ITC Cess refund on export of car

[saket s]

Hi,

Need some input under following scenario.

We locally purchase cars (at GST 28% + Cess 22% = 50%) and export the same. We do not have any local sales of cars, thus, we have accumulated huge ITC credit of cess, and hence we need to fully claim the compensation Cess as refund. For ITC refund the residual rule 89(4) is applicable in our case. However the formula prescribed under rule 89(4) “Refund Amount = (Turnover of zero-rated supply of goods + Turnover of zero-rated supply of services) x Net ITC ÷ Adjusted Total Turnover” reduces our ITC refund substantially. Since our total exports is less than 10% and further the car exports is less than 5% of total turnover, the claimable refund amount upon applying the formula is very insignificant resulting in substantial lapse of balance 95% Cess which was otherwise claimable as refund. Further, we cannot utilize any Cess balance not granted as refund. Is there any way we can avail/utilize ITC Cess refund on export of car?

Saket

[Alkesh Jani]

Sir,

Please refer Section 9 (1)(c) of GST (Compensation to the States) Act,2017, under which you can claim for refund. Please also refer definitions of “Cess” and “Input Tax”. Please try to contact your jurisdictional office (State) for form prescribed for refund if any. Hope this may help you.

Our experts may correct me if mistaken.

Thanks

[saket s]

Thank You.

If any expert has any different view on this matter, kindly share.

[Alkesh Jani]

Sir,

Please refer Para 5 of Circular issued vide F. No. CBEC/20/16/4/2018-GST dated 30/05/2018, Which clarifies that you are eligible for refund. Please do needful for better results.

Our experts may correct me if mistaken.

Thanks

[Ganeshan Kalyani]

Refund of unutilized cess can be claimed.

AI Summary

ITC Cess refund: exporters may claim compensation cess credit refunds despite prorata formula limits, following statutory refund route.
Exporters who buy cars locally and export them can accumulate unutilized compensation cess input tax credit; the residual refund formula prorating refundable ITC by zero-rated turnover against adjusted total turnover can sharply limit refundable cess, while administrative guidance and a departmental circular clarify that a statutory refund route exists and that exporters should pursue refund procedures with their jurisdictional office.