Input Tax Credit on Import Return

[Kaustubh Karandikar]

XYZ imported goods and input tax credit taken on it for IGST charged in the Bill of Entry. These goods were rejected being wrong supply and re-exported to the supplier.

1) Can they claim input tax credit of IGST paid?

2) While re-exporting to the supplier, can they export without payment of GST under LUT even if they had taken input tax credit of the IGST?

[YAGAY andSUN]

Except certain circumstances, there is no tax on export. in our view, XYZ can claim input tax credit of IGST paid and they can export under LUT without payment of IGST.

[DR.MARIAPPAN GOVINDARAJAN]

I endorse the views of Yagay and Sun.

[HariKishan Bhonagiri]

ITC eligibility - As per Sec 16(1) Every registered person shall, subject to such conditions and restrictions as may be prescribed and in the manner specified in section 49, be entitled to take credit of input tax charged on any supply of goods or services or both to him which are used or intended to be used in the course of his business and the said amount shall be credited to the electronic credit ledger of such person.

The bold letters makes the significance of not intended to use in the business - when they are rejected and sending back not intended to use for business.

Since the very eligibility is restricted, cannot take the ITC on imports.

AI Summary

Input Tax Credit on importability: IGST paid can be claimed and re exports allowed under LUT despite ITC. A forum majority holds IGST paid on imported goods may be claimed as input tax credit and those goods may be re-exported under a Letter of Undertaking without payment of IGST. An alternative position argues ITC is unavailable where the intended-use eligibility condition for credit is not met, such as for rejected goods sent back to the supplier.