GST UPDATE ON RESTRICTION ON CLAIMING HIGHER DRAWBACK WITH REFUND PART-II

In continuation to the discussion made in our earlier update, we submit that in cases of refund of accumulated input tax credit filed by the assessees for the month of July, 2017 wherein they have exported the goods manufactured from the stock of inputs prior to 30.06.2017 wherein no input tax credit was availed, the refund claims are being denied on the grounds that higher drawback was claimed by the assessee. In such cases, the refund of accumulated input tax credit of CGST/IGST portion is outrightly rejected without even giving show cause notice or following the due process of law. However, in our opinion, since the exporter has not availed credit of Central Excise on stock of inputs available as on 30.06.2017 under transitional provisions wherein higher rate of drawback was claimed, the benefit of refund of accumulated input tax credit should not be denied to the assessees for refund claims filed for subsequent months. This is for the reason that the Central Excise and Service Tax Drawback Rules only put restriction on availing credit on inputs used in manufacture of exported goods. However, the refund claimed in the month of July, 2017 is with respect to inputs that are procured in the said month to be used in future for which the refund cannot be denied.
Moreover, the GST officers are required to allow re-credit of the amount claimed as refund if the same is rejected and simultaneously issue show cause notice if the re-credit is being objected. However, no such procedure is being followed and the refund of CGST/IGST portion is being simply rejected as not admissible. This practice is being prescribed by para no. 4 of the circular number 59/33/2018-GST dated 04.09.2018 issued by the CBIC.

It was represented even by certain exporters that the refund claim should not be denied for the reason that the higher drawback was availed by the assessees if they are ready to surrender the drawback benefit. But even this suggestion is not being accepted by the GST officers on the grounds that there is no mechanism to amend the shipping bill in which higher rate of drawback has been opted for. It is submitted that when the IGST can be paid from either credit available with respect to IGST/CGST/SGST, then imposition of restriction is not at all proper. When SGST is unconditionally admissible, the restriction as regards non-availability of IGST refund is not at all logical. Hence, the government should re-consider the imposition of such a restriction in the interests of exporters.

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GST UPDATE ON RESTRICTION ON CLAIMING HIGHER DRAWBACK WITH REFUND PART-II

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