GST Refund on zero rated supplies, Goods and Services Tax - GST

[Ankit Gangrade]

While claimng "Refund of unutilised input tax credit on zero rated supplies",

Can we take refund of input tax credit on those input services which are capitalised with the value of capital goods in books of accounts?

Posts / Replies

[Yash Jain]

Dear Sir,

Yes, we can take input for those input services which have been capitalized in the books of account, only with condition that the “Input” Should not have been capitalized.

Reason : When we fill Form GSTR 3B, the refund amount in RFD-01 is autopopulated from the said form. Hence yes, ITC can be applied for refund, only if the said input is not capitalized.

Comments from esteemed members highly solicited

[Ankit Gangrade]

As per my opinion, Refund of unutilised ITC on same input services not available because this service is input services for capital goods completion, not for export material

[Yash Jain]

Dear Sir,

Reference is invited to following definition(s) in CGST Act, and same being stated herewith and as under,

1. Sec 2(19) - Definition of Capital Goods : “capital goods” means goods, the value of which is capitalised in the books of account of the person claiming the input tax credit and which are used or intended to be used in the course or furtherance of business”;

However, even if the goods are not capitalzed the input against them, can be taken as ITC as the same is not restricted in Terms of Sec 17(5) of CGST Act.

2. Sec 2(63) – Defination of Input Tax Credit : input tax credit” means the credit of input tax;

Now while making application for Refund of “Input tax Credit”, we may take support of Sec 2(63), as the section defines Input tax Credit as “Credit of Input taxes” and does not distinguished between ITC of RM/Consumables V/s Capital Goods.

If we go by the rational that Capital Goods Credit cannot be asked for refund, then it will be deemed that ITC on Capital goods also , cannot be utilized for discharge for GST Liability for Domestic sales, and hence should lapse.

Hence considering aforesaid, we can easily take ITC Refund for Capital Goods.

Comments from esteemed members highly solicited.

[Nitika Aggarwal]

Dear Sir,

In my humble opinion, keeping in view the provisions of section 54 of CGST Act, 2017 read with rule 89 of CGST Rules, 2017, refund can be claimed only in respect of input and input services which are used for making such zero-rated supplies of goods or services or both but not in respect of capital goods.

Regards

Nitika Aggarwal

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[Yash Jain]

Dear Sir/Madam,

Reproducing herewith the Rule 89 (Relevant Clauses Only - as such) and as under,

89(3) Where the application relates to refund of input tax credit, the electronic credit ledger shall be debited by the applicant by an amount equal to the refund so claimed.

89(4) 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; (How can one assume that it refers only to inputs used for “making such goods”, as the rule is silent in this aspect we can also presume that input means input which is used in the process of manufacturing of Goods/Services (Including capital Goods)

(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;

Hence were it is categorically stated that Input is only in respect of Input other than capital Goods?.

Then what will happen to input of capital Goods as the full CGST Act does not impose any restrictions.

Comments from other members highly solicited.

[Pavan Mahulkar]

Dear Yash Jain Sir,

We can't presume Inputs as Capital Asset

Please refer definition of INPUT as per section 2 of CGST Act

(59) “input” means any goods other than capital goods used or intended to be used by a supplier in the course or furtherance of business;

[Nitika Aggarwal]

I have the same view as inscripted by Mr. Pavan Mahulkar.

The Government is going to give benefit only in respect of those input and input services which are used in the course or furtherance of Zero-rated supply not other than that.

Nitika Aggarwal

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[Yash Jain]

Dear Pavan Sir Ji/ Nikita Ji,

Sir/Madam, first of all we are applying for Refund of “Input tax Credit” and read with Sec 2(63), that ITC means credit availed on inputs. (Whether capital or Consumables).

Now, suppose if we take a stand/interpretation that Refund for Capital Goods will not be availed, then why “Not” the same restriction if placed in refund by “Way of Payment of Taxes – Payment of IGST”?. Wouldn’t it be then prudent for exporter to opt for Refund with payment of taxes as “No such condition is prescribed in Sec 54(8) (a)”

It can be intention of the Law to give relaxation in one Section and impose restriction in another section, if both the section pertains to same subject. Also the definition of the Net ITC as being stated above does not impose restriction on the definition of Input. It only says Net ITC Means inputs and input services.

If the points as being put forth by your good end, “does” hold good, then it would be much prudent for an exporter to export goods by Charging “IGST”, as he would be eligible for much more amount of ITC Refund, rather than to opt for refund of ITC (By way of Zero Rated Export).

This subject needs to be deliberated as its interpretation is causing a general confusion among the exporters for application of Refund.

[Ganeshan Kalyani]

In my view, input tax cannot be said to include input tax on capital goods.