Duty credit e-scrips classified as goods under HSN 4907, exempted from GST under Notification 35/2017, affects turnover calculations under Rule 89(4).

The AAR held that duty credit e-scrips are classified as goods under HSN 4907 and exempted from GST under Notification No. 35/2017. Sale of duty credit scrips constitutes exempted supply in domestic tariff area, requiring reduction from total turnover when computing Adjusted Total Turnover under Rule 89(4) of CGST Rules 2017. For refund claims under Rule 89(4B), turnover from duty credit scrip sales is irrelevant as refunds are limited to input tax credit on specified inputs used for export goods only.

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Issues Involved:
1. Whether the sale of duty credit e-Scrips forms part of Turnover for applying Rule 42 of the CGST Rules, 2017.
2. Whether the sale of duty credit e-Scrips forms part of Turnover for applying Rule 89(4) of the CGST Rules, 2017.
3. Whether the sale of duty credit e-Scrips forms part of Turnover for applying Rule 89(4B) of the CGST Rules, 2017.

Summary:

Issue 1: Applicability of Rule 42 of the CGST Rules, 2017
The applicant, M/s. Kaveri Exports, deals in the export of cotton lint and receives duty credit e-scrips under the RoDTEP scheme. These e-scrips are used for clearing imports and are transferrable. The applicant argued that these e-scrips should be excluded from the total turnover for the purpose of Rule 42 of the CGST Rules, 2017, as they are exempt from tax. The Authority for Advance Ruling clarified that after the insertion of clause (d) in Explanation-1 to Rule 43 of the CGST Rules vide Notification No. 14/2022 dated 05.07.2022, the value of duty credit scrips shall be excluded from the value of exempt supply for the purpose of applying Rule 42.

Issue 2: Applicability of Rule 89(4) of the CGST Rules, 2017
The applicant sought clarification on whether the sale of duty credit e-scrips should be included in the turnover for applying Rule 89(4). The Authority noted that duty credit scrips are classified as exempt supplies under Notification No. 35/2017-Central Tax (Rate) dated 13.10.2017. Therefore, the turnover pertaining to the sale of duty credit scrips should be reduced from the total turnover in the state for the computation of the 'Adjusted Total Turnover' as per Rule 89(4) of the CGST Rules, 2017.

Issue 3: Applicability of Rule 89(4B) of the CGST Rules, 2017
The applicant also sought clarity on whether the sale of duty credit e-scrips should be included in the turnover for applying Rule 89(4B). The Authority concluded that the turnover related to the sale of duty credit scrips does not arise in the computation of the refund of input tax credit under Rule 89(4B). This is because the refund pertains to inputs received under specific notifications for export of goods and the input tax credit availed in respect of other inputs or input services used in making such exports.

Final Ruling:
1. The value of duty credit scrips shall be excluded from the value of exempt supply for the purpose of applying Rule 42 of the CGST Rules.
2. The turnover pertaining to the sale of duty credit scrips should be reduced from the total turnover in the state for the computation of the Adjusted Total Turnover as per Rule 89(4) of the CGST Rules.
3. The turnover related to the sale of duty credit scrips does not arise in the computation of the refund of input tax credit under Rule 89(4B) of the CGST Rules.

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