GST refund on machine imported and being re-exported

[Bharat Garg]

We intend to get an imported machinery replaced from an exporter within the warranty period, due to certain defects identified in the machine. The new machine is proposed to be imported on a DPP basis and hence, all customs and taxes will be borne by the exporter only.

In relation to the old machine which has to go back, we intend to continue to claim GST paid last year. Even if there is no financial consideration involved on the current outward transaction, understand that the same will be subject to GST under Schedule I. Accordingly, we intend to issue an export invoice (with IGST) for such transaction, computing IGST based on remaining life of the asset and include the same in our GST returns.

Please let us know if you agree with the above proposed. Also, will there be a challenge in claiming GST refund if there is no consideration involved.

AI Summary

GST refund on returned machinery: IGST refundable on depreciated value; credit barred where exporter pays taxes on free replacement.
IGST on the returned machine may be computed on its depreciated value and refunded if export refund conditions are satisfied. Where a replacement machine is supplied free and the exporter pays customs duty and IGST, the recipient cannot claim input tax credit because claiming credit requires payment of the supplier's invoice (including taxes) within 180 days, which does not occur in a free replacement. Check DGFT export schedule for commodity restrictions.