Dated 20th September, 2018

 Retrospective Amendment for IGST Refund

Retrospective Amendment for IGST Refund


A BIG BLOW TO HOLDERS OF ADVANCE AUTHORISATION, EPCG LICENSE HOLDERS, DEEMED EXPORT SUPPLIERS

Recently, the Ministry of Finance have come out with a notification which will impact the industry as a whole in the process of obtaining their IGST Refunds. Though, the Ministry have always taken a liberal approach for removing of hindrances, so that the exporters community at large can easily get their long witheld refunds on exports even if clerical error creeps up in the shipping bill or the GST invoices. Moreover, now and then the Ministry has also granted extensions to encourage lubrication of cash flow for these exporters so that trade is not affected in any manner whatsoever.

However, the recently issued Notification No. 39/2018-Central Tax dated 04.09.18 is going to be a big nightmare on those exporters who have though made exports on payment of Integrated Goods and Service Tax (IGST) but have also enjoyed any kind of benefit under any specified notification be that of IGST exemption under Advance Authorisation on meeting up with the pre import and physical exports condition, EPCG Authorisation or enjoyed the benefit of Deemed Exports or import of goods by an EOU from public/private warehouse or supply to a merchant exporter.1

Initially, the restriction for availing refund of IGST was bought only for Merchant Exporters who used to buy goods at concessional rate from the manufacturers and the only option left with such merchant exporters was to clear goods for exports under LUT. However, the new amendment, which has been made retrospective from 23.10.2017 has put a bar not only on merchant exporters but other exporters who have availed any kind of benefit of reduced tax incidence or no tax incidence under certain specified notifications to get back their IGST Refunds paid on exports. Moreover, such amendment is also made retrospective in nature and is applicable from 23.10.2017.

EARLIER RESTRICTION REGARDING REFUND OF IGST2

The IGST Act, 2017 coined exports as a “zero rated supply” and also gives two options to export either by way of LUT or on payment of IGST. Though there are certain restrictions imposed on getting refunds of IGST, however any of such restrictions did not create undue hardship of the exporting community.

One of the major restrictions being among them is that exporters who has received supplies on which supplier has claimed benefit under any of the aforesaid notifications as stated above, shall be debarred from exporting with payment of IGST. However, in no case the holder of any authorisation or the person supplying under Deemed Exports or imports made from public warehouse by an EOU, supply made to a Merchant Exporter was precluded from availing refund of IGST paid at the time of exports.

FROM 23.10.17 ADVANCE LICENSE HOLDERS, EPCG LICENSE HOLDERS, EXPORTERS MAKING DEEMED EXPORTS SUPPLY, SUPPLY MADE TO MERCHANT EXPORTER CANNOT AVAIL REFUND OF IGST PAID ON EXPORTS.

The Advance License holders, EPCG license holders, persons making domestic supply against any authorisation, supply of goods to EOU and supply at concessional rate made to a merchant exporter have now only a single option to export under LUT. Henceforth persons availing any of the aforesaid benefit will have to compulsorily move into the LUT process of Exports and can apply for refund of ITC accumulated on Exports. Moreover, the aforesaid notification has retrospective effect and is applicable for exporters with effect from 23.10.17. The same is also clarified by circular no. 59/33/2018-GST dated 04.09.18.

The amendment bought is a very stringent one since it is being made effective retrospectively and will have far reaching impact, since most of the importers have already taken the benefit of Advance authorisation or EPCG licence and subsequently made exports on payment of IGST. Moreover, such a change will cause undue hardships on those exporters who have though taken the benefit of IGST exemption but perhaps utilised the Advance License to a negligible extent. In furtherance to the above how can such a drastic change be made retrospective in nature when the exporters have already taken advance license after October, 2017 and availed IGST exemption however later on the refund which has already been granted is now not admissible.

Under such a circumstance the exporters are left with innumerable questions in mind as to what would happen to the refund already issued to them during this period and as to what will be the duty liability as on date which in turn is going to hamper their working capital to a great extent. Moreover, on going through the legal terminology how can such restrictive change be bought in the CGST Rules, 2017 without making any subsequent change in the CGST Act, 2017.

We understand that the matter had been taken up with the GST law makers during interactive discussions involving most of the chambers. Top level policy makers commented that the Government intention and objective was not to allow IGST refund, when goods have been procured IGST free under any scheme. Having said that, they sought suggestion from the trade and industry to provide amicable solutions which meets the objective.

We can hope that a proper amicable solution is brought to resolve such issue, if not, there would be huge litigation on the subject matter.

1Notf. No. 48/2017 dated 18.10.2017, Notf. No.40/2017-Central Tax (Rate) & Notf. No. 41/2017- Integrated Tax (Rate) both dated 23.10.17, Notf. No.78/2017-cus and 79/2017-cus both dated 13.10.17

2 Rule 96(10) of the CGST Rules, 2017.


RETROSPECTIVE AMENDMENT FOR IGST REFUND

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RETROSPECTIVE AMENDMENT FOR IGST REFUND

RETROSPECTIVE AMENDMENT FOR IGST REFUND
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BT Associates, India

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Twenty years of exprience in tax practice, specialist in structuring & planing and tax optimization under indirect tax. Lead eastern India indirect tax practice of Ernst & Young in past.