Refund of Input Tax Credit(ITC) on Export of Goods/Services under Bond/LUT

 

 

Refund of input tax credit on export of goods/services under Bond/LUT is dealt with as per provision of sub-section (3) of section 54 of CGST Act, 2017

 

As per this sub-section, refund of unutilised input tax credit in case of export of goods/service without payment of tax under cover of Bond/LUT may be claimed by a registered person at the end of any tax period.

 

Process of claiming the Refund of ITC

 

I.                Compute the Refund Amount – 

As per sub-rule (4) of rule 89 of CGST Rules, 2017- In the 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 sub-section (3) of section 16 of the Integrated Goods and Services Tax Act, 2017 (13 of 2017), refund of input tax credit shall be granted as per the following formula – 

 

Refund Amount = (Turnover of zero-rated supply of goods + Turnover of zero-rated supply of services) x Net ITC ÷Adjusted Total Turnover  

 

Where, -  

(A) "Refund amount" means the maximum refund that is admissible;

 

(B) "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-rules (4A) or (4B) or both;

 (C) "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-rules (4A) or (4B) or both;  

(D) "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;  

 

(E) "Adjusted Total turnover" means the turnover in a State or a Union territory, as defined under clause (112) of section 2, excluding – 

(a) the value of exempt supplies other than zero-rated supplies and 

(b) the turnover of supplies in respect of which refund is claimed under sub-rules (4A) or (4B) or both, if any, during the relevant period; 

(F) “Relevant period” means the period for which the claim has been filed.

 Sub-rule 4A of rule 89 relates to refund of ITC on supply of goods received which have been notified as Deemed Exports and sub-rule 4B of rule 89 relates to refund of ITC on Supplies received on payment of concessional rate of tax by Merchant Exporter. 

Clarification vide circular no. 37/11/2018

 

Filing frequency of Refunds: Various representations have been made to the Board regarding the period for which refund applications can be filed. Section 2(107) of the CGST Act defines the term “tax period” as the period for which the return is required to be furnished. The terms ‘Net ITC’ and ‘turnover of zero rated supply of goods/services’ are used in the context of the relevant period in rule 89(4) of CGST Rules. The phrase ‘relevant period’ has been defined in the said sub-rule as ‘the period for which the claim has been filed’.

 

In many scenarios, exports may not have been made in that period in which the inputs or input services were received and input tax credit has been availed. Similarly, there may be cases where exports may have been made in a period but no input tax credit has been availed in the said period. The above referred rule, taking into account such scenarios, defines relevant period in the context of the refund claim and does not link it to a tax period.

 

In this regard, it is hereby clarified that the exporter, at his option, may file refund claim for one calendar month / quarter or by clubbing successive calendar months / quarters.

 

The calendar month(s) / quarter(s) for which refund claim has been filed, however, cannot spread across different financial years.

 

 

Clarification vide circular no. 37/11/2018

 

Supplies to Merchant Exporters: Notification No. 40/2017 – Central Tax (Rate), dated 23rd October 2017 and notification No. 41/2017 – Integrated Tax (Rate) dated 23rd October 2017 provide for supplies for exports at a concessional rate of 0.05% and 0.1% respectively, subject to certain conditions specified in the said notifications.

It is clarified that the benefit of supplies at concessional rate is subject to certain conditions and the said benefit is optional. The option may or may not be availed by the supplier and / or the recipient and the goods may be procured at the normal applicable tax rate.

 

It is also clarified that the exporter will be eligible to take credit of the tax @ 0.05% / 0.1% paid by him. The supplier who supplies goods at the concessional rate is also eligible for refund on account of inverted tax structure as per the provisions of clause (ii) of the first proviso to sub-section (3) of section 54 of the CGST Act. It may also be noted that the exporter of such goods can export the goods only under LUT / bond and cannot export on payment of integrated tax. In this connection, notification No. 3/2018-Central Tax, dated 23.01.2018 may be referred.

 

II.           Prepare the documents required –

 

Table showing documents required

Export (goods or services) without payment of tax (Refund of accumulated ITC of IGST / CGST / SGST / UTGST / Cess)

·        Copy of FORM RFD-01A filed on common portal

·        Copy of Statement 3A of FORM RFD-01A generated on common portal

·        Copy of Statement 3 of FORM RFD-01A

·        Invoices w.r.t. input and input services i.e. Statement containing the number and the date of the invoices received during a tax period

·        BRC/FIRC for export of services (and not for export of goods as per Clarification vide circular no. 37/11/2018)

·        Undertaking / Declaration in FORM RFD-01A

 

Statement- 3 [rule 89(2)(b) and 89(2)(c)]

Refund Type: Export without payment of tax (accumulated ITC)

(Amount in Rs.)

Sr. No.

Invoice Details

Goods/

Services

Shipping bill/

Bill of export

EGM

Details

BRC/

FIRC

No.

Date

Value

Port Code

No.

Date

Ref.

No.

Date

No.

Date

1

2

3

4

5

6

7

8

9

10

11

12

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Statement- 3A [rule 89(4)]

Refund Type: Export without payment of tax (accumulated ITC) – calculation of refund amount

(Amount in Rs.)

Turnover of zero rated supply of goods and services

Net input tax credit

Adjusted total turnover

Refund amount

(1×2÷3)

1

2

3

4

 

 

 

 

 

DECLARATION [second proviso to section 54(3)]

I hereby declare that the goods exported are not subject to any export duty. I also declare that I have not availed any drawback of central excise duty/service tax/central tax on goods or services or both and that I have not claimed refund of the integrated tax paid on supplies in respect of which refund is claimed.

Signature

Name –

Designation / Status

 

DECLARATION [section 54(3)(ii)]

I hereby declare that the refund of ITC claimed in the application does not include ITC availed on goods or services used for making ‘nil’ rated or fully exempt supplies

Signature

Name –

Designation / Status

 

UNDERTAKING

I hereby undertake to pay back to the Government the amount of refund sanctioned along with interest in case it is found subsequently that the requirements of clause (c) of sub-section (2) of section 16 read with sub-section (2) of section 42 of the

CGST/SGST Act have not been complied with in respect of the amount refunded.

Signature

Name –

Designation / Status

 

III.     Compulsion to export the goods by goods exporter and receipt of convertible foreign exchange by service exporter 

As per sub-rule (1) of rule 96A of CGST Rules, 2017, any registered person availing the option to supply goods or services for export without payment of integrated tax shall furnish, prior to export, a bond or a Letter of Undertaking in FORM GST RFD-11 to the jurisdictional Commissioner, binding himself to pay the tax due along with the interest specified under sub-section (1) of section 50 within a period of —

(a) fifteen days after the expiry of three months 53[, or such further period as may be allowed by the Commissioner,] from the date of issue of the invoice for export, if the goods are not exported out of India; or 

(b) fifteen days after the expiry of one year, or such further period as may be allowed by the Commissioner, from the date of issue of the invoice for export, if the payment of such services is not received by the exporter in convertible foreign exchange.

 

Clarification vide circular no. 37/11/2018

 

Exports without LUT: Export of goods or services can be made without payment of integrated tax under the provisions of rule 96A of the Central Goods and Services Tax Rules, 2017 (the CGST Rules). Under the said provisions, an exporter is required to furnish a bond or Letter of Undertaking (LUT) to the jurisdictional Commissioner before effecting zero rated supplies. A detailed procedure for filing of LUT has already been specified vide Circular No. 8/8/2017 –GST dated 4th October, 2017. It has been brought to the notice of the Board that in some cases, such zero rated supplies have been made before filing the LUT and refund claims for unutilized input tax credit have been filed.

 

In this regard, it is emphasised that the substantive benefits of zero rating may not be denied where it has been established that exports in terms of the relevant provisions have been made. The delay in furnishing of LUT in such cases may be condoned and the facility for export under LUT may be allowed on ex post facto basis taking into account the facts and circumstances of each case.

 

Exports after specified period: Rule 96A (1) of the CGST Rules provides that any registered person may export goods or services without payment of integrated tax after furnishing a LUT / bond and that he would be liable to pay the tax due along with the interest as applicable within a period of fifteen days after the expiry of three months or such further period as may be allowed by the Commissioner from the date of issue of the invoice for export, if the goods are not exported out of India. The time period in case of services is fifteen days after the expiry of one year or such further period as may be allowed by the Commissioner from the date of issue of the invoice for export, if the payment of such services is not received by the exporter in convertible foreign exchange.

 

It has been reported that the exporters have been asked to pay integrated tax where the goods have been exported but not within three months from the date of the issue of the invoice for export. In this regard, it is emphasised that exports have been zero rated under the Integrated Goods and Services Tax Act, 2017 (IGST Act) and as long as goods have actually been exported even after a period of three months, payment of integrated tax first and claiming refund at a subsequent date should not be insisted upon. In such cases, the jurisdictional Commissioner may consider granting extension of time limit for export as provided in the said sub-rule on post facto basis keeping in view the facts and circumstances of each case. The same principle should be followed in case of export of services.

 

 

The detailed procedure for disposal of Refund claims filed manually is as under:

STEPS

REMARKS

LEGAL PROVISIONS

Filing of refund application in FORM GST RFD- 01A online on the common portal (only when refund of unutilized ITC is claimed)

The corresponding electronic credit ledger of CT / ST / UT / IT/ Cess would get debited and an ARN number would get generated.

Rule 89

Filing of printout of FORMGST RFD-01A

The printout of the ARN along with application of refund shall be submitted manually in the appropriate jurisdiction.

 

This form needs to be accompanied with the requisite documentary evidences. This Form shall contain the debit entry in the electronic credit ledger of the amount claimed as refund in FORM GST RFD-01A. 

Rule 89(1) – Application

Rule 89(2) – Requisite Documents

Rule 89(3) – Debiting of electronic credit ledger

Initial scrutiny of the Documents by the proper officer

 

The proper officer shall validate the GSTIN details on the portal to validate whether return in FORM GSTR-3 or FORM GSTR- 3B, as the case may be, has been filed. A declaration is required to be submitted by the claimant that no refund has been claimed against the relevant invoices.

 

Deficiencies, if any, in documentary evidences are to be ascertained and communicated in FORM GST RFD-03 within 15 days of filing of the refund application.

 

Deficiency Memo should be complete in all respects and only one Deficiency Memo shall be given.

 

Submission of application after Deficiency Memo shall be treated as a fresh application.

 

Resubmission of the application, after rectifying the deficiencies pointed out in the Deficiency memo, shall be made by using the ARN and debit entry number generated originally.

 

If the application is not filed afresh within thirty days of the communication of the deficiency memo, the proper officer shall pass an order in FORM GST PMT-03 and re-credit the amount claimed as refund through FORM GST RFD-01B.

 

 

Rule 90(2) – 15 day time for scrutiny

Rule 90(3) – Issuance of Deficiency memo

Rule 90(3) – Fresh refund application requirement

Rule 93(1) – re-credit of refund amount applied for

Issue acknowledgement manually within 15 days in FORM GST RFD-02

 

The date of submission of application for which acknowledgement has been given will be considered as the date for ensuring whether the refund application has been sanctioned within the stipulated time period.

 

Rule 90(2) - Acknowledgement

 

Grant of provisional refund within seven days of issue of acknowledgement

 

The amount of provisional refund shall be calculated taking into account the total input tax credit, without making any reduction for credit being provisionally accepted.

 

 

Provisional refund shall be granted separately for each head CT / ST / UT / IT/ Cess within 7 days of acknowledgement in FORM GST RFD-04.

 

 

Before sanction of the refund a declaration shall be obtained that the applicant has not contravened rule 91(1).

 

Payment advice to be issued in FORM GST RFD-05.

 

Refund would be made directly in the bank account mentioned in the registration.

 

Rule 91(1) – Requirement of no prosecution for last 5 years where amount of tax evaded exceeds Rs. 250 lakhs

Rule 91(2) – Prima facie satisfaction, seven day requirement

Rule 91(3) – Payment advice, electronic credit to bank account

Detailed scrutiny of the refund application along with submitted documents

 

The officer shall validate refund statement details with details in FORM GSTR 1 (or Table 6A of FORM GSTR-1) available on the common portal.

 

The Shipping bill details shall be checked by officer through ICEGATE SITE (www.icegate.gov.in) wherein the officer would be able to check details of EGM and shipping bill by keying in port name, Shipping bill number and date.

 

Further, details of IGST paid also needs to be verified from FORM GSTR- 3 or FORM GSTR- 3B, as the case may be, filed by the applicant and it needs to be verified that the refund amount claimed shall be less than the tax paid on account of zero rated supplies as per FORM GSTR-3 or FORM GSTR- 3B, as the case may be.

 

Ascertain what amount may be sanctioned finally and see whether any adjustments against any outstanding liability is required (FORM GST RFD-07 – Part A).

 

Ascertain what amount of the input tax credit is sanction-able, and amount of refund, if any, liable to be withheld.

 

Order needs to be passed in FORM GST RFD-07 – Part B.

 

Rule 89(4) – Refund Amount Calculation

Rule 92(1) – Any adjustments made in the amount against existing demands

Rule 92(2) – reasons for withholding of refunds

If the sanction-able amount is less than the applied amount

 

Notice has to be issued to the applicant in FORM GST RFD-08.

 

The applicant has to reply within 15 days of receipt of the notice in FORM GST RFD-09.

 

Principles of natural justice to be followed before making the final decision.

 

Final order to be made in FORM GST RFD-06.

 

Rule 92(3) – Notice for refund not admissible / payable

Rule 92(3) – Requirement of reply to the notice within 15 days

Rule 92(3), 92(4), 92(5) – Sanction of Refund order

Pre-Audit

 

Pre-audit of the manually processed refund applications is not required to be carried out, irrespective of the amount involved, till separate detailed guidelines are issued.

 

Post-audit of the orders may however continue on the basis of extant guidelines.

 

 

Final sanction of refund

 

The proper officer shall issue the refund order manually for each head i.e. CT / ST / UT / IT/ Cess.

 

Amount paid provisionally needs to be adjusted accordingly.

 

Payment advice is to be made in FORM GST RFD-05.

 

The amount of credit rejected has to be re-credited to the credit ledger by an order in FORM GST PMT- 03 and shall be intimated to the common portal in FORM GST RFD- 01B.

 

Refund, if any, will be paid by an order with payment advice in FORM GST RFD-05.

 

The details of the refund along with taxpayer bank account details shall be manually submitted in PFMS/[States’] system by the jurisdictional Division’s DDO and a signed copy of the sanction order shall be sent to PAO office for release of payment.

 

Rule 92(3), 92(4), 92(5) – Sanction of Refund order

 

Rule 92(4), 92(5) – Payment advice issue

Payment of interest if any

 

Amount, if any, will be paid by an order with payment advice in FORM GST RFD-05.

 

Rule 94

 

 

 

 

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