goods Scheme. It is very clear from the above that the restriction is on the persons claiming refund of IGST paid that he must not have received supplies on which the benefit of the Government of India, Ministry of Finance notification No. 40/2017-Central Tax (Rate), dated the 23rd October, 2017 has been availed, and not related to the individual transactions. If the person has utilized the benefit of the said notification on his inward supplies, then he would not be eligible to the scheme of paying IGST on the export of goods and then claiming the entire amount of IGST paid as refund on such goods being exported. But this does not amount to denial of refund of input tax credit and he can always avail the benefit of zero-rated supplies on the basis of LUT. 5.2 The scheme of Merchant Exports was brought into effect by Notification N ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) dated the 13th October, 2017 or notification No. 79/2017-Customs dated the 13th October, 2017 published in the Gazette of India, Extraordinary, Part II, Section 3, Sub-section (i), vide number G.S.R 1299 (E) dated the 13th October, 2017. ; 5.4 Hence sub-rule (10) of rule 96 has come into effect from 23.10.2017 which is also the date of effect of Notification No. 40/2017 - Central Tax (Rate) dated 23.10.2017. Hence there is an alignment of the Merchant Export scheme and the refund of IGST paid on exports. 5.5 Hence it is clear that the persons who have procured goods utilising the benefits of the Notification No. 40/2017 - Central Tax (Rate) dated 23.10.2017 are not eligible to claim refund of the IGST paid on the export of such goods by virtue of the Rule 96(10). 5.6 Regarding the interpretation of the legality of the provision, this authority does not have such powers and hence the same is not discussed. 6. In view of the foregoing, we rule as follows RULING The persons who have procured goods by utilising the benefit of Notification No. 40/2017 - Central Tax (Rate) dated 23.10.2017 are not eligible to claim refund of th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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