Application for Refund of ITC on Export of Goods & Services without payment of ITC

[VIRAF DEBOO]

We are manufacturer exporter registered under GST. We are exporting our goods to various countries. We want to know that, whether Application for Refund of ITC on Export of Goods & Services without payment of ITC under LUT as per Section 54(3) (i) and Rule 89(4) of CGST Act 2017 is compulsory / mandatory??
We have blocked / carry forward proportionate ITC in Electronic Credit Ledger as per formula given in Rule 89(4) of CGST Rules & to be applied for ITC refund in GST RFD-01A form on common portal. Kindly advice whether it is mandatory or optional ??

[Nash Industries I Pvt Ltd]

Export can be made either with payment of IGST under claim of rebate or under LUT without payment of IGST. One of the procedure can be followed as mandated by law.

Regards

S.Ramaswamy

[KASTURI SETHI]

It is optional. I support the views of Sh.S. Ramaswamy, Sir.

[VIRAF DEBOO]

Dear Mr. Ramaswamy S. Sir,

Thanks for your reply. Sir our query is regarding refund application under LUT without payment of IGST.

As per Rule 89(4) of CGST Rules..................Rule 89(4) In the case of zero-rated supply of goods or services or both without payment of tax under bond or letter of undertaking in accordance with the provisions of sub-section (3) of section 16 of the Integrated Goods and Services Tax Act, 2017 (13 of 2017), refund of input tax credit shall be granted as per the following formula –

Refund Amount = (Turnover of zero-rated supply of goods + Turnover of zero-rated supply of services) x Net ITC ÷Adjusted Total Turnover

Sir kindly advice that, whether it is compulsory / mandatory that we have to block / carry forward ITC in Electronic Credit Ledger as per above formula against zero rated goods & the same ITC will be applied for refund in GST RFD-01A FORM on common portal ??

[Nash Industries I Pvt Ltd]

This is similar to rule 5 of erstwhile Cenvat Credit Rules.

The refund of tax paid on inputs for exports without payment of IGST under LUT or bond is allowed as per the formula.

The formula is the same as that of Notification 27/2012 CE(NT) issued under rule 5 of CCR,2004.

The refund of tax paid on inputs is not allowed if goods or services is exported on payment of IGST.

In short-

Export on payment of IGST - Rebate of IGST - no refund under rule 89(4) of CGST Rules 2017

Export without payment of IGST under LUT/Bond - Optional to claim refund under rule 89(4) of CGST Rules, 2017.

Regards

S.Ramaswamy

[VIRAF DEBOO]

Dear Mr. Ramaswamy S. Sir......Thanks for your reply Sir

[Ganeshan Kalyani]

Why would one like to forgo the benefit. It is optional but claiming is beneficial.

[DR.MARIAPPAN GOVINDARAJAN]

I endorse the views of Sri Ramasamy.

[Mr Rao]

Nicely elucidated by Shri Ramaswamy sir

[Ganeshan Kalyani]

Yes, indeed.

[Yash Jain]

Sir,

When we apply for refund U/s 54(3), the refund amount is automatically reversed in electronic credit ledger , which again depends on balance available as on date(I.e the balance on date when refund is filed)and not the date on which export is done/gaye 3b is filed.

Sir, now from your question I interpretate that you will export zero rated and claim ITC refund, by keeping in ecl the amount of refund (as per formula). In this case I would request you to please evaluate the option of paying igst (by input tax reversal) and claim refund, as this is least time consuming option as compared to refund of Unutilized ITC.

Regards

[Nash Industries I Pvt Ltd]

Section 54(3) talks about refund of unutilized inputs which is as per the formula.

Regards,

S.Ramaswamy

AI Summary

Refund of Input Tax Credit optional when goods/services exported under LUT without payment of IGST, claimable under prescribed formula.
Claiming refund of unutilized input tax credit for zero-rated supplies made without payment of IGST under a letter of undertaking is optional; the refund is available under the statutory formula that apportions Net ITC to zero-rated turnover and is claimed via the portal using form RFD-01A, while the alternative is to export on payment of IGST and claim rebate.