Refund of unutilised input tax credit

[Yatin Bhopi]

Dear expert

We are procuring goods locally on the payment of SGST+CGST and supplying goods to SEZ without payment of taxes under LUT. Now we are not able to utilise ITC paid on purchses since there is no other taxable supply.

Please let me know whether is there any provision of claiming refund claim of unutilised ITC.

[DR.MARIAPPAN GOVINDARAJAN]

In my view, no refund is possible.

[Yatin Bhopi]

is there any way to overcome this situation.

[Rajagopalan Ranganathan]

Sir,

As per Section 16 (1) (b) of IGST Act, 2017 "supply of goods or services or both to a Special Economic Zone developer or a Special Economic Zone unit" is "zero rated supply."

According to Section 16 (3) of the same Act "a registered person making zero rated supply shall be eligible to claim refund under either of the following options, namely:––

(a) he may supply goods or services or both under bond or Letter of Undertaking, subject to such conditions, safeguards and procedure as may be prescribed, without payment of integrated tax and claim refund of unutilised input tax credit; or

(b) he may supply goods or services or both, subject to such conditions, safeguards and procedure as may be prescribed, on payment of integrated tax and claim refund of such tax paid on goods or services or both supplied,

in accordance with the provisions of section 54 of the Central Goods and Services Tax Act or the rules made thereunder.

[Yatin Bhopi]

Thanks a lot Sir

[Nash Industries I Pvt Ltd]

Supplies to SEZ is a physical export. Since all the supplies are only to SEZ, suggest to pay the IGST on the goods supplied to SEZ instead of LUT. Refund of the IGST paid is allowed and is easier relatively compared to the refund of unutilised ITC.

Regards

S.Ramaswamy

[Yatin Bhopi]

Dear Sir

Since CGST+SGST credit is accumulated, we can not able to utilise it to pay IGST.

In this situation as mentioned by Mr. Rajagopalan Ranganathan Sir only option available is to take refund of unutilised input tax credit.

[Nash Industries I Pvt Ltd]

CGST and SGST can be utilised for payment of IGST. The payment of IGST utilising the CGST and then SGST is allowed.

its payment of IGST for exports and hence refund of the IGST paid on clearances to SEZ is allowed.

It is always simpler to get the refund of outward IGST on exports when compared to refund of unutilised Input Credit.

IGST can be utilised for payment of IGST, CGST and SGST in that order/

Only Cross utilisation of CGST and SGST is not allowed.

Regards

S.Ramaswamy

AI Summary

Zero rated supply to SEZ: claim refund of unutilised input tax credit or pay IGST and claim refund of IGST.
Supply to a Special Economic Zone is a zero rated supply, permitting (a) export under bond or a Letter of Undertaking without payment of integrated tax and refund of unutilised input tax credit, or (b) payment of IGST on supplies and refund of the IGST paid under the statutory refund provisions. Practitioners note refund of paid IGST is often administratively simpler, and that CGST and SGST credits can be used to discharge IGST liabilities (utilising CGST then SGST), while cross-utilisation between CGST and SGST is not allowed.