As per 89(4) of CGST Rules, in case of zero rated supply of goods or services or both without payment of tax under bond or letter of undertaking in accordance with the provisions of section 16(3) of the IGST Act, refund of input tax credit shall be granted as per following formula :-
Refund Amount = (Turnover of zero-rated supply of goods + Turnover of zero-rated supply of services) × Net ITC ÷ Adjusted Total Turnover.
In this article, an attempt has been made to simplify (with the help of an example) the contents used for computation of the refund amount .
Example :- Mr A , registered in Maharashtra , engaged in Intra State / Inter State supply of taxable and exempted goods /services . He exports goods and services without payment of tax under bond or letter of undertaking. Also , Input tax availed by him includes the amount on which refund has been claimed by his supplier under Rule 89(4A) & 4(B).(As per 89(4A) & (B) , if a supplier has claim benefit of Deemed Export / Merchant Export , refund will be available if the recipient makes a Zero rated Supply ) .
Details of supplies made by Mr A during the relevant period is as follows :-
| Sl. | Description | Amount (Rs. In Lakhs) | Amount (Rs. In Lakhs) |
| a. | Taxable Supply of Goods in Maharashtra | 225 | |
| b. | Taxable Supply of Services in Maharashtra | 75 | |
| c. | Inter State Supply of Goods | 100 | |
| d. | Inter State Supply of Services | 25 | |
| e. | Total Exempted Supply | 25 | |
| f. | Zero rated Supply of Goods | 150 | |
| g. | Zero rated Supply of Service | 90 | |
| g(i) | Payment received in prior period as an advance ( zero rated supply of services completed in the relevant period) | 10 | |
| g(ii) | Aggregate payment received during the relevant period for zero rated supply of services ) | 100 | |
| g(iii) | Payment received in advance for which zero rated supply has not completed in relevant period | 20 | |
| h. | Turnover of supplies under Rule 89(4A) & (4B) | 15 | |
| i. | Input Tax on amount under Rule 89(4A) & (4B) | 3 | |
| j | Input Tax Credit on input and input services | 15 |
Turnover in State : turnover in State” or “turnover in Union territory” means the aggregate value of all taxable supplies (excluding the value of inward supplies on which tax is payable by a person on reverse charge basis) and exempt supplies made within a State or Union territory by a taxable person, exports of goods or services or both and inter-State supplies of goods or services or both made from the State or Union territory by the said taxable person but excludes central tax, State tax, Union territory tax, integrated tax and cess;
| Heading | Description | Amount(Rs. In Lakhs) | Amount(Rs. In Lakhs) |
| Turnover in State
(k) |
aggregate value of all taxable supplies+ exempt supplies+ exports of Goods and Services +interstate supply (a to h ) above | 225+75+100+25+25+150+90+15 | 705 |
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| 6. Adjusted Total Turnover :- “Adjusted Total Turnover” means the sum total of the value of- (a) the turnover in a State or a Union territory, as defined under section 2(112) of CGST Act, excluding the turnover of services; and (b) the turnover of zero-rated supply of services determined in terms of clause (D) above and non-zero-rated supply of services. | |
| Excluding- | |
| the value of exempt supplies other than zero-rated supplies; and | |
| the turnover of supplies in respect of which refund is claimed under rule 89(4A) or rule 89(4B) or both, if any, during the relevant period [ definition as amended w.e.f. 4-9-2018] | |
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| Heading | Description | Amount(Rs. In Lakhs) | Amount(Rs. In Lakhs) |
| Adjusted Total Turnover | sum total of the value of
(a) State turnover excluding the turnover of services. ( k)-(b+d+g) (b) the turnover of zero-rated supply of services & non zero rated supply of services (g+d+g) Excluding – (i) value of exempt supplies other than zero-rated supplies (e) (ii) Turnover of supplies under Rule 89(4A) & (4B)(h) g-(e+h) |
705-(75+25+90) 90+25+75-(25+15) Total |
515 150 665 |
Net ITC :- Net ITC” means input tax credit availed on inputs and input services during the relevant period other than the input tax credit availed for which refund is claimed under sub-rule 89 (4A) or (4B) or both
| Sl | Description | Amount (Rs. In Lakhs) | Amount (Rs. In Lakhs) |
| Net ITC | ITC on Inputs & services Other than ITC rule 89 (4A) & (4B) (j-i) | 15-3 | 12 |
Turnover of zero-rated supply of goods : 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, other than the turnover of supplies in respect of which refund is claimed under sub-rule (4A) or (4B) or both.
| Sl | Description | Amount (Rs. In Lakhs) | Amount(Rs. In Lakhs) |
| Turnover of zero Rated Goods | value of zero-rated supply of goods other than turnover under sub-rule (4A) or (4B) or both( f-h) | 150-15 | 135 |
Turnover of zero-rated supply of services Turnover of zero-rated supply of services” means the value of zero-rated supply of services made without payment of tax under bond or letter of undertaking, calculated in the following manner, namely:— Zero-rated supply of services is the aggregate of the payments received during the relevant period for zero-rated supply of services and zero-rated supply of services where supply has been completed for which payment had been received in advance in any period prior to the relevant period reduced by advances received for zero-rated supply of services for which the supply of services has not been completed during the relevant period.
| Sl | Description | Amount (Rs. In Lakhs) | Amount (Rs. In Lakhs) |
| Turnover of Zero Rated Supply of services | Payment received during the relevant period + Received in prior period – Advance received for which supply not completed | g(i)+g(ii)-(giii) | 90 |
Calculation of Refund : Refund Amount = (Turnover of zero-rated supply of goods + Turnover of zero-rated supply of services) × Net ITC ÷ Adjusted Total Turnover.
Refund Amount = (135+90)*12/665 = Rs. 4.06 Lakh.
Stores, spares, packing material, stationery are all ‘inputs’ and its ITC is permissible However, refund of ITC on capital goods is not allowable – CBI&C circular No. 79/53/2018-GST dated 31-12-2018.
Note : Figures are indicative and have been used for better understanding of the concept. Care has been taken to maintain the accuracy.
The Author can be accessed at caanitabhadra@gmail.com
Author Bio
Hi Anita,
I am freelancer and provide IT services to international clients. Hence it is considered as zero rated supply. I have also taken LUT.
My question is, am I eligible for input tax credit? For example, I want to buy AC for the office or laptop for the work. Can I seek refund of GST (as input tax credit) paid on such purchases? Thanks!
What’s is the other option of utc refubd of zero rated supply on payment of tax ?
My query is export is expted then how’s the exporter can pay the tax and claim refund .
Your query is not clear.
Payment of tax is at the time of export only.
Is ITC refund allowed to Cooperative Housing Society with GST registration where the per month contribution per member is less than exempted amount of 7500.
If yes than how to claim it?
No such refund is admissible to Co-op societies