Refund of integrated tax paid on exports was restricted by a retrospective amendment effecting Advance license or ECPCG license holders or EOU/STP/EHTP who enjoyed the benefit of IGST exemption on imports, which in turn created disarray amongst the exporters at large who had made exports on payment of Integrated Tax (IGST) and simultaneously also availed IGST exemption under Advance Authorisation or EPCG Authorisation or import of goods by an EOU/STP/EHTP. Such restriction was imposed vide Notification No. 39/2018-Central Tax dated 04.09.18 and that too from a retrospective date being 23.10.17.
The aforesaid major change provided undue hardship as to its retrospective nature and the exporter would again face the problem of liquidity crunch if the refund of IGST allowed earlier would be disallowed and was to be paid back to the Government as it would have violated Rule 96(10) of the CGST Rules, 2017, being one of the criteria for availing refund of IGST paid on exports of goods/ services.
Considering the hurdles which could at large hit the exporters who are major foreign exchange earners of the country, the Ministry of Finance has bought out Notification no. 53/2018- Central Tax dated 09.10.18 and Notification no. 54/2018- Central Tax dated 09.10.18. Both the notifications has not only granted relief to large exporters but also corrected anomalies as to bring out the true intention of the law makers as to curbing of IGST Refund wherein specified exemption has been availed.
The eleventh amendment to the CGST Rules, 2017 has nullified the amendment bought out by Notification no. 39/2018-Central Tax dated 04.09.18 and restored the earlier provisions upto 08.10.18. Therefore, a person availing IGST exemption under Advance License, EPCG or an EOU/STP/EHTP procuring goods is eligible for IGST Refund upto 08.10.18.
The restriction for refund of IGST upto 08.10.18 is only for those persons claiming refund of IGST on exports, who have received supplies from suppliers who has availed benefit of any specified exemption notification. Therefore, there is no restriction on IGST Refund on exports for persons enjoying IGST exemption on imports made directly by them under an Advance Authorization or EPCG or EOU/STP/EHTP as the case may be.
However, from 09.10.18 no refund of IGST will be admissible to Advance License & EPCG License holders and EOU/STP/EHTP availing exemption of IGST on imports. There is only one exception which remains is that persons will still be able to export the goods on payment of IGST and claim refund even if IGST exemption has been claimed in case of procurement of capital goods under the EPCG Scheme.
The aforesaid change has been a great sigh of relief to exporters who had made imports availing IGST exemption under the specified notification by nullifying the retrospective change of the notification issued on 04.10.18. Moreover, the twelfth amendment now imposes a restriction on availing IGST refund directly on Advance License & EPCG license holders and EOU/STP/EHTP procuring from public/private warehouse and such persons are compulsorily required to export of goods under a valid letter of undertaking and plan its exports in such a way so as to abide by the condition as stipulated in rule 96(10) of the CGST Rules, 2017.
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Twenty years of exprience in tax practice, specialist in structuring & planing and tax optimization under indirect tax. Lead eastern India indirect tax practice of Ernst & Young in past.