Under GST, Exports and supplies to SEZ are considered to be zero rated supply as per section 16 of IGST Act, 2017. As per section 16(3), a registered person making zero rated supply shall be eligible to claim refund under either of the following options, namely:-
(a) he may supply goods or services or both under bond or Letter of Undertaking without payment of integrated tax and claim refund of unutilised input tax credit; or
(b) he may supply goods or services or both on payment of integrated tax and claim refund of such tax paid on goods or services or both supplied, in accordance with the provisions of section 54 of the Central Goods and Services Tax Act or the rules made thereunder.
As per section 54(1), any person claiming refund of any tax & interest paid on such tax may make an application before the expiry of two years from the relevant date in such form and manner as may be prescribed.
Accordingly, rule 96 of CGST rules, 2017 has been prescribed for claiming refund of IGST paid on goods or services exported out of India.
Rule 96(10) of CGST rules, 2017 places restriction on claiming of refund of IGST paid on exports of Goods or Services in following cases:
(a) Person claiming the refund received supplies on which the benefit of following notifications has been availed:
(b) Person claiming the refund has availed the benefit of following two notifications:
Multiple amendments have been made in rule 96(10) over a period of time since its introduction by various notifications. Two most relevant notifications, Notification no.53/2018 & Notification no.54/2018 were published on 9th October, 2018.
Notification no.53/2018, substituted rule 96(10) retrospectively with effect from 23rd October, 2017 restricting refund of IGST paid, in case person claiming the refund received supplies on which benefits of Notification no.78/2017-Customs or Notification no.79/2017-Customs has been availed.
Notification no.54/2018, again substituted rule 96(10) w.e.f. the date of publishing in the official gazette i.e. 9th October,2018 restricting the refund of IGST paid, in case person claiming the refund availed the benefits of Notification no.78/2017-Customs or Notification no.79/2017-Customs.
As Notification no.53/2018, restricted refund w.e.f. 23rd October, 2017 & non-availability of provision restricting refund from the beginning i.e. 1st July, 2017, IGST paid on exports from 1st July,2017 till 22nd October, 2018 shall be granted.
Notification no.79/2017 seeks to amend various customs exemption notification to exempt Integrated Tax/Cess on import of goods under AA/EPCG schemes.
As Notification no.53/2018, specifically restricts refund in case supplier availed the benefits of Notification no.79/2017, which in any case can’t be availed by supplier as only importer of the goods can availed, Assessee shall be allowed refund of IGST paid for the exports made during 23rd October, 2017 to 8th October, 2018.
Refund of IGST paid on exports made subsequent to 8th October, 2018 shall not be granted as restricted by Notification no.54/2018.
Further, CBIC Circular 125/44/2019 (Para no. 52) also clarifies any exporter who himself/herself imported any inputs/capital goods in terms of notification Nos. 78/2017-Customs and 79/2017-Customs both dated 13.10.2017, before the issuance of the notification No. 54/2018 – Central Tax dated 09.10.2018, shall be eligible to claim refund of the Integrated tax paid on exports. Further, exporters who have imported inputs in terms of notification Nos. 78/2017-Customs, after the issuance of notification No. 54/2018 – Central Tax dated 09.10.2018, would not be eligible to claim refund of integrated tax paid on exports.
In C/SCA/15833/2018 Cosmo Films Limited Vs Union of India on 20th October, 2020 it was decided by Hon’ble Gujrat High Court that provision of Notification no. 54/2018 shall apply retrospectively instead of its date of publication in its official gazette.However, the case was referred in C/SCA/4782/2021 Gujrat Dyestuff Manufactures Association Vs Union of India dated 12th March, 2021 attention was drawn towards para 1(2) of notification No. 54/2018 – Central Tax dated 09.10.2018, which particularly prescribes the date of enforcement of the notification prospectively and pleaded to relook in order passed in C/SCA/15833/2018 Cosmo Films Limited Vs Union of India. Further, Hon’ble Gurjrat High Court in R/SPECIAL CIVIL APPLICATION NO. 3653 of 2021 I-Tech Plast India Pvt Ltd vs State of Gujrat allowed re-credit of the ITC utilised in IGST paid on the repayment of erroneous refund credited to the account of assesse.
Conclusion: If assesse is holding AA license licence & export the goods on the payment of IGST shall be eligible for refund if he availing the benefit of Notification no.79/2017-Customs only (receiving no domestic supplies covered under Notification No.48/2017-CT, Notification No. 40/2017-CT (Rate), Notification No.-41-IT (Rate)) from 1st of Jul,2017 till 8th October, 2018. 9th October, 2018 onwards, Assesse shall not be eligible for refund. In case any erroneous refund has been credited to assessee post 8th October, 2018, Assessee will have to repay it back along with applicable interest but he/she can claim the credit of such amount (Only principal) taking ground of judgement given in Hon’ble High Court Judgment in case of I-Tech Plast India Pvt Ltd.