GST Update on Refund as per Inverted duty structure to registered suppliers supplying to Merchant exporter

GST Update on Refund as per Inverted duty structure to registered suppliers supplying to Merchant exporter

Section 54 of Central Goods and Service Tax Act, 2017 prescribes the provisions related to refund of tax paid on goods or services or both. Under the provisions of the first proviso to sub-section 3 of Section 54 of the CGST Act a registered person may claim refund of unutilised input tax credit in case of inverted duty structure. The exact language of this proviso reads as follows:-

"(ii) where the credit has accumulated on account of rate of tax on inputs being higher than the rate of tax on output supplies (other than nil rated or fully exempt supplies), except supplies of goods or services or both as may be notified by the Government on the recommendations of the Council:"

Therefore, the language contained in the above section uses the language "RATE OF TAX ON INPUTS being higher than RATE OF TAX ON OUTPUT SUPPLIES".

Pursuant to notification no. 40/2017-Central Tax (Rate) and 41/2017-Integrated tax (Rate) dated 23/10/2017, government has exempted intra-state and inter-state supply of goods by registered supplier to registered recipient for export from so much of leviable tax under section 9 of CGST Act and section 5 of IGST Act in excess of the rate of 0.05% and 0.1% respectively subject to fulfillment of certain conditions. Now, accordingly if a registered supplier supplies his goods to registered recipient for export (i.e. merchant exporter) at the rate 0.10% instead of 18%, then the situation of accumulated credit arises. Further, in the mentioned notification it has been clearly declared that any supplies made to merchant exporter shall be exempt over and above 0.05% and 0.10% in case of CGST and IGST respectively i.e. the taxable rate for supplies made to merchant exporter shall be 0.05% and 0.10% CGST and IGST respectively. Further, these notifications have been issued in "Rate" section, therefore, it is clear that it seeks to reduce the rate of tax on output supplies.

Now, the issue arises in case of supplier who is charging only 0.10% to the merchant exporter and whereas he has paid 18% GST on purchase of raw material for which there is no set off available to the supplier. If the supplier is solely supplying to merchant exporter, then it would create a situation of Inverted duty structure and the supplier can claim refund under inverted duty structure as per language used in section 54(3) of CGST Act, 2017.

The content of this GST update is for educational purpose only and not intended for solicitation.
You can reach us at www.capradeepjain.com, at our facebook page on https://www.facebook.com/GSTTODAYBYPRADEEPJAIN/as well as follow us on Twitter athttps://www.twitter.com/@capradeepjain21

Comments

GST Update on Refund as per Inverted duty structure to registered suppliers supplying to Merchant exporter

Post a Comment

Query