Duty Credit Scrips under RoSCTL scheme exempt from GST under HSN 4907 entry 122A notification 35/2017

The AAR, UP held that Duty Credit Scrips issued under the RoSCTL scheme are exempt from GST under HSN code 4907, entry 122A of Notification 35/2017-Central Tax (Rate). The authority determined that these scrips, being instruments for export promotion incentives allowing exporters to offset basic customs duty, fall under the specific exemption. The ruling clarified that this exemption applies to all duty credit scrips, not just those under RoSCTL, as the notification specifically exempts "Duty Credit Scrips" without scheme-specific limitations.

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Issues Involved:
1. Taxability of Duty Credit Scrips issued under the RoSCTL scheme.
2. Applicability of Notification No. 35/2017-Central Tax (Rate) dated 13th October 2017 to all duty credit scrips.

Detailed Analysis:

1. Taxability of Duty Credit Scrips under RoSCTL Scheme:
- Applicant's Submission: The applicant, engaged in buying and selling Duty Credit Scrips, sought clarification on whether Duty Credit Scrips issued under the RoSCTL scheme are taxable or exempt under GST Schedule I, Sl. No.-122A HSN code 4907. They argued that all duty credit scrips should be exempt under GST, regardless of the scheme under which they were issued, based on Notification No. 35/2017-Central Tax (Rate) dated 13th October 2017.

- Authority's Discussion: The Authority reviewed the RoSCTL scheme, which was introduced to rebate embedded State and Central Taxes and Levies on garments and made-ups to enhance competitiveness. The scheme issues rebates in the form of duty credit scrips, which are freely transferable and can be used for payment of Basic Customs Duty on import of goods.

- Legal Interpretation: The Authority referred to the Foreign Trade Policy (FTP) 2015-20, which defines Duty Credit Scrips as instruments to award incentives to exporters, allowing them to set off Basic Customs Duty. The Authority noted that the duty credit scrips under the RoSCTL scheme are similar to those under other schemes like MEIS and SEIS.

- Conclusion: The Authority concluded that Duty Credit Scrips issued under the RoSCTL scheme are not taxable under GST, falling under HSN code 4907 and exempt as per Entry No. 122A inserted by Notification No. 35/2017-C.T. (Rate) dated 13.10.2017.

2. Applicability of Notification No. 35/2017-Central Tax (Rate) dated 13th October 2017:
- Applicant's Query: The applicant sought clarification on whether Notification No. 35/2017-Central Tax (Rate) dated 13th October 2017 is applicable to all duty credit scrips.

- Authority's Discussion: The Authority examined the notification, which amended Notification No. 02/2017-Central Tax (Rate) dated 28.06.2017 to include Duty Credit Scrips under HSN code 4907, making them exempt from GST. The Authority also reviewed various circulars and previous rulings, including Circular No. 46/20/2018-GST, which clarified that duty credit scrips attract Nil GST under S.No. 122A of Notification No. 2/2017-Central Tax (Rate) dated 28.06.2017.

- Conclusion: The Authority affirmed that Notification No. 35/2017-Central Tax (Rate) dated 13th October 2017 is applicable to all duty credit scrips, excluding ineligible ones. This includes the Duty Credit Scrips issued under the RoSCTL scheme.

Order:
1. Taxability of Duty Credit Scrips under RoSCTL: Duty Credit Scrips issued under the RoSCTL scheme are not taxable as per Entry No. 122A inserted by Notification No. 35/2017-C.T. (Rate) dated 13.10.2017, falling under HSN 4907.
2. Applicability of Notification No. 35/2017-Central Tax (Rate): The notification is applicable to all duty credit scrips, excluding ineligible ones.

This ruling is valid only within the jurisdiction of the Authority for Advance Ruling Uttar Pradesh and is subject to the provisions under Section 103(2) of the CGST Act, 2017 until declared void under Section 104(1) of the Act.

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