You may please be aware that as per the provisions of GOODS & SERVICE TAX ACT (CGST, SGST, UTGST & IGST), an exporter may export goods either under the following options:
(i) On payment of Integrated Goods & Service Tax (IGST); or
(ii) Without payment of tax under Letter of Undertaking (LUT) or Bond.
In both the above cases, there is provision of REFUND as stipulated under section 16(3) of the IGST Act, 2017 which stated that-
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 subject to such conditions, safeguards and procedure as may be prescribed, without payment of integrated tax and claim refund of unutilized input tax credit; or
(b) he may supply goods or services or both, subject to such conditions, safeguards and procedure as may be prescribed, 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 there under.
Whereas “zero rated supply” means any of the following supplies of goods or services or both, namely:––
(a) export of goods or services or both; or
(b) supply of goods or services or both to a Special Economic Zone developer or a Special Economic Zone unit.
As per the provisions of Section 54 (3) of the CGST Act, 2017, registered person may claim refund of any unutilized input tax credit at the end of any tax period. Provided that no refund of unutilized input tax credit shall be allowed in cases other than––
(i) zero rated supplies made without payment of tax…………………………
Rule 89-97A of the CGST Rules, 2017 provides for the mechanism of filing application of REFUND CLAIM, its processing and sanction.
REFUND OF ITC ON EXPORT OF GOODS & SERVICES WITHOUT PAYMENT OF INTEGRATED TAX”
At present, for filing claim of REFUND of tax paid on inputs & input services pertinent to goods exported without payment of Integrated Tax, an online utility cum form is available on the portal namely GST RFD-01A- “Refund of ITC on Export of Goods & Services without payment of Integrated Tax”. As provided under Circular No. 17/17/2017-GST date 15.11.2017, this form needs to be filed on the common portal. The amount of credit claimed as refund would be debited in the electronic credit ledger and proof of debit needs to be generated on the common portal. Printout of the filed form needs to be submitted before the jurisdictional GST officer along with necessary documentary evidences.
Following the above procedure, the exporters are filing the refund claim with the respective jurisdictional authorities- CENTER or STATE.
REFUND OF INTEGRATED TAX PAID ON EXPORT GOODS/SERVICES
Refund of IGST paid on export goods/services is governed by rule 96 of the CGST Rules, 2017 wherein it is stipulated that- The shipping bill filed by an exporter shall be deemed to be an application for refund of integrated tax paid on the goods exported out of India and such application shall be deemed to have been filed only when:-
(a) the person in charge of the conveyance carrying the export goods duly files an export manifest or an export report covering the number and the date of shipping bills or bills of export; and
(b) the applicant has furnished a valid return in FORM GSTR-3or FORM GSTR-3B, as the case may be;
Upon receipt of the information regarding furnishing of a valid return in FORM GSTR-3 or FORM GSTR-3B, as the case may be, from the common portal, the system designated by the Customs shall process the claim for refund and an amount equal to the integrated tax paid in respect of such export shall be electronically credited to the bank account of the applicant. However, for the time being, the Central Govt. has provided a separate portal wherein at Table # 6A, the information relating to exports is required to be furnished after return in form GSTR-3B is furnished.
However, despite of filing Table # 6A and GSTR-3B for the relevant tax period(s), the refund of Integrated Tax (IGST) paid on export goods has not been granted and is kept pending with the CUSTOMS for the following reasons communicated vide circular #42/2017-Customs dt. 07.11.2017:
1. Incorrect SB Number in GSTR-1
2. Invoice Number and IGST paid amount mis-match.
3. EGM Error
4. Wrong Bank Account given to Customs.
In the meantime, Trade/ Public Notices were also issued by relevant CUSTOMS COMMISSIONERATES informing reasons for non-sanction of refund and pendency thereon. Amongst them, we would like to refer recent Trade/Public Notice No. 25/2017 issued from the Office of the Principal Commissioner of Customs (Preventive), Jodhpur date 28.11.2017 wherein following reasons/discrepancies enumerated:
1. Incorrect details in Shipping Bill
It was mentioned that there are cases where details mentioned in the shipping bill are not correct and thus there is a mismatch between details in the shipping bill and GST returns. For example- There are cases where at ITEM level, instead of mentioning taxable value under the heading TAX VALUE, the tax rate has been mentioned.
2. Bank details not verified by PFMS
3. Non filing of Table 6A for the month of August
4. Non-filing of GATEWAY EGM by shipping lines.
5. Multiple GST Invoices
It is because of the above stated reasons, the refund claims have been kept pending for quite a long time, which is really a matter of deep concern for the exporters as a significant sum of money is being stuck and working capital cycle is literally hampered, increasing chances of almost “finance-drain”.
These Circulars/ Trade Notices also stipulates that the above error/mistakes may be rectified with the Customs immediately; thereafter only, the refund may be released, as the as the Customs system is designed to automatically grant refunds without involvement of any officer by matching information that is furnished on GSTN portal and Customs system, the onus is on the exporters to fill in all the details accurately. Exporters may therefore take due precaution to ensure that no errors creep in while filing Table 6A of GSTR 1 of August 2017 and on wards
INTERIM RELIEF TO EXPORTERS
The above illustrative instances are only technical/latent discrepancies/ mistakes apparent on the record like that the invoice number (GST Invoice) is not matching/ tallying with that mentioned on the shipping bill; ISGT amount paid (as mentioned on the invoice and in return-GSTR3B) not matching with that mentioned on the shipping bill, etc. It is submitted that notwithstanding these typographical/ technical lapses/ errors, it remains the fact that the goods are actually exported out of India, and these exports fall within the meaning of “zero rated supply” as mentioned in preceding paras.
Till the time the relevant discrepancies/mistakes are corrected/rectified at each shipping bill level at different port of customs, which practically seems a herculean task, a considerable sum of money of exporters’ shall remain blocked, which can lead to severe liquidity crunch and may ignite situation of financial insolvency and closure of business. To add to the ailment, relevant authorities at most of the ports/ICDs, etc., are even not able to communicate the underlying deficiencies specific to a particular exporter. Nor any corrective action seems possible such as amendment of certain field appearing on the shipping bill like INVOICE NUMBER; TAXABLE VALUE; TAX AMOUNT, etc. Even CHAs (Custom House Agents) are not able to provide any aid in this regard. It is also informed that amendment in shipping bills after generation of EGM is not at all possible. Even till date, there is no option available on the ICEGATE portal to view shipping bill wise data online, the reference of which is made in all these circulars/trade notices.
Therefore, considering the genuineness of the transaction and financial starving of the exporters, an interim refund of integrated tax may please be granted immediately and the same should not be held up for the reasons of procedural/apparent mistakes on the record. In fact, with the refund, it can be made mandatory to submit copies of relevant shipping bill; Bill of Lading/ Airway Bill/ Railway Receipt; & Bank Realization Certificates (BRCs) evidencing the fact that exports have actually taken place.
In fact, since the exports are treated as “zero rated supplies”, the ultimate burden of tax should not be upon the exporter and therefore there is provision of either claiming refund of ITC paid on input/ input services, or claiming refund of integrated tax paid on exports. Hence, if refund cannot be released pending rectification of procedural mistakes, which seems the only thrust matter, the Government may at least allow re-credit of input tax credit (ITC) utilized for making payment of IGST, considering the revenue-neutrality.