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

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]

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

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2 Comments

  1. Mohit Pande says:

    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?

    1. Anita Bhadra says:

      No, Refund is not allowed.
      In fact, Co-operative society need not take registration and pay tax if contribution per member is less than Rs 7500/- and aggregate turnover is less than Rs 20 Lakhs

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