Sale of Duty Free scrips not relevant for computing ITC Refund: Telangana AAR

In re Kaveri Exports (GST AAR Telangana)

Authority for Advance Rulings, Telangana (‘AAR’) in the case of M/s Kaveri Exports “the applicant” has issued a ruling holding that turnover pertaining to the sale of duty credit scrips would not be relevant for computation of the refund of input tax credit. Captioned ruling has been analyzed in this update.

A. FACTS OF THE CASE

• The applicant is a supplier of Indian Origin raw cotton bales.
• The applicant is in receipt of duty credit e-scrips under the scheme for remission of duties and taxes on exported products (RoDTEP) from the Department of Foreign Trade.

B. QUESTIONS BEFORE THE AAR

• Whether the sale of duty credit e-Scrips is only other income and not form part of Turnover for applying Rule 42, Rule 89(4) and Rule 89(4B) of the CGST Rules, 2017?

C. CONTENTION OF THE APPLICANT

• That these e-scrips are exempted from tax vide Notification No.02/2017 dt: 28.06.2017.
• That since the e-scrips are in the nature of an incentive and thus the same should be excluded from the total turnover for the purpose of rule 89(4) and 89(4B) of the CGST Rules, 2017.

D. RELEVANT LEGAL PROVISIONS REFERRED

• Rule 42, Rule 43, Rule 89(4) and Rule 89(4B) of CGST Rules, 2017

E. OBSERVATION AND RULING BY THE AAR