Advocate R C Verma
The Central Government vide Notification No. 40/2017-Central Tax(Rate), dated:23rd October, 2017 has exempted intra-state supply of taxable goods by a registered supplier from so much of the central tax leviable thereon under section 9 of the Central Goods and Service Tax Act, 2017, as in excess of the amount calculated at the rate of 0.05% , subject to certain conditions specified under the notification . And similar notifications have also been issued under the Integrated/State/Union Territory Tax.
2. While issuing the aforesaid notifications, it has been not visualized that the supplier of such goods to the merchant exporters will get accumulation of GST Input Tax credit, as being such supplies to be charged at 0.1% of the total tax leviable. This accumulation will get increased with each such supply made to the merchant exporters.
3. REFUND OF ACCUMULATED CREDIT IS NOT ADMISSIBLE
Section 54(3) of the Central Goods and Service Tax Act, 2017 laid down the provision for claiming refund of unutilized input tax credit at the end of the tax period. The aforesaid provision is reproduced below for easy reference:
Section 54(3):- Subject to the provisions of sub-section (10), a registered person may claim refund of any unutilised input tax credit at the end of any tax period:
Provided that no refund of unutilised input tax credit shall be allowed in cases other than––
(i) zero rated supplies made without payment of tax;
(ii) where the credit has accumulated on account of rate of tax on inputs beinghigher than the rate of tax on output supplies (other than nil rated or fully exempt supplies), except supplies of goods or services or both as may be notified by the Government on the recommendations of the Council:
From the perusal of the above statutory provision, it can be seen that refund of unutilized input tax credit can be claimed only in the following two situations:
(a) First, where zero rated supplies made without payment of tax
In view of payment of an amount of 0.1% of the total tax payable on such supplies, it cannot be treated as zero rated supply without payment of tax. Hence, refund cannot be claimed under this provision.
(b) Now , let us take the second situation given under section 54(3) ibid.
Here, it is the case where the credit has accumulated on account of rate of tax on inputs being higher than the rate of tax on output supplies. From the perusal of the notification cited above which exempts tax in excess of the amount calculated at the rate of 0.1% of the total tax payable. Obviously, it is not a case of change in rate of tax either on inputs or services.
In view of above, it appears that above notification issued by the Central Government has not taken care of the suppliers who will get accumulation of credit and will not be entitled of any refund, despite contributing in exporting the goods indirectly.
Author: R C Verma is the Author of this article and is an Advocate by profession. The Author can be reached at firstname.lastname@example.org/Mobile:09810525780
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