Can a Trader claim Refund of Accumulated Compensation Cess on Export under LUT

[NEHA GARDI]

Respected All,

Kindly guide me,whether a trader can claim refund of accumulated Compensation cess on sale done to SEZ under LUT? Specifically i cannot find anywhere that it is allowed only to manufacturer.

Thanks in Advance

[KASTURI SETHI]

It is allowed. "The concept of merchant or manufacturer exporter has become irrelevant under the GST regime. The procedure in respect of the supplies made for export is same for both merchant exporter and a manufacturer".

This is an extract from FAQ issued by the Board.

For further clarification also go through Board's Circular No.1/1/2017-Compensation Cess dated 26.7.17. Emphasis is on para no.8 of the circular.

[NEHA GARDI]

Thanks you Sir

[Kashish Gupta]

Dear Neha ji,

As we know that the refund of unutilized ITC would be allowed only in the following cases:

1. Zero rated supplies (export or supply to SEZ) made without payment of IGST under bond or LUT.
2. Inverted duty structure (GST rate of inputs being higher than rate on output supplies other than nil rated or fully exempt supplies).

The refund of accumulated ITC of compensation cess could be claimed by satisfying the following conditions:

1. The registered person would have paid compensation cess on inward supply of goods.
2. The inward goods would have utilized for making outward supplies.
3. The final goods would have been exported under bond or LUT without payment of IGST.
4. The compensation cess would have been availed as ITC in GSTR 3B return.
5. The final goods may or may not leviable to compensation cess.
6. Other conditions for claiming refund under section 54 of CGST Act.

Further, the department has provided clarity vide Circular No.1/1/2017-Compensation Cess dt. 26th July, 2017 regarding this issue.

Conclusion

I can say that a trader can file GST Refund on account of supplies made to SEZ unit/ SEZ developer (without payment of tax) under Refund Tab on the GSTN Portal. Moreover, if he wants to claim refund of accumulated compensation cess and not of the IGST, then he should edit the Net Input Tax Credit column. The concerned Assistant Commissioner, if satisfied may release the funds, else he may give a deficiency memo asking to provide further information.

[NEHA GARDI]

Thank you Sir.

AI Summary

Refund of Compensation Cess available for exports to SEZ under LUT, subject to specified conditions and procedural compliance.
Refund of accumulated compensation cess is claimable for supplies to a Special Economic Zone under a Letter of Undertaking without payment of tax; merchant/manufacturer status is irrelevant. Conditions include that compensation cess was paid on inward supplies and availed as ITC in GSTR-3B, inward goods were used for outward supplies, final goods were exported under bond/LUT without IGST payment, and other statutory refund requirements and portal procedures are satisfied.