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TMI BlogSECTION 16 ZERO RATED SUPPLY (IGST ACT)X X X X Extracts X X X X X X X X Extracts X X X X ..... SECTION 16 ZERO RATED SUPPLY (IGST ACT) - By: - Pradeep Jain - Goods and Services Tax - GST - Dated:- 26-12-2016 - - DAILY DOSE OF GST UPDATE BY CA PRADEEP JAIN SECTION 16 ZERO RATED SUPPLY (IGST ACT):- A new Chapter VIII has been introduced in the IGST Act wherein the concept of zero rated supply has been framed. The provisions contained in the section 16 are discussed as follow ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s:- Zero rated supply means any of the following taxable supply of goods and/or services, namely- Export of goods and/or services; or Supply of goods and/or services to a SEZ developer or an SEZ unit. It is also provided that the credit of input tax may be availed for making zero rated supplies notwithstanding that such supply may be an exempt supply. It is further provided tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t a registered taxable person exporting goods or services shall be eligible to claim refund under one of the following two options:- A registered taxable person may export goods or services under bond, subject to such conditions, safeguards and procedure as may be prescribed without payment of IGST and claim refund of unutilised input tax credit in accordance with provisions of section 48 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the CGST Act. A registered taxable person may export goods or services subject to such conditions, safeguards and procedure as may be prescribed with payment of IGST and claim refund of IGST paid on goods and services exported in accordance with provisions of section 48 of the CGST Act. Lastly, it is provided that the SEZ developer or SEZ unit receiving zero rated supply shall be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... entitled to claim refund of IGST paid by registered taxable person on such supply. On studying the above provisions, following implications may be drawn:- The meaning of zero rated supply is very restricted and limited to normal exports and supply to SEZ or SEZ developer. The supplies made to EOUs, EHTP, STP etc are not covered under the concept of zero rated supply. The input tax cred ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it is available for zero rated supplies. This means that export without payment of duty and supply to SEZ will be considered as zero rated supply and credit will be available. Consequently, there will not be requirement to reverse credit even when the supplies are made without payment of duty in cases of exports and supply made to SEZ. As EOU are not covered under zero rated supplies, the refun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d of unutilised cenvat credit will not be admissible to the supplies made to EOU. It was concluded by various judicial pronouncements like NBM Industries Case wherein supply to EOU was treated at par with physical export and benefit of refund of accumulated credit was extended. However, there amendment was made vide Budget, 2015 wherein definition of export was given for the purpose of refund ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of accumulated cenvat credit which stated that export means taking out of India to a place outside India. Consequently, refund of accumulated credit is not admissible to EOU but is available for clearances made to SEZ because the provisions of SEZ Act have overriding effect and supplies to SEZ are to be considered as export. It appears that the present policy is carried forward in the GST regime t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oo. It appears that the concept of deemed exports will also be introduced in GST laws. This is evident from the definition of deemed exports given under section 2(37) of the GST Act, 2016. It states that deemed exports as notified by the Central/State Government on the recommendation of the Council, refer to those transactions in which the goods supplied do not leave India and payment f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or such supplies is received either in Indian rupees or in convertible foreign exchange. At present, as per DGFT Laws, supplies to EOU is considered as deemed export and it may be possible that it is specified as deemed exports in GST Law also if the same is recommended by the Council. It is also pertinent to mention that refund under section 48 of the CGST Act includes refund of tax on suppl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y of goods regarded as deemed exports. Consequently, it may be possible that supplies to EOU are made on payment of tax but refund of the said tax is admissible to the supplier. This is departure from the present provision under Central Excise Laws wherein clearances to EOU are made without payment of excise duty. We can say that exemption for supplies to EOU will be through refund mechanism. Simi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... larly, for SEZ, exemption by way of refund mechanism has been prescribed in GST regime. You may visit us at www.capradeepjain.com https://www.facebook.com/GSTTODAYBYPRADEEPJAIN - Reply By Ganeshan Kalyani as = Nice article Sir. Additionally, the refund would be allowed to the extent of 90 percent without assessment and the balance amount of claim would be refunded after the assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment is carried out. Dated: 26-12-2016 - Scholarly articles for knowledge sharing authors experts professionals Tax Management India - taxmanagementindia - taxmanagement - taxmanagementindia.com - TMI - TaxTMI - TMITax ..... X X X X Extracts X X X X X X X X Extracts X X X X
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