Yesterday Government has issued two Notifications (Notification No. 53/2018 – Central Tax & Notification No. 54/2018 – Central Tax) making certain changes in Rule 89 & 96 of the CGST Rules, 2017. Gist of the changes are as under:
Rule 89: Said Rule deals with the refund of tax in cases, other than IGST paid on export of goods. Hence cases such as refund of accumulated input tax credit on account of zero-rated supplies, refund under inverted rate structure, etc. are covered under the said Rule. Sub-rule (4B) of the said Rule covers cases where refund of input tax credit on inputs received under certain stipulated Notifications (merchant export, Advance Authorization, EPCG, etc.) as well as inputs or input services used in making export of goods shall be available. Now vide Notification No. 54/2018 – Central Tax dated 9th October, 2018, said sub-rule (4B) has been amended.
Earlier sub-rule was as under:
“(4B) In the case of supplies received on which the supplier has availed the benefit of the Government of India, Ministry of Finance, notification No. 40/2017-Central Tax (Rate) dated the 23rd October, 2017 published in the Gazette of India, Extraordinary, Part II, Section 3, Sub-section (i), vide number G.S.R 1320 (E) dated the 23rd October, 2017 or notification No. 41/2017-Integrated Tax (Rate) dated the 23rd October, 2017 published in the Gazette of India, Extraordinary, Part II, Section 3, Sub-section (i), vide number G.S.R 1321(E) dated the 23rd October, 2017 or notification No. 78/2017-Customs dated the 13th October, 2017 published in the Gazette of India, Extraordinary, Part II, Section 3, Sub- section (i), vide number G.S.R 1272(E) dated the 13th October, 2017 or notification No. 79/2017-Customs dated the 13th October, 2017 published in the Gazette of India, Extraordinary, Part II, Section 3, Sub-section (i), vide number G.S.R 1299(E) dated the 13th October, 2017, or all of them, refund of input tax credit, availed in respect of inputs received under the said notifications for export of goods and the input tax credit availed in respect of other inputs or input services to the extent used in making such export of goods, shall be granted”
Amended sub-rule is as under which is made effective from the 09th October, 2018:
“(4B) Where the person claiming refund of unutilised input tax credit on account of zero rated supplies without payment of tax has –
(a) received supplies on which the supplier has availed the benefit of the Government of India, Ministry of Finance, notification No. 40/2017-Central Tax (Rate) dated the 23rd October, 2017, published in the Gazette of India, Extraordinary, Part II, Section 3, Sub-section (i), vide number G.S.R 1320 (E), dated the 23rd October, 2017 or notification No. 41/2017-Integrated Tax (Rate) dated the 23rd October, 2017, published in the Gazette of India, Extraordinary, Part II, Section 3, Sub-section (i), vide number G.S.R 1321(E), dated the 23rd October, 2017; or
(b) availed the benefit of notification No. 78/2017-Customs dated the 13th October, 2017, published in the Gazette of India, Extraordinary, Part II, Section 3, Sub- section (i), vide number G.S.R 1272(E), dated the 13th October, 2017 or notification No. 79/2017-Customs dated the 13th October, 2017, published in the Gazette of India, Extraordinary, Part II, Section 3, Sub-section (i), vide number G.S.R 1299(E), dated the 13th October, 2017, the refund of input tax credit, availed in respect of inputs received under the said notifications for export of goods and the input tax credit availed in respect of other inputs or input services to the extent used in making such export of goods, shall be granted.”
Implications:
1. Earlier sub-rule (4B) permitted claim of refund, in case of an exporter, of input tax credit availed in respect of inputs received under the following notifications for export of goods:
a. notification No. 40/2017-Central Tax (Rate) – Said Notification covers supplies made to merchant exporter at the rate of 0.05% each in case of CGST & SGST.’’
b. notification No. 41/2017-Integrated Tax (Rate) – Said Notification covers supplies made to merchant exporter at the rate of 0.1% in case of IGST.
c. notification No. 78/2017-Customs – Said Notification read with parent Notification provides exemption from Customs Duty & IGST under Customs on goods imported or procured from Public or Private Warehouse or from International Exhibition by Hundred per cent EOU, STP or EHTP units. Said exemption has now been extended till 31.03.2019.
d. notification No. 79/2017-Customs – Said Notification read with parent Notification provides exemption from Customs Duty & IGST under Customs on imports under EPCG, Advance Authorization, Advance Authorization for Annual Requirements, Advance Authorization for Deemed Export, Advance Authorization for export of Prohibited Goods and Narrow Woven Fabrics, etc. Said exemption has now been extended till 31.03.2019.
It also permitted refund of input tax credit availed in respect of other inputs or input services to the extent used in making export of goods.
As per the amendment, said refund shall now be allowed only in cases where the person is claiming refund of unutilised input tax credit on account of zero rated supplies without payment of tax. Hence person making zero rated supplies with payment of tax shall not be eligible for refund.
2. Cases covered under notification No. 78/2017-Customs & No. 79/2017-Customs were posing a challenge under the earlier sub-rule (4B) since it covered cases where the person claiming refund has received supplies on which “supplier has availed the benefit”. Transactions covered under the referred Notifications are such where the exporter avails the benefit on imports. Hence the amendment has cured the said defect by providing that the cases where the person claiming refund “has availed the benefit” under the referred notifications shall be entitled for the refund under the said sub-rule.
It may be noted that the input tax credit in respect of which refund is claimed under the said sub-rule shall not be included while claiming refund of accumulated input tax credit under sub-rule (4). Sub-rule (4) deals with the refund of unutilized credit in the case of zero-rated supply of goods or services or both without payment of tax as per the stipulated formula.
Rule 96: Said Rule deals with the refund of IGST paid on export of goods or services. Earlier Rule 96(10) as amended vide Notification No. 39/2018 dt 04.09.2018, made applicable from 23.10.2017, provided as under:
“(10) The persons claiming refund of integrated tax paid on exports of goods or services should not have-
(a) received supplies on which the benefit of the Government of India, Ministry of Finance notification No. 48/2017-Central Tax, dated the 18th October, 2017 published in the Gazette of India, Extraordinary, Part II, Section 3, Sub-section (i),vide number G.S.R 1305 (E), dated the 18th October, 2017 or notification No. 40/2017-Central Tax (Rate) dated the 23rd October, 2017 published in the Gazette of India, Extraordinary, Part II, Section 3, Sub-section (i),vide number G.S.R 1320 (E), dated the 23rd October, 2017 or notification No. 41/2017-Integrated Tax (Rate) dated the 23rd October, 2017 published in the Gazette of India, Extraordinary, Part II, Section 3, Sub-section (i), vide number G.S.R 1321 (E), dated the 23rd October, 2017 has been availed; or
(b) availed the benefit under notification No. 78/2017-Customs dated the 13th October, 2017 published in the Gazette of India, Extraordinary, Part II, Section 3, Sub-section (i),vide number G.S.R 1272(E), dated the 13th October, 2017 or notification No. 79/2017-Customs dated the 13th October, 2017 published in the Gazette of India, Extraordinary, Part II, Section 3, Sub-section (i),vide number G.S.R 1299 (E), dated the 13th October, 2017.”
Above sub-rule was made applicable retrospectively from 23.10.2017. Said retrospective amendment created chaos for the exporters since the exporter who has availed the benefit under the given notifications (e.g. Advance Authorization under notification No. 79/2017-Customs) were prohibited from claiming refund of IGST paid on the export of goods. Hence vide Notification No. 53/2018 – Central Tax & Notification No. 54/2018 – Central Tax, following changes have been made:
For period from 23.10.2017 to 08.10.2018: Sub-rule (10) for the said period is substituted as under vide Notification No. 53/2018 – Central Tax:
“(10) The persons claiming refund of integrated tax paid on exports of goods or services should not have received supplies on which the supplier has availed the benefit of the Government of India, Ministry of Finance, notification No. 48/2017-Central Tax, dated the 18th October, 2017, published in the Gazette of India, Extraordinary, Part II, Section 3, Sub-section (i), vide number G.S.R 1305 (E), dated the 18th October, 2017 or notification No. 40/2017-Central Tax (Rate) dated the 23rd October, 2017, published in the Gazette of India, Extraordinary, Part II, Section 3, Sub-section (i), vide number G.S.R 1320 (E), dated the 23rd October, 2017 or notification No. 41/2017-Integrated Tax (Rate) dated the 23rd October, 2017, published in the Gazette of India, Extraordinary, Part II, Section 3, Sub-section (i), vide number G.S.R 1321 (E), dated the 23rd October, 2017 or notification No. 78/2017-Customs dated the 13th October, 2017, published in the Gazette of India, Extraordinary, Part II, Section 3, Sub-section (i), vide number G.S.R 1272(E), dated the 13th October, 2017 or notification No. 79/2017-Customs dated the 13th October, 2017, published in the Gazette of India, Extraordinary, Part II, Section 3, Sub-section (i), vide number G.S.R 1299 (E) dated the 13th October, 2017.”
Implications:
Contents of the said sub-rule are exactly similar to the one as appearing before the amendment vide Notification No. 39/2018 dt 04.09.2018. The implications of the said restoration are that an exporter who has availed the benefit under notification No. 78/2017-Customs or notification No. 79/2017-Customs (e.g. Advance Authorization or EPCG) shall be entitled to claim refund of IGST paid on export of goods. Readers may peruse our article dated 14th July, 2018 (copy attached) wherein we have analysed the text of the substituted sub-rule in detail.For the period on or after 09.10.2018: On or after 09th October, 2018, sub-rule (10) shall be as under vide Notification No. 54/2018 – Central Tax:
“(10) The persons claiming refund of integrated tax paid on exports of goods or services should not have –
(a) received supplies on which the benefit of the Government of India, Ministry of Finance notification No. 48/2017-Central Tax, dated the 18th October, 2017, published in the Gazette of India, Extraordinary, Part II, Section 3, Sub-section (i), vide number G.S.R 1305 (E), dated the 18th October, 2017 except so far it relates to receipt of capital goods by such person against Export Promotion Capital Goods Scheme or notification No. 40/2017-Central Tax (Rate) dated the 23rd October, 2017, published in the Gazette of India, Extraordinary, Part II, Section 3, Sub-section (i), vide number G.S.R 1320 (E), dated the 23rd October, 2017 or notification No. 41/2017-Integrated Tax (Rate) dated the 23rd October, 2017, published in the Gazette of India, Extraordinary, Part II, Section 3, Sub-section (i), vide number G.S.R 1321 (E), dated the 23rd October, 2017 has been availed; or
(b) availed the benefit under notification No. 78/2017-Customs dated the 13th October, 2017, published in the Gazette of India, Extraordinary, Part II, Section 3, Sub-section (i), vide number G.S.R 1272(E), dated the 13th October, 2017 or notification No. 79/2017-Customs dated the 13th October, 2017, published in the Gazette of India, Extraordinary, Part II, Section 3, Sub-section (i), vide number G.S.R 1299 (E), dated the 13th October, 2017 except so far it relates to receipt of capital goods by such person against Export Promotion Capital Goods Scheme.”
Implications:
Now, as per the above sub-rule, w.e.f. 09th October, 2018, if any person claiming refund of IGST paid on export of goods or services should not have received any supplies covered under clause (a) nor should have availed any benefit of the notifications covered under clause (b) (which includes Advance Authorization). Also an exception has been created wherein the person will still be able to export the goods on payment of IGST and claim refund even if IGST exemption has been claimed on capital goods under EPCG Scheme. In other words, if IGST exemption is claimed (e.g. against Advance Authorization), a person cannot export goods or services on payment of IGST and claim refund. He has to compulsorily export under LUT and claim refund of the accumulated credit. However, if such person has only availed the benefit in respect of capital goods under EPCG, he can still export on payment of IGST and claim refund of the same.
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R 96(10) restricts exporter to opt for refund of unutilised ITC and not to go with paymen tof tax option however this restriction seems is not for supply to SEZ units..
Pls confirm
If we are claiming benefit of advance licence to exempt custom duty but not taking benefit of advance licence in claiming IGST exemption in import, does it mean that we can not do duty paid export and claim refund due to above notificaiton. we are claiming custom exemption but not taking IGST exemption so we are claiming partial benefit of notification no 18. 78-79/2018 amends the original notification no-18. please clarify/
What is the logic behind this amendment?
Now, As a single entity, I do have my two business segment. 1. I am manufacturer and exporting finished goods by availing Advance authorisation benefit. So I am not entitled export with payment of tax and claim refund. 2. I am also exporting some services which are not related anyhow with my manufacturing business.
So according to this notification, if i have availed benefit of Adv autho. I am not entitled to export service with payment of tax and claim refund… (no matter my export of services is not at all related to my finished goods advance license .. as its totally separate business)