GST Refund on Export of Goods – Understanding Adjusted Total Turnover

Introduction

In the course of handling GST refund matters, a recurring issue that continues to arise is the computation of “Adjusted Total Turnover” under Rule 89(4) of the CGST Rules, 2017.

Recently, a notice was received from the GST department seeking clarification on the value adopted in the computation of adjusted total turnover in a refund application filed for export of goods. This highlights the ongoing confusion not only among taxpayers but also at the departmental level.

Statutory Framework

The computation of refund of unutilized Input Tax Credit (ITC) in case of zero-rated supplies is governed by Rule 89(4) of the CGST Rules, 2017.

As per Explanation (4)(E) to Rule 89, “Adjusted Total Turnover” is defined as:

The sum total of:

• • Turnover in a State or Union Territory (excluding turnover of services), and
  • Turnover of zero-rated supply of services and non-zero-rated supply of services,
    while excluding the value of exempt supplies (other than zero-rated supplies), during the relevant period.

Value of Export of Goods – Key Amendment

An important clarification was introduced via Notification No. 14/2022 – Central Tax dated 05.07.2022, wherein it was provided that:

The value of goods exported out of India shall be taken as:

• FOB value declared in the Shipping Bill / Bill of Export, or
• Value declared in the tax invoice or bill of supply,
  whichever is lower.

This amendment plays a crucial role in determining the value of zero-rated supply of goods for refund purposes.

Departmental Clarification

Subsequently, Circular No. 197/09/2023–GST dated 17.07.2023 clarified the methodology for computation:

The Circular provides that, for the purpose of calculating Adjusted Total Turnover, including “turnover in a State or a Union Territory”, the value of zero-rated supplies must be taken consistently with the value adopted in the numerator, i.e., as determined in accordance with the prescribed method for computation of turnover of zero-rated supply of goods.

Therefore, the value of zero-rated supply considered in the numerator must be consistently adopted in the denominator, i.e., in Adjusted Total Turnover.

Practical Implication

In practice, taxpayers often face a mismatch because:

• GSTR-1 reflects invoice value, whereas
• Refund computation may be based on FOB value (if lower)

This difference frequently leads to:

• Departmental queries
• Refund delays
• Issuance of notices

Key Principle – Consistency

The most critical takeaway from the legal provisions and clarifications is:

The value adopted for export turnover must be consistently used in both numerator and denominator while computing refund.

In other words:

• If FOB value is adopted for export turnover,
• The same FOB value must be considered in Adjusted Total Turnover.

Conclusion

The issue of Adjusted Total Turnover is not complex but requires careful attention to statutory provisions and departmental clarifications.

Many disputes arise not due to interpretation of law, but due to inconsistent application of values in the refund formula.