2023 (6) TMI 744 - AAR - GST

Refund - Zero rated supplies - Computation of Turnover - sale of duty credit e-Scrips - Interpretation of Statute - Rule 42, Rule 89(4) and Rule 89(4B) of the CGST Act - Whether sale of duty credit e-Scrips is only other income and not form part of Turnover? - HELD THAT - A Duty Credit Scrip is a certificate (or scrip), is an export promotion benefit, offered by Government of India under the Foreign trade policy, which can be used for the payment of Customs Duty. These scrips, which are issued to both the exporters of goods as well to exporters of services under the various schemes mentioned in the Foreign Trade Policy, can be transferred to others if they cannot be utilised by the taxpayer for various reasons - The Notification no. 02/2017- Central Tax (Rate) dated 28.06.2017 which provided list of goods which were exempted from payment of GST was amended vide Notification No. 35/2017- Central Tax (Rate) dated 13.10.2017 to include a new entry of Duty Credit Scrips under the HSN 4907 at Serial No. 122A. Thus the Duty credit scrips , which are classified under the category of goods, are exempted from payment of Goods and Service tax vide the notification No. 35/2017- Central Tax (Rate) dated 13.10.2017. The sale of Duty credit scrips , which are classified under the category of goods, are exempted from payment of Goods and Service tax vide the Notification No. 35/2017- Central Tax (Rate) dated 13.10.2017 after amendment of the Notification no. 02/2017- Central Tax (Rate) dated 28.06.2017 which provided the list of goods which were exempted from payment of GST. Sale of Duty credit scrips in Domestic tariff area is classified as exempted supply as per the above Notification dated 13.10.2017. Therefore it is pertinent to note that the turnover pertaining to sale of Duty credit scrips should be reduced from the total turnover in the state as defined under clause (112) of section 2 for computation of the Adjusted Total Turnover as per Rule 89(4) of CGST Rules 2017. As per Rule 89(4B) of the CGST Rules 2017 Where the person claiming refund of unutilised input tax credit on account of zero rated supplies without payment of tax has received supplies on which he has availed the benefit of the notification No. 40/2017-Central Tax (Rate) dated 23rd October, 2017 or notification No. 41/2017- Integrated Tax (Rate) dated 23rd October, 2017 or availed the benefit of notification No. 78/2017-Customs, dated 13th October, 2017 the refund of input tax credit, availed in respect of inputs received under the said notifications for export of goods and the input tax credit availed in respect of other inputs or input services to the extent used in making such export of goods, shall be granted. This mandates to compute the amount of refund of input tax credit pertaining to only those inputs received under the said notifications and other inputs or input services, only, to the extent used in making such export of goods - the relevancy of the turnover pertaining to the sale of Duty credit scrips does not arise in the computation of the refund of input tax credit, availed in respect of inputs received under the said notifications for export of goods and the input tax credit availed in respect of other inputs or input services to the extent used in making such export of goods.

Issues Involved:
1. Whether the sale of duty credit e-Scrips forms part of Turnover for applying Rule 42 of the CGST Rules, 2017.
2. Whether the sale of duty credit e-Scrips forms part of Turnover for applying Rule 89(4) of the CGST Rules, 2017.
3. Whether the sale of duty credit e-Scrips forms part of Turnover for applying Rule 89(4B) of the CGST Rules, 2017.

Summary:

Issue 1: Applicability of Rule 42 of the CGST Rules, 2017
The applicant, M/s. Kaveri Exports, deals in the export of cotton lint and receives duty credit e-scrips under the RoDTEP scheme. These e-scrips are used for clearing imports and are transferrable. The applicant argued that these e-scrips should be excluded from the total turnover for the purpose of Rule 42 of the CGST Rules, 2017, as they are exempt from tax. The Authority for Advance Ruling clarified that after the insertion of clause (d) in Explanation-1 to Rule 43 of the CGST Rules vide Notification No. 14/2022 dated 05.07.2022, the value of duty credit scrips shall be excluded from the value of exempt supply for the purpose of applying Rule 42.

Issue 2: Applicability of Rule 89(4) of the CGST Rules, 2017
The applicant sought clarification on whether the sale of duty credit e-scrips should be included in the turnover for applying Rule 89(4). The Authority noted that duty credit scrips are classified as exempt supplies under Notification No. 35/2017-Central Tax (Rate) dated 13.10.2017. Therefore, the turnover pertaining to the sale of duty credit scrips should be reduced from the total turnover in the state for the computation of the 'Adjusted Total Turnover' as per Rule 89(4) of the CGST Rules, 2017.

Issue 3: Applicability of Rule 89(4B) of the CGST Rules, 2017
The applicant also sought clarity on whether the sale of duty credit e-scrips should be included in the turnover for applying Rule 89(4B). The Authority concluded that the turnover related to the sale of duty credit scrips does not arise in the computation of the refund of input tax credit under Rule 89(4B). This is because the refund pertains to inputs received under specific notifications for export of goods and the input tax credit availed in respect of other inputs or input services used in making such exports.

Final Ruling:
1. The value of duty credit scrips shall be excluded from the value of exempt supply for the purpose of applying Rule 42 of the CGST Rules.
2. The turnover pertaining to the sale of duty credit scrips should be reduced from the total turnover in the state for the computation of the Adjusted Total Turnover as per Rule 89(4) of the CGST Rules.
3. The turnover related to the sale of duty credit scrips does not arise in the computation of the refund of input tax credit under Rule 89(4B) of the CGST Rules.

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