Duty Drawback & Input Credit - under GST

[unni kv]

Dear Sir

We are a Man Made Fabrics exporter (95% export) located at Kannur District, Kerala.

We are exporting against Letter of Undertaking without paying GST.

We are availing duty drawback in the lower rate (from 1/7/2017 onwards), earlier

we used to availed duty drawback in the High rate i.e till 30/6/2017.

Could you please clarify my following query

• Whether we are eligible for avail Input Credit for materials purchased ?
• Whether Input Credit can avail for Integrated Tax paid for Import?
• Whether input credit can avail on SGST/CGST paid on Reversal Charge Mechanism?
• We have already filed GSTR3B for July & August 2017 after making payment towards

CGST/SGST on RCM and showed as ITC receivable for tax on purchases/RCM, is this

Correct or else how we can reverse these ITC. We have not any set off against this

ITC receivable.

Your early feedback on my above subject will be highly appreciated.

[SHIVKUMAR SHARMA]

Reply as under :-Subject to your output supply is taxable.

• Whether we are eligible for avail Input Credit for materials purchased ? -YES
• Whether Input Credit can avail for Integrated Tax paid for Import? -YES
• Whether input credit can avail on SGST/CGST paid on Reversal Charge Mechanism? -YES
• We have already filed GSTR3B for July & August 2017 after making payment towards

CGST/SGST on RCM and showed as ITC receivable for tax on purchases/RCM, is this

Correct or else how we can reverse these ITC. We have not any set off against this

ITC receivable.-YES, IT IS CORRECT PROCEDURE

[unni kv]

Sir,

Thanks, since we are availaing duty draw back in lower rate (2.50%), my question is whether we

can avail input credit on purchase/RCM or not ?

[Rajagopalan Ranganathan]

Sir,

As per proviso 3 of Section 54 (3) of CGST Act, 2017 "no refund of input tax credit shall be allowed, if the supplier of goods or services or both avails of drawback in respect of central tax or claims refund of the integrated tax paid on such supplies."

As per proviso 3 of Section 54 (3) of Maharashtra Goods and Services Tax Act, 2017 "no refund of input tax credit shall be allowed, if the supplier of goods or services or both claims refund of the integrated tax paid on such supplies."

In respect of exports only integrated tax is payable. If you export the goods on payment of IGST and claim the refund of the same under proviso 3 of Section 54 (3) of CGST Act, 2017 then you are eligible to claim refund of credit of input tax paid on inputs and input services utilised for supply of export goods. Draw back is available only in respect of central tax and integrated tax.

One more point which I am not able to understand is when you supply the export goods under letter of undertaking/bond without payment of IGST how can you claim drawback?

[SHIVKUMAR SHARMA]

Yes, Yoy can avail input tax credit on purchase/RCM

[unni kv]

Sir,

Our output supply is taxable as per GST but exporting with Nil Tax against Letter of Undertaking

and availing Duty Drawback (at lower rate i.e 2.50%) . Still whether we can avail Input credit on

purchase and tax paid on RCM ?

[unni kv]

Dear Rajagopalan Ranganathan

Sir, we are availing duty drawback not in respect of Central Tax or IGST paid on supplies, it is on the

basis of the rates of drawback specified against the various tariff items.

[SHIVKUMAR SHARMA]

Your output supply is taxable as per GST Rule & you are paying GST on output supply in domestic market but exporting with Nil rated tax against Letter of Undertaking & availing duty draw back . Still you can avail Input tax credit on purchase & RCM.

[unni kv]

Dear Sirs

Whether we can reverse the Input Tax Receivable amount filed in GSTR3B while filing GSTR2 ?

Not done any set off against Input Credit.

regards

[Himansu Sekhar]

Yes you can take credit on the above three occasions.

[Rajagopalan Ranganathan]

Sir,

Please clarify in respect of which duty/tax you are claiming drawback?

[Ganeshan Kalyani]

Either you pay IGST and claim refund. Here paying IGST on export means net liability arising at after setting off input tax credit.

Second option is do not pay IGST under bond of letter of understanding and claim duty drawback.

AI Summary

Input tax credit availability affirmed for purchases, imports and RCM; refund barred if drawback claimed. Provided the output supply is taxable, input tax credit on purchases is available; integrated tax paid on import and CGST/SGST paid under reverse charge are eligible for credit. Recording such credit as ITC receivable in GSTR-3B after payment of RCM is procedurally acceptable when no set-off has been taken. A statutory limitation bars refund of ITC where the supplier avails duty drawback in respect of central tax or claims refund of integrated tax, so exporters must choose between paying IGST and claiming refund or exporting under LUT and claiming drawback, and reconcile or reverse ITC accordingly.