Refund of accumulated ITC due to supplies @0.1% GST merchant exporters

[MohanLal tiwari]

Dear Panelists,

We are manufacturing & supplying goods to merchant exporters @ 0.1%, Railway parts @5% and others @18%. Due to maximum supplies to merchant exporters and railways, the ITC is getting accumulated day be day.

Kindly advise whether we should claim refund of accumulated ITC on account of supplies to merchant exporters, if so how we can segregate the ITC against ITC taken for manufacturing of export or railway goods if some of the inputs are common for all.

[KASTURI SETHI]

In GST era, the concept of 'merchant exporter' has lost its relevance. Now there is no difference between the terms, 'Manufacturer Exporter' and 'Merchant Exporter' for the purpose of export.. The procedure in respect of the supplies made for export is same. You can claim refund of accumulated credit, being maximum supplies for export. Regarding segregation, you may consult CMA. He can certify the data.

[MohanLal tiwari]

Thanks Kasturi Sir,

For us, the Merchant exporter is buyer who is procuring materials from us for export and registered for the purpose and paying us GST @ 0.1%. For the direct exports, we are charging full GST and getting refund also.

Please advise for refund wherein goods are supplied by us charging GST @0.1% for export through merchant exporter.

[Rajagopalan Ranganathan]

Sir,

According to Section 54 (3) (ii) of CGST Act, 2017 'where the credit has accumulated on account of rate of tax on inputs being higher than the rate of tax on output supplies (other than nil rated or fully exempt supplies), except supplies of goods or services or both as may be notified by the Government on the recommendations of the Council." :

Since you are paying more tax on inward supply of materials procured by you and your out put tax rate is less than the rate tax paid on inward supplies you can claim refund due to the reason of inverted tax rate.

[Ganeshan Kalyani]

Refund can be claimed for excess input tax credit accumulated on account of less output tax payable. And as regard segregation of input tax credit into input proportionate to supply @0.1%, export and regular supply, you may resort to turnover ratio.

[Nandan Khambete]

Yes, refund by way of Inverted Tax structure can be claimed certainly. My client is claiming since October 2017 and tefund are sanctioned without any issue.

AI Summary

Inverted tax structure: refund claim possible for accumulated input tax credit where inputs attract higher tax than outputs.
Accumulation of input tax credit because inputs attract higher GST than outputs taxed at a concessional rate can justify a refund under the inverted tax structure; merchant exporter transactions are treated as export supplies for this purpose. Where inputs are common to supplies at different rates, claimants should segregate ITC by documentary methods such as cost accountant certification or apportionment by turnover ratio to allocate credit to lower rated supplies and exports.