Background:
In the 54th GST Council Meeting held on September 09, 2024 recommended to clarify that where the inputs were initially imported without payment of integrated tax and compensation cess by availing benefits under Notification No. 78/2017- Customs dated October 13, 2017 or Notification No. 79/2017-Customs dated October 13, 2017, but IGST and compensation cess on such imported inputs are subsequently paid, along with applicable interest, and the Bill of Entry in respect of the import of the said inputs is got reassessed through the jurisdictional Customs authorities to this effect, then the IGST paid on exports, refunded to the said exporter shall not be considered to be in contravention of provisions of sub-rule (10) of rule 96 of the Central Goods and Services Rules, 2017 (“the CGST Rules”).
Further, considering the difficulty being faced by the exporters due to restriction in respect of refund on exports, imposed vide Rule 96(10), Rule 89(4A) & Rule 89(4B) of the CGST Rules in cases where benefit of the specified concessional/ exemption notifications is availed on the inputs, the Council recommended to prospectively omit Rule 96(10), Rule 89(4A) & Rule 89(4B) from CGST Rules. This will simplify and expedite the procedure for refunds in respect of such exports.
Thereafter, vide Circular No. 233/27/2024-GST dated September 10, 2024 the CBIC provided Clarification regarding regularization of refund of IGST availed in contravention of Rule 96(10) of the CGST Rules, in cases where the exporters had imported certain inputs without payment of integrated taxes and compensation cess.
Now:
The CBIC vide Notification No. 20/2024 – Central Tax dated October 08, 2024 has omitted some definitions in Rule 89 of the CGST Rules which were required to be consideration for computation of GST Refund which reads as follows:
(a) in sub-rule (4) of Rule 89 of the CGST Rules,–
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After |
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(B) “Net ITC” 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; |
(B) “Net ITC” means input tax credit availed on inputs and input services during the relevant period |
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(C) “Turnover of zero-rated supply of goods” means the value of zero-rated supply of goods made during the relevant period without payment of tax under bond or letter of undertaking or the value which is 1.5 times the value of like goods domestically supplied by the same or, similarly placed, supplier, as declared by the supplier, whichever is less, other than the turnover of supplies in respect of which refund is claimed under sub-rules (4A) or (4B) or both; |
(C) “Turnover of zero-rated supply of goods” means the value of zero-rated supply of goods made during the relevant period without payment of tax under bond or letter of undertaking or the value which is 1.5 times the value of like goods domestically supplied by the same or, similarly placed, supplier, as declared by the supplier, whichever is less, |
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(E) “Adjusted Total Turnover” means the sum total of the value of-
(a) the turnover in a State or a Union territory, as defined under clause (112) of section 2, excluding the turnover of services; and
(b) the turnover of zero-rated supply of services determined in terms of clause (D) above and non-zero-rated supply of services,
excluding-
(i) the value of exempt supplies other than zero-rated supplies; and
(ii) the turnover of supplies in respect of which refund is claimed under sub-rule (4A) or sub-rule (4B) or both, if any,
during the relevant period. |
(E) “Adjusted Total Turnover” means the sum total of the value of-
(a) the turnover in a State or a Union territory, as defined under clause (112) of section 2, excluding the turnover of services; and
(b) the turnover of zero-rated supply of services determined in terms of clause (D) above and non-zero-rated supply of services,
[excluding the value of exempt supplies other than zero-rated supplies during the relevant period]; |
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(4A) In the case of supplies received on which the supplier has availed the benefit of the Government of India, Ministry of Finance, notification No. 48/2017-Central Tax dated the 18th October, 2017 published in the Gazette of India, Extraordinary, Part II, Section 3, Sub-section (i), vide number G.S.R 1305 (E) dated the 18th October, 2017, refund of input tax credit, availed in respect of other inputs or input services used in making zero-rated supply of goods or services or both, shall be granted. |
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(4B) Where the person claiming refund of unutilised input tax credit on account of zero rated supplies without payment of tax has – (a) received supplies on which the supplier has availed the benefit of the Government of India, Ministry of Finance, notification No. 40/2017-Central 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 (b) availed the benefit of 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, 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, the refund of input tax credit, availed in respect of inputs received under the said notifications for export of goods 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.
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(5) In the case of refund on account of inverted duty structure, refund of input tax credit shall be granted as per the following formula:- Maximum Refund Amount = {(Turnover of inverted rated supply of goods and services) x Net ITC ÷ Adjusted Total Turnover} – {tax payable on such inverted rated supply of goods and services x (Net ITC÷ ITC availed on inputs and input services)}. Explanation:- For the purposes of this sub-rule, the expressions – (a) Net ITC shall mean input tax credit availed on inputs during the relevant period other than the input tax credit availed for which refund is claimed under sub-rules (4A) or (4B) or both; and (b) “Adjusted Total turnover” and “relevant period” shall have the same meaning as assigned to them in sub-rule (4)
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(5) In the case of refund on account of inverted duty structure, refund of input tax credit shall be granted as per the following formula:- Maximum Refund Amount = {(Turnover of inverted rated supply of goods and services) x Net ITC ÷ Adjusted Total Turnover} – {tax payable on such inverted rated supply of goods and services x (Net ITC÷ ITC availed on inputs and input services)}. Explanation:- For the purposes of this sub-rule, the expressions – (a) Net ITC shall mean input tax credit availed on inputs during the relevant period (b) “Adjusted Total turnover” and “relevant period” shall have the same meaning as assigned to them in sub-rule (4)
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96. Refund of integrated tax paid on goods or services exported out of India.- (10) The persons claiming refund of integrated tax paid on exports of goods or services should not have –
(a) received supplies on which the benefit of the Government of India, Ministry of Finance notification No. 48/2017-Central Tax, dated the 18th October, 2017, published in the Gazette of India, Extraordinary, Part II, Section 3, Sub-section (i), vide number G.S.R 1305 (E), dated the 18th October, 2017 except so far it relates to receipt of capital goods by such person against Export Promotion Capital Goods Scheme or notification No. 40/2017-Central 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 has been availed; or
(b) availed the benefit under 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, 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.
Explanation.- For the purpose of this sub-rule, the benefit of the notifications mentioned therein shall not be considered to have been availed only where the registered person has paid Integrated Goods and Services Tax and Compensation Cess on inputs and has availed exemption of only Basic Customs Duty (BCD) under the said notifications.
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96. Refund of integrated tax paid on goods or services exported out of India.-
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Our Comments:
Effective from October 08, 2024, simplifies the GST refund process by omitting certain provisions that previously imposed restrictions on exporters. Specifically, the omission of Rule 96(10), Rule 89(4A), and Rule 89(4B) from the CGST Rules relieves exporters who initially imported inputs under concessional or exemption notifications but later paid IGST and compensation cess on those inputs. This will ease compliance burdens, expedite refund processes, and provide clarity, addressing the concerns of exporters regarding working capital blockages and delayed refunds.
These amendments streamline procedures and ensure that refunds on zero-rated exports are no longer considered contraventions of earlier provisions, provided the reassessment of the Bill of Entry is completed. The changes to the definitions of “Net ITC” and “Adjusted Total Turnover” further enhance transparency in refund calculations. This overall move is expected to foster a more business-friendly environment, encouraging exports and reducing procedural hurdles.
The Notification can be accessed at: https://a2z-bucket.s3.ap-south-1.amazonaws.com/CBIC_notified_the_Central_Goods_and_Services_Tax_%28Second_Amendment%29_Rules%2C_2024..pdf