Refunds of IGST paid on Supplies meant for Export under Rule 96(10) of CGST Rules “Effective Date of Implementation 09.10.2018 OR 23.10.2017”

[CSSANJAY MALHOTRA]

CBIC has recently issued Notification No. 16/2020-Central Tax dated 23.03.2020 thus adding the Explanation to Rule 96(10) of CGST Rules 2017 and giving the same retrospective effect from 23.10.2017. Extracts of various amendments to Rule 96 of CGST Rules 2017 are placed below which makes it evident that the Explanation added should be effective from 09.10.2018 and not 23.10.2017. Suitable Clarification / corrigendum should be issued to rectify the same at right time to avoid unwanted litigations later on. Notifications should be issued as per the discussions held in GST Council meetings [30^th GST Council Meetings] to avoid corrections later on.

Rule 96(10) of CGST Rules 2017 provides for refund of Integrated tax if the supplies (goods/services) meant for Exports have been cleared on payment of Integrated tax,

Article 265 of the Constitution states that “No Tax shall be levied or collected except by the authority of law”.

Article 286 of the Constitution of India prohibits the Imposition of tax on any sale or purchase of goods in the course of the Import of goods into or Exports of goods out of the territory of India. In short, Exports are Zero Rated i.e. “No tax can be levied on Exports of goods / services out of India” and if any taxes have been paid on Inputs or input services used in the Exported goods / services or the tax has been paid on output supply meat for Export, the same has to be refunded back to exporter.

Statutory Provisions relating to Refund of IGST paid on Exported Goods

Refund of IGST paid on Exported Goods are governed by provisions as contained in Section 16(3) of IGST Act to be read with Section 54 of CGST Act and Rules 96(10) of CGST Rules 2017.

Sec 2(5) of IGST defines “Export of goods” with its grammatical variations and cognate expressions, means taking goods out of India to a place outside India;

Sec 16(1) of IGST Act “Zero rated supply” means any of the following supplies of goods or services or both, namely: ––

(a) export of goods or services or both; or

(b) supply of goods or services or both to a Special Economic Zone developer or a Special Economic Zone unit

Sec 16(3) of IGST Act: A registered person making zero rated supply shall be eligible to claim refund under either of the following options, namely: ––

(a) he may supply goods or services or both under bond or Letter of Undertaking, subject to such conditions, safeguards and procedure as may be prescribed, without payment of integrated tax and claim refund of unutilised input tax credit; or

(b) he may supply goods or services or both, subject to such conditions, safeguards and procedure as may be prescribed, on payment of integrated tax and claim refund of such tax paid on goods or services or both supplied,

in accordance with the provisions of section 54 of the Central Goods and Services Tax Act or the rules made thereunder.

Hence, the Exporter has 2 options available for claiming refund i.e. (a) to pay the integrated tax on supplies meant for Export / SEZ and claim refund of same (subject to conditions in Rule 96(10) of CGST Rules 2017 or (b) to supply the goods/services under LUT/Bond and file the refund for accumulated ITC under Rule 89 of CGST Rules.

Mentioned below are the extracts from various Notifications issued under Central Tax in context to provisions of Rule 96 of CGST Rules 2017

Sr No	Notification / Circular No	Amendments in Notification / Circular issued
1	03/2017-CT dated 19.06.2017	Rule 96 notified vide CGST Rules 2017 having sub-clauses from 96(1) to 96(8)
2	75/2017-CT dated 29.12.2017	Rule 96(9) has been inserted after Rule 96(8) as under: w.e.f 23.10.2017 Rule 96[(9) The persons claiming refund of integrated tax paid on export of goods or services should not have received supplies on which the supplier has availed the benefit of notification No. 48/2017-Central Tax dated 18th October, 2017 or notification No. 40/2017-Central Tax (Rate) dated 23rd October, 2017 or notification No. 41/2017-Integrated Tax (Rate) dated 23rd October, 2017]"
3	03/2018-CT dated 23.01.2018	(x) with effect from 23rd October, 2017, in rule 96, (d) for sub-rule (9), the following sub-rules shall be substituted, namely: - “96(9) The application for refund of integrated tax paid on the services exported out of India shall be filed in FORM GST RFD-01 and shall be dealt with in accordance with the provisions of rule 89”.   96(10) : The persons claiming refund of integrated tax paid on exports of goods or services should not have received supplies on which the supplier has availed the benefit of the Government of India, Ministry of Finance, notification No. 48/2017-Central Tax dated the 18th October, 2017 published in the Gazette of India, Extraordinary, Part II, Section 3, Sub-section (i), vide number G.S.R 1305 (E) dated the 18th October, 2017 or notification No. 40/2017-Central Tax (Rate) 23rd October, 2017 published in the Gazette of India, Extraordinary, Part II, Section 3, Sub-section (i), vide number G.S.R 1320 (E) dated the 23rd October, 2017 or notification No. 41/2017-Integrated Tax (Rate) dated the 23rd October, 2017 published in the Gazette of India, Extraordinary, Part II, Section 3, Sub-section (i), vide number G.S.R 1321 (E) dated the 23rd October, 2017 or notification No. 78/2017-Customs dated the 13th October, 2017 published in the Gazette of India, Extraordinary, Part II, Section 3, Sub-section (i), vide number G.S.R 1272(E) dated the 13th October, 2017 or notification No. 79/2017-Customs Tax dated the 13th October, 2017 published in the Gazette of India, Extraordinary, Part II, Section 3, Sub-section (i), vide number G.S.R 1299 (E) dated the 13th October, 2017.”;
3	39/2018-CT dated 04.09.2018	6. In the said rules, with effect from the 23rd October, 2017, in rule 96, for sub-rule (10), the following sub-rule shall be substituted, namely:- “(10) The persons claiming refund of integrated tax paid on exports of goods or services should not have - received supplies on which the benefit of the Government of India, Ministry of Finance notification No. 48/2017-Central Tax, dated the 18th October, 2017 published in the Gazette of India, Extraordinary, Part II, Section 3, Sub-section (i),vide number G.S.R 1305 (E), dated the 18th October, 2017 or notification No. 40/2017-Central Tax (Rate), dated the 23rd October, 2017 published in the Gazette of India, Extraordinary, Part II, Section 3, Sub-section (i),vide number G.S.R 1320 (E), dated the 23rd October, 2017 or notification No. 41/2017-Integrated Tax (Rate), dated the 23rd October, 2017 published in the Gazette of India, Extraordinary, Part II, Section 3, Sub-section (i), vide number G.S.R 1321 (E), dated the 23rd October, 2017 has been availed; or availed the benefit under notification No. 78/2017-Customs, dated the 13th October, 2017 published in the Gazette of India, Extraordinary, Part II, Section 3, Sub-section (i), vide number G.S.R 1272(E), dated the 13th October, 2017 or notification No. 79/2017-Customs, dated the 13th October, 2017 published in the Gazette of India, Extraordinary, Part II, Section 3, Sub-section (i),vide number G.S.R 1299 (E), dated the 13th October, 2017.
4	53/2018-CT dated 09.10.2018	2. In the Central Goods and Services Tax Rules, 2017, in rule 96, for sub-rule (10), the following sub-rule shall be substituted and shall be deemed to have been substituted with effect from the 23rd October, 2017, namely:- “(10) The persons claiming refund of integrated tax paid on exports of goods or services should not have received supplies on which the supplier has availed the benefit of the Government of India, Ministry of Finance, notification No. 48/2017-Central Tax, dated the 18th October, 2017, published in the Gazette of India, Extraordinary, Part II, Section 3, Sub-section (i), vide number G.S.R 1305 (E), dated the 18th October, 2017 or notification No. 40/2017-Central Tax (Rate) dated the 23rd October, 2017, published in the Gazette of India, Extraordinary, Part II, Section 3, Sub-section (i), vide number G.S.R 1320 (E), dated the 23rd October, 2017 or notification No. 41/2017-Integrated Tax (Rate), dated the 23rd October, 2017, published in the Gazette of India, Extraordinary, Part II, Section 3, Sub-section (i), vide number G.S.R 1321 (E), dated the 23rd October, 2017 or notification No. 78/2017-Customs, dated the 13th October, 2017, published in the Gazette of India, Extraordinary, Part II, Section 3, Sub-section (i), vide number G.S.R 1272(E), dated the 13th October, 2017 or notification No. 79/2017-Customs, dated the 13th October, 2017, published in the Gazette of India, Extraordinary, Part II, Section 3, Sub-section (i), vide number G.S.R 1299 (E) dated the 13th October, 2017.”.
5	54/2018-CT dated 09.10.2018	3. In the said rules, in rule 96, for sub-rule (10), the following sub-rule shall be substituted, namely:- “(10) The persons claiming refund of integrated tax paid on exports of goods or services should not have – received supplies on which the benefit of the Government of India, Ministry of Finance notification No. 48/2017-Central Tax, dated the 18th October, 2017, published in the Gazette of India, Extraordinary, Part II, Section 3, Sub-section (i), vide number G.S.R 1305 (E), dated the 18th October, 2017 except so far it relates to receipt of capital goods by such person against Export Promotion Capital Goods Scheme or notification No. 40/2017-Central Tax (Rate), dated the 23rd October, 2017, published in the Gazette of India, Extraordinary, Part II, Section 3, Sub-section (i), vide number G.S.R 1320 (E), dated the 23rd October, 2017 or notification No. 41/2017-Integrated Tax (Rate), dated the 23rd October, 2017, published in the Gazette of India, Extraordinary, Part II, Section 3, Sub-section (i), vide number G.S.R 1321 (E), dated the 23rd October, 2017 has been availed; or availed the benefit under notification No. 78/2017-Customs, dated the 13th October, 2017, published in the Gazette of India, Extraordinary, Part II, Section 3, Sub-section (i), vide number G.S.R 1272(E), dated the 13th October, 2017 or notification No. 79/2017-Customs, dated the 13th October, 2017, published in the Gazette of India, Extraordinary, Part II, Section 3, Sub-section (i), vide number G.S.R 1299 (E), dated the 13th October, 2017 except so far it relates to receipt of capital goods by such person against Export Promotion Capital Goods Scheme.”.
6	16/2020-CT dated 23.03.2020	Explanation added to Rule 96(10) w.e.f 23.10.2017 Explanation.- For the purpose of this sub-rule, the benefit of the notifications mentioned therein shall not be considered to have been availed only where the registered person has paid Integrated Goods and Services Tax and Compensation Cess on inputs and has availed exemption of only Basic Customs Duty (BCD) under the said notifications.]

• All the Notifications under Central Tax as stated above has effective date of insertion / substitution effective from 23.10.2017 (specifically stated in the Notifications) except for Notification No. 54/2018-CT dated 09.10.2018 which has effective date of implementation as the date of publication in official gazette which is 09.10.2018.
• Hence, its evident that the Notification No. 16/2020-CT dated 23.03.2020 which has added Explanation to Rule 96(10) of CGST Rules 2017 should be effective from 09.10.2018 and not 23.10.2017
• When the Rule 96(10) was inserted in CGST Rules 2017 from 23.10.2017 vide Notification No. 03/2018-CT dated 23.01.2018 the same has restriction that the supplies should not be received from suppliers who have availed the benefit of Notifications No………..The said Notification did not debarred exporters from claiming IGST refund who have directly made Imports under Notification No………(means if the Importer has made imports under Advance Authorisation then also he was entitled for refund irrespective of whether he has claimed IGST exemption or not). Government realise the above anomaly lately in September 2018 and issued Notification No. 39/2018-Central Tax dated 04.09.2018 thus amending Rule 96(10) of CGST Rules 2017 and replacing the same w.e.f. 23.10.2017 with the clause that “the benefit is not available if the person claiming the refund has received supplies on which benefit is availed for Notification No……….” (meaning thereby that even if the exporter has made imports directly under Advance Authorization, then also he is not eligible for refund).
• The above Notification No. 39/2018-CT dated 04.09.2018 has given powers to field formations to recover IGST refunds from Exporters who imported under Advance Authorizations claiming the benefit of IGST exemption. IGST Refunds which were sanctioned and disbursed on one hand by department later on with retrospective amendments became recoverable with interest from exporters. Representations were made to Council that why should exporters suffer due to fault in drafting of Notification at Government level. Accordingly, the amendment made vide Notification No. 39/2018-CT dated 04.09.2018 was taken back and old clause was substituted again vide Notification no. 53/2018-CT dated 09.10.2018.
• On same date after issuance of Notification No. 53/2018-CT dated 09.10.2018 thus incorporating the clause in Rule 96(10) of CGST Rules as the same existed prior to Notification No. 39/2018-CT dated 23.10.2017, another Notification No. 54/2018-CT dated 09.10.2018 was issued thus making the exporters eligibility for IGST refund prospective (from 09.10.2018) if they don’t avail the benefit of Notifications No……
• Recently the insertion of Explanation to Rule 96(10) of CGST Rules 2017 should have effect from 09.10.2018 in view of facts placed in preceding para. Delay in correction would invite unwanted litigations wherein the department stance will fail but would add to cost and time at both ends.
• Explanation was added as some field officers at Custom Ports were not allowing the Exporters to file Shipping Bills on payment of IGST where they have made imports under Advance Authorisation and has claimed the benefit of BCD only and paid IGST in cash. Explanation added to Notification 16/2020-CT dated 23.03.2020 clarified that the exporters who imports under Advance Authorisation and have not availed the benefit of IGST exemption are entitle to IGST refund. 

Note: The above facts placed are solely the views of author and one may have different perspective to same.

Discussions to this article

[CSSANJAY MALHOTRA]

CBIC should withdraw the explanation inserted w.e.f 23.10.2017 to Rule 96(10) of CGST Rules 2017 as the same would result in recovery of IGST refund from Exporters who have made imports under Advance Authorisation thus availing IGST exemption. Hopefully, GST Council too have not accorded any approval of GST recoveries retrospectively.

[Ganeshan Kalyani]

Very nice write-up Sir. Your efforts are really appreciated.

Take care of yourself and your family.

[KASTURI SETHI]

Respected Sir,

Himalayan error pointed out by you. It must have reached the CBIC. Reason being, TMI is a very popular site. It is visited by Govt. officers of GST department. I am very hopeful Govt. will rectify this error. By writing this article on TMI website, you have saved the assessees from the rigours of litigation. Your article is timely and very informative. Really you have worked hard in compilation of supporting data and drafting the same in brevity in public interest.

Thanks & Regards

KASTURI SETHI

[Mohideen A]

Extra ordinary efforts and very good compilation !! Thanks

[CSSANJAY MALHOTRA]

Thanks Sh. Kasturi ji / Ganeshan ji / Mr. Mohideen ji,

We all look forward to compliance being followed at both taxpayer/ dept's end in true spirit and not to have stick policy. FYI extracts of Para 8.1 of GST Council MOM (available at GST council website out in 30th council meeting)

8.1. Shri Manpreet Singh Badal, Hon'ble Minister from Punjab stated that the role of GIC was to mostly issue clarifications on procedural issues and it should avoid approving amendment to Rules with retrospective effect.

He stated that the notification regarding Rule 96 (10) and such other decisions involving retrospective amendments should have been brought before the Council and it was only about 10 days before the Council Meeting that the notifications were issued. He cautioned that GlC should not subsume the role of the Council.

[CSSANJAY MALHOTRA]

Please read para as (available at GSTCouncil website. MOM of 30th GST council meeting)

[Mohideen A]

Yes Ji. Thanks a lot. This statement in the council meeting is an "ICING ON THE CAKE" so as to reconfirm our understanding on retrospective amendment. well the proof of the pudding lies with the field officers at the Department.

[CSSANJAY MALHOTRA]

Yes, agree with you. Stick approach should be there for these erring officials who make mockery of statute.