According to the provisions of Rule 89(4) sub-rule (C), after considering the Notification No. 16/2020 – Central Tax dated 23rd March, 2020, the definition of calculating turnover has been changed.

Before 23rd March 2020, For calculating the amount of the refund of an Input Tax Credit, turnover was considered as per the amount mentioned in the sales invoice however after the above notification the definition of turnover has been changed for the purpose of claiming refund of an Input Tax credit.

Now the turnover meaning is as per provisions is as mentioned below:

“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.

Explanation:

Value of the export for the On account of claiming refund of, Input Tax Credit or any Integrated Tax paid on such export, will be considered lower of the below two:

a) 1.5 times of the price of the item if sold in the domestic market or Similar item sold; or

b) Price of Item on export Invoice.

Note: Applicant can export at higher than 1.5 times of domestic price however for calculation of refund value will be taken as mentioned in the explanation above.

Exmple_1: A supplier Export 1000 Watches @Rs.100 each. And the supplier selling the same watch in Indian Market at Rs. 70.

See the below-mentioned calculation for the Turnover for claiming refund:

The export value will be as per the lower of below:

  • 100; or
  • 70*1.5=105; Hence Value will be Rs.100

Example_2: A supplier Export 1000 Watches @Rs.100 each. And the supplier selling the same watch in Indian Market at Rs. 60.

See the below-mentioned calculation for the Turnover for claiming refund:

The export value will be as per the lower of below:

  • 100; or
  • 60*1.5=90; Hence Value will be Rs.90

Example_3: A supplier Export 1000 Watches @Rs.100 each. And he is not selling in the domestic market however another supplier selling a similar watch in Indian Market at Rs. 120.

See the below-mentioned calculation for the Turnover for claiming refund:

The export value will be as per the lower of below:

  • 100; or
  • 120*1.5=180; Hence Value will be Rs.100

Rule 96B: Recovery of refund of unutilized input tax credit or integrated tax paid on export of goods where export proceeds not realized:

Earlier as per the provision of this rule, there was no requirement of compliances of Foreign Exchange Management Act,1999 for the realization of proceeds related to export sales however with the “Notification No. 16/2020 – Central Tax” dated 23rd March 2020, the notification made applicable the laws of Foreign Exchange Management Act,1999, (42 of 1999), for the realization of proceeds from the Export sale of goods, to prevent a fraudulent claim of Input Tax Credit against Export of sale of Goods.

1) After the above notification, If any refund of an Input tax credit granted to an applicant on account of export of goods or of any Integrated tax paid on such goods, against which realization is not made in India in full, or in part then the applicant shall deposit the amount so refunded along with the applicable interest under section 50 to the extent of unrealized export revenue.

Further timeline for the realization from the export will be applicable as given in the Foreign exchange management act 1999.

Failure to comply with the above-mentioned provision will results in recovery as per section 73 & 74 considering the erroneous claim of refund by the applicant and recovery will be made including the interest applicable as per section 50.

Provided that if the Reserve Bank of India writes off the requirement of realization of sale proceeds on merits, the refund paid to the applicant shall not be recovered.

2) If the sale proceeds are realized by the applicant after the recovery of the amount as per sub-rule-1, and the applicant produced evidence about such realization within a period of three months from the date of realization of such proceeds, the amount so recovered shall be refunded by the proper officer to the applicant to the extent of realization provided the sale proceeds have been realized within such extended period as permitted by the Reserve Bank of India.”

#GST #Export #Refund #Notification #GSTAmendment #RecentChanges #TaxLaws

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4 Comments

  1. Ritesh Rathi says:

    I had pending refund of year 2019 to be applied.
    I have applied it in August 2020.
    Officer is taking objection with aid of amendment of Rule 89(4)(C) w.r.t. 1.5 times of value of goods in domestic market. This amendment was effective from 23rd March, 2020. My refund is of year 2019.
    Is the officer correct in raising such objection retrospectively.

  2. Hiren vora says:

    Are the two rules intertwined? Applicable for refund filed for period April 2020 onwards or for the refund filed for any period after 1 Apr 2020? How to determine the value of like goods? Again computation of like goods to be made statewise or PAN India? Once refund is repaid, will the amount be refunded in ECL?

    1. garg.nishank@gmail.com says:

      Further understanding of both the Rules is required because in case of goods also FEMA compliances are made applicable.

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