Update on Rule 96(10).

FIFTH TIME AMENDMENT IN RULE 96(10)
This is the fifth time Rule 96(10) of the CGST Rules, 2017 has been amended, that too, retrospectively. The history of amendments made in this Rule is summarized as follows:-
1. The notification no. 75/2017-Central Tax dated 29.12.2017 inserted sub-rule (9) applicable retrospectively w.e.f. 23.10.2017 which stated that the person claiming refund of integrated tax paid on export of goods or services should not have received the supplies on which the supplier had availed the benefit of notification no. 48/2017-Central Tax dated 18.10.2017 or notification no. 40/2017-Central Tax (Rate) dated 23.10.2017 or notification no. 41/2017-Integrated Tax (Rate) dated 23.10.2017. It is worth noting that the notifications mentioned pertain to following issues:
 Notification no. 40/2017-Central Tax (Rate) dated 23rd October, 2017:- This notification prescribes CGST rate of 0.05% if goods are supplied by registered supplier to a registered recipeint for export subject to certain conditions.

 Notification no. 41/2017-Integrated Tax (Rate) dated 23rd October, 2017:- This notification prescribes IGST rate of 0.1% if goods are supplied by registered supplier to a registered recipeint for export subject to certain conditions.

 Notification no. 48/2017-Central Tax dated 18th October, 2017:- This notification notifies supplies to be considered as deemed exports.
2. This sub-rule (9) was then substituted as sub-rule (10) vide notification no. 03/2018-Central Tax dated 23.01.2018 wherein reference of certain other customs notifications was also included. The said notifications were Notification No. 78/2017-Customs dated 13.10.2017 and notification no. 79/2017-Customs dated 13.10.2017. The details of the notifications are as follows:-
Notification no. 78/2017-Customs dated 13th October, 2017:- This notification provides exemption to IGST and compensation cess levied on goods imported by EOU.

Notification no. 79/2017-Customs dated 13th October, 2017:- This notification amends various notifications issued under advance authorization so as to provide IGST exemption and Compensation Cess exemption to goods imported against advance authorization.
3. This sub-rule (10) was once again amended vide notification no. 39/2018-Central Tax dated 04.09.2018 wherein the entire language of the sub-rule was changed. It was provided that the persons claiming refund of IGST paid on export of goods should not have availed benefit under the specified notifications. This amendment was material departure from the interpretation taken that the refund of IGST paid on exports should not be claimed by the persons availing benefit of notifications directly as against the interpretation that the restriction of refund of IGST paid on exports was applicable only where supplier has availed the benefit of the specified notifications. This amendment was a cause of concern and worry for many exporters who were holder of advance authorisation and had claimed refund of IGST paid on export of goods or services as revenue authorities were seeking recovery of refund already sanctioned.
However, it appears that the government has heard the cries of such exporters partly and Rule 96(10) has been amended once again to restore the position as applicable vide notification no. 03/2018-Central Tax dated 23.01.2018. The notification no. 53/2018-Central Tax dated 09.10.2018 seeks to amend the Rule 96(10) so as to deny benefit of refund of IGST paid on export of goods or services to persons who have received supplies on which the supplier has availed the benefit of specified notifications. The amendments made in this sub-rule, that too having retrospective effect have made the interpretation very complicated and complex. The story does not ends here. The same Rule 96(10) has been again amended on the same date vide notification no. 54/2018-Central Tax dated 09.10.2018 and this amendment has prospective effect, i.e., w.e.f. 09.10.2018.
Before proceeding to discuss the amendment made vide notification no. 54/2018-Central Tax dated 09.10.2018, it is pertinent to mention here that we had mentioned in our update titled “GST Update on restriction of refund of IGST paid on exports under Rule 96(10) of the CGST Rules” on release of Notification no. 39/2018-Central Tax dated 04.09.2018 that the restriction as regards refund of IGST paid on exports to exporter importing capital goods under specified notification is absurd as in case of EPCG, the export obligation is required to be discharged in 6 years and debarring exporter to claim refund of IGST paid on export of goods merely because IGST exemption was availed on import of capital goods is totally absurd. We are pleased to inform that the anomaly as pointed in our update has been removed by the government vide Notification No. 54/2018-Central Tax dated 09.10.2018 which allows exporters who have received capital goods under EPCG Scheme to claim the refund of IGST paid on exports. This amendment is welcomed by exporters but the point is that this amendment has been applied PROSPECTIVELY.
To sum up, the crux of the amendments made in Rule 96(10) till date have the following interpretation:-
A) PERIOD 23.10.2017 TO 08.10.2018:- The exporter claiming refund of IGST paid on export of goods or services should not have received supplies from supplier who has availed benefit of specified notifications. The exporter was debarred from claiming refund of IGST paid on exports even on goods manufactured from capital goods imported under EPCG (either covered under notification no. 48/2017-Central Tax dated 18.10.2017 or notification no. 78/2017-Customs dated 13.10.2017 or notification no. 79/2017-Customs dated 13.10.2017). However, exporter holding advance authorisation could have claimed refund of IGST paid on export of goods or services as restriction was only on supplies received from supplier who availed benefit of specified notification.
B) 09.10.2018 ONWARDS:- The exporter availing benefit of specified notifications cannot claim refund of IGST paid on export of goods or services. However, the restriction does not apply to capital goods procured under EPCG scheme without payment of IGST. But, the exporter holding advance authorisation is debarred from claiming refund of IGST paid on export of goods which is not appreciable.
The manner of amendments made in Rule 96(10), that too, retrospectively and thereafter prospectively have only added to the miseries of the exporters as this really does not support the motto of ‘EASE OF DOING BUSINESS’.

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Update on Rule 96(10).

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