Refund of CGST & IGST on Export of Goods under Drawback

[Vaibhav Choudhary]

Dear Professionals,

We are continuously exporting goods under Pre & Post GST Regimes. Further facts of case as under :

1. We were not registered in Excise in post GST Period as our goods were not taxable.

2. Our Manufacturing Cycle is of 1 months. So inputs purchased in month of June, 2017 where used in export of goods in the Month of July,2017 & Aug,2017 under Higher Drawback Route/Claim.

Now Issue is that the Finished goods which were manufactured out of goods which were purchased in the Month of July & Aug under GST were exported in the month of Sept & Oct,2017 onwards.

As the goods where exported under Higher Drawback Claim route we are not eligible for double Claim consequently our Input Credit of the Month of July & Aug is rejected on the same ground. But the fact is that the goods purchased in the month of July & Aug under GST were used in consumption of goods exported in the month of Aug & Sept 2017.

As there is no concept of consumption theory in GST Law the eligible credit for the inputs purchased in month of July & Aug is rejected as export is made under drawback route.

Expert's comment required on the same & pl also share if any recent favorable judgment is pronounced in this regards.

[SHARAD ANADA]

Refer Circular No. 37/11/2018-GST 15th March, 2018 para 2

2. Non-availment of drawback: The third proviso to sub-section (3) of section 54 of the CGST Act states that no refund of input tax credit shall be allowed in cases where the supplier of goods or services or both avails of drawback in respect of central tax.

2.1 This has been clarified in paragraph 8.0 of Circular No. 24/24/2017 – GST, dated 21st December 2017. In the said paragraph, reference to “section 54(3)(ii) of the CGST Act” is a typographical error and it should read as “section 54(3)(i) of the CGST Act”. It may be noted that in the said circular reference has been made only to central tax, integrated tax, State / Union territory tax and not to customs duty leviable under the Customs Act, 1962. Therefore, a supplier availing of drawback only with respect to basic customs duty shall be eligible for refund of unutilized input tax credit of central tax / State tax / Union territory tax / integrated tax / compensation cess under the said provision. It is further clarified that refund of eligible credit on account of State tax shall be available even if the supplier of goods or services or both has availed of drawback in respect of central tax.

AI Summary

Input tax credit refund when drawback claimed: barred for central tax but allowed if only basic customs duty drawn. The central issue is whether availing drawback bars refund of unutilized input tax credit. Circular guidance states that availing drawback in respect of central tax prevents refund of input tax credit, which explains rejection of ITC claims when exports used the higher drawback route. However, if drawback is availed only for basic customs duty, refund of unutilized input tax credit for central, State/UT, integrated tax and compensation cess remains available; State tax credit refund is nevertheless available even where drawback was claimed for central tax.