GST UPDATE ON AVAILMENT OF ITC BY EXPORTERS AVAILING HIGHER RATE OF DRAWBACK

GST UPDATE ON AVAILMENT OF ITC BY EXPORTERS AVAILING HIGHER RATE OF DRAWBACK

At present, two rates of drawback are prescribed - “Drawback when CENVAT facility has not been availed” and “Drawback when CENVAT facility has been availed”. Wherever the wordings, “Drawback when CENVAT facility has not been availed” have been used, it means that the exporter is eligible to claim the components of Customs, Excise and Service tax. This rate is on higher side and cenvat facility is not available with this rate. Further, wherever the wordings, “Drawback when CENVAT facility has been availed” are used, it means that the exporter is eligible only for the Customs portion of duty drawback. This rate is on lower side and exporters claiming this rate are allowed to avail the facility of cenvat credit.

Government has notified new Customs and Central Excise Duties Drawback Rules, 2017 vide notification no. 88/2017-Customs (N.T.) dated 21.9.2017. Circular no. 38/2017-Customs dated 21/09/2017 has been issued to clarify the provisions related to the new rules. Further, the new all industry rates of duty drawback have also been notified which are effective from 1st October, 2017.

In case where the higher rate of drawback is claimed, only the credit of SGST is allowable. Now there can be two type of invoices. First type of invoice where inter-state supply takes place and only IGST is charged. The complete credit will not be allowed in that case and no need to accept the invoice. Alternatively, we can accept the invoice and reverse the entire credit of IGST as mentioned in the invoice accepted by us. But intra-state supply takes place in second type of invoice and both CGST and SGST are charged. In such a situation, the credit of SGST is allowed but CGST is not allowed. However, the supplier will upload the entire invoice details which will auto-populate in the GSTR-2 of exporter. However, a part of invoice cannot be accepted, thus, the entire invoice shall have to be accepted by the exporter.
Hence, no option is left with exporter except to accept the complete invoice. But the credit of CGST is not allowed. Then there is practical solution to this practical problem. After accepting the invoice, the exporter can reverse the CGST portion in GSTR-2 return itself. In GSTR-3B, this amount is being shown at reversal column (others). Similarly, exporter shall have to accept the entire invoice in GSTR-2 also. Thereafter, in the column of reversal, the non-admissible portion of credit will have to be shown in the residual column "others". The ultimate effect of this exercise will be that only SGST credit shall stand availed.

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GST UPDATE ON AVAILMENT OF ITC BY EXPORTERS AVAILING HIGHER RATE OF DRAWBACK

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