GST UPDATE ON CLARIFICATION THAT IGST REFUND NOT ADMISSIBLE WHEN HIGHER DRAWBACK CLAIMED

GST UPDATE ON CLARIFICATION THAT IGST REFUND NOT ADMISSIBLE WHEN HIGHER DRAWBACK CLAIMED:-

CBIC has recently issued circular no. 37/2018-Customs dated 09.10.2018 wherein it has been clarified that IGST refund have not been granted in cases where higher drawback has been claimed. In this context, it is worth observing that there were two types of drawback rates upto 30.09.2017, one with cenvat facility denoted as ‘B’ and the other without cenvat facility denoted as ‘A’. If an assessee opted for drawback rate specified under ‘B’, it meant that lower rate of drawback was claimed which pertained to customs portion only as the credit of Central Excise Duty and Service Tax had been availed by the assessee. Thereafter, with effect from 01.10.2017, the drawback rate was merged with only one rate which is limited only to the refund of the customs duty. It is also pertinent to note that since the drawback is granted only with respect to central excise and service tax portion, the credit that is to be denied is only that of Central Laws. This has also been clarified vide Circular No. 37/11/2018-GST dated 15.03.2018 wherein it is stated that a supplier availing of drawback only with respect to basic customs duty shall be eligible for refund of unutilized input tax credit of central tax / State tax / Union territory tax integrated tax / compensation cess. It is further clarified that refund of eligible credit on account of State tax shall be available even if the supplier of goods or services or both has availed of drawback in respect of central tax. Although the above circular is issued in context of refund of accumulated input tax credit, its ratio is equally applicable in the present discussion.

In context of the recent circular issued wherein it is stated that refund of IGST shall not be admissible if the higher rate of drawback is being claimed, it is submitted that such a condition is very irrational. It is submitted that as stated above, refund of SGST credit is admissible even if higher drawback is claimed. Consequently, there may be possibility that there is sufficient balance of SGST available with the assessee and the goods can be exported on payment of IGST by utilising SGST credit balance. In such cases, there should be no embargo in claiming the refund of IGST paid by utilising SGST credit balance. Even otherwise, an assessee may have huge credit balance on account of transitional credit or on account of purchase of capital goods. In such cases, there is no rational in imposing restriction as regards export on payment of IGST. Accordingly, the restriction of simultaneous availment of higher drawback along with refund of IGST paid on exports should be re-looked by the government. Even this was allowed in Central Excise Regime also. Rajasthan High Court has allowed higher rate of drawback along with rebate claim in case of Iscon Surgicals Limited [2016(344)ELT 108(Raj.)]

Another point that is relevant is that the circular even puts restriction on claiming refund of IGST paid on export goods if the higher and lower rate of drawback on certain goods were identical. This is for the reason that it is presumed that if the drawback rate under category ‘A’ and ‘B’ are same, it means that drawback has been granted of central excise and service tax portion too. This is very absurd as the benefit of refund of IGST is being denied outrightly to the assessees who have availed the benefit of such drawback rate.

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GST UPDATE ON CLARIFICATION THAT IGST REFUND NOT ADMISSIBLE WHEN HIGHER DRAWBACK CLAIMED

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