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.

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.