ITC Refund

[Kaustubh Karandikar]

A 100% service exports company has gross billable income of 5.75 crores for FY 2018-19. It has LUT registration. Its total accumulated ITC for the year will be about 30 lakhs. It will be raising March 2019 invoices for this amount. However, since cash-flow wise, it does not need 5.75 crores as such, it may raise two invoices in march 2019 – one for say 2.50 cr. and another for 3.25 cr. Supposing by the time it files a refund application for ITC credits, only one invoice (3.25 ) has been paid (another may be paid a few months later), will it be granted full refund of ITC of 30 lakhs, or the refund will be pro-rated as 3.25:2.50?

[Shilpi Jain]

While you file the refund application the proof of receipt of payment will also have to be provided. Hence you will be able to claim refund only after the amount is realised in convertible foreign currency.

AI Summary

Refund of input tax credit depends on realisation of export proceeds in convertible foreign currency before claim is allowed. Refund of input tax credit for service exports under LUT is admissible only upon proof of realisation of export proceeds in convertible foreign currency; refund is limited to the portion of invoices for which payment has been realised and amounts not yet realised are ineligible until subsequent realisation.