GST UPDATE ON PRACTICAL DIFFICULTY FOR EXPORTERS SUPPLYING GOODS ON PAYMENT OF IGST

PRACTICAL DIFFICULTY FOR EXPORTERS SUPPLYING GOODS ON PAYMENT OF IGST-
According to the provisions of section 16 of the IGST Act, 2017, an exporter is eligible to claim refund under either of the following options:
(a) He may supply goods or services under bond without payment of IGST and claim refund of unutilized input tax credit as per section 54 of CGST Act;
(b) He may supply goods or services, on payment of IGST and claim refund of IGST paid on goods and services exported in accordance with provisions of section 54 of the CGST Act, 2017.
Rule 96 of the CGST Rules, 2017 provides for provision relating to refund of integrated tax paid on goods exported out of India wherein it has been stated that filing of valid return in GSTR-3 or GSTR-3B will be deemed as application of refund. Moreover, section 54(7) prescribes the time limit for issue of order as sixty days from the date of receipt of application of refund which is complete in all respects. It is also worth mentioning that in case of any claim for refund on account of zero rated supplies, section 54(6) provides benefit of provisional refund of 90% of the total amount of refund claimed excluding the amount of input tax credit provisionally accepted. The benefit sought to be given to the exporters by way of provisional refund of 90% of the total refund is with the condition that the amount of provisional input tax credit shall be excluded from the total claim. This in turn seeks to nullify the purpose of the benefit intended to be given to the exporters because the refund claim is required to be sanctioned within a period of 60 days from the date of receipt and the provisional input tax credit takes a period of one month to be able to be considered as final input tax credit. It is submitted that although there is no restriction as regards utilisation of provisional input tax credit, the refund claim filed by the exporters by utilising provisional input tax credit will be withheld until the said input tax credit is finally accepted.

The government has relaxed the provisions regarding filing of GSTR-1, GSTR-2 and GSTR-3 for July, 2017 and August, 2017. The assessee is required to file GSTR-1 for July, 2017 from 1st to 5th September and GSTR-2 for the month of July, 2017 from 6th to 10th September. Hence, the mechanism of provisional input tax credit for the month of July, 2017 will commence in the month of September, 2017. The details of inputs procured from various suppliers by the exporters will be auto-populated in GSTR-2 by 10th September, 2017 and the GSTR-3 for July, 2017 will be filed upto 15th September, 2017. Now, it is not clear that whether the provisionally admissible input tax credit for the month of July, 2017 will be finalised by 15th September or by 30th September, being the last date for filing GSTR-3 for the month of August, 2017. In any case, even if it is assumed that the input tax credit for the month of July, 2017 is finalised by 30th September, 2017, the claim of refund of exporters supplying goods or services on payment of IGST will be delayed.
Since the closing balance of credit from Excise, VAT and Service Tax returns will be available in the Electronic Cash Ledger only after filing TRAN-1, the export of goods and services on payment of IGST will be made only by utilising the provisional credit admissible to them. It is pertinent to mention that the filing of GSTR-3 or GSTR-3B will be deemed as an application for claiming refund of IGST paid on exports. It is also worth noting that although GSTR-3B has been mentioned as one of the ways of claiming refund of IGST paid on exports but the format does not contain any details pertaining to shipping bill number through which refund could be granted. Hence, it appears that the refund of IGST paid on exports will be admissible only after filing GSTR-3 because the provisional credit used by the exporters will not be refunded on provisional basis. The GSTR-3 for the month of July, 2017 will be filed on 15th September, 2017 which will adversely affect the working capital requirements of the exporters.
It is also submitted that even for the month of September, 2017, although, the exporter will utilise the provisional credit for payment of IGST and it will be deemed that the refund application of IGST paid on exports has been filed on 20th October, 2017 but inspite of this, the provisional refund to the extent of 90% will be admissible only after 20th November, 2017 when the provisional input tax credit will be finally accepted. This will have the effect that the refund application will be filed on 20.10.2017 whereas the provisional refund of 90% will be granted after 20.11.2017 while the order for refund is to be passed upto 19.12.2017. Say for example, if the opening balance of input tax credit in September, 2017 was Rs. 1,00,000/- while the provisional input tax credit received during the month of September, 2017 was Rs. 5,00,000/- and the IGST paid on exports by utilising input tax credit was Rs. 3,00,000/-, then the exporter will get provisional refund of Rs. 90,000/- (being 90% of Rs. 1,00,000) as the input tax credit of Rs. 5,00,000/- would be finally accepted by 20.11.2017. In our opinion, the ultimate purpose of the benefit will be defeated if the provisional refund is granted excluding the amount of provisional input tax credit.

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GST UPDATE ON PRACTICAL DIFFICULTY FOR EXPORTERS SUPPLYING GOODS ON PAYMENT OF IGST

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