Under section 16 of IGST Act 2017, exports are considered as zero rated supplies. Zero rated supplies means where the GST burden on both inputs and outputs is zero. This is mainly to make Indian Goods and Services competitive in the international market.
GST Act has prescribed ways to achieve this mainly.
1. Export of Goods& Services without payment of tax against Bond/LUT
2. Export of Goods & Services with payment of tax and refund of IGST paid
3. Refund of ITC paid on inputs
4. Export of goods on payment of 1% GST if export through merchant exporter and refund of same
However, there are certain circumstances under which refund is not available to the exporter.
1. Refund shall not be available to exporter if supplier avails duty draw back of CGST/SGST/UTGST or IGST. However, no restriction on refund if only draw back of customs portions is availed. Also, if draw back on only CGST is availed then refund of SGST can be claimed as per CBIC circular No. 37/11/2018 dtd 15-3-2018.
2. No refund of unutilised ITC in case where goods exported are subject to Export duty.
3. Refund in case of services is only after realisation in convertible foreign exchange against BRC/FIRC. This is applicable only for services and not in case of goods. Refund in case of goods can be applied even without the realisation in foreign exchange as explained in CBIC circular No. 37/11/2018 dtd 15-3-2018.
4. No refund of Input Tax Credit for transitional credit. Refund under earlier laws will have to be disposed off under earlier law and refund is not eligible for transitional credit under GST law.
5. Refund of IGST not permissible if inputs were obtained at concessional rate of GST i.e., .1% IGST. This means in case inputs are obtained at .1% then export cannot be with payment of IGST and it has to be only against LUT/Bond.
6. No refund on Capital goods if exports done without payment of tax against LUT/Bond. There is still a confusion on this aspect and as of now the Law stands at no refund for ITCpaid on capital goods, if exports done against LUT/Bond.
Further the outcome of 39th GST Council meeting, it is stated that “to provide for recovery of refund on export of goods where export proceeds are not realised within the time prescribed under FEMA. This means till now, the requirement of realisation of exchange was limited to services but now if realisation in convertible foreign exchange does not happen as per FEMA timelines then the refund provided on such exports may be recovered may be along with interest. Notification awaited in this regard.
Author Bio
CBEC has issued Notification No. 16/2020 – Central Tax dated 23.03.2020 amending CGST Rules inserting new Rule 96B for Recovery of refund of unutilised input tax credit or integrated tax paid on export of goods where export proceeds not realized.