Value of Zero rated supply as per new Rule 89(4)(C) w.e.f. 23-03-2020

[Vinay Kunte]

Respected Sir,

This query is in connection with the amendment made to Rule 89 (4) (C) with effect from 23-03-2020, in respect of the calculation for the Value of Zero-Rated supplies is as under:

The amended Rule reads as under:

Rule 89(4)(C) ― “Turnover of zero-rated supply of goods' means the value of zero-rated supply of goods made during the relevant period without payment of tax under bond or letter of undertaking or the value which is 1.5 times the value of like goods domestically supplied by the same or, similarly placed, supplier, as declared by the supplier, whichever is less, other than the turnover of supplies in respect of which refund is claimed under sub-rules (4A) or (4B) or both;]”

Now, if the Exporter has only 10-15% of supply domestically and exports the remaining 85-90% goods, the value of the Goods exported will always be much more than 1.5 Times the value of the goods supplies domestically and hence the Zero-Rated Supply will always be considered well below the actual value of the goods exported based on the above amendment of 1.5 times the value of the Goods supplied domestically.

Will it not be drastically unfair to the exporter? Or is it that the same value of Zero-Rated supplies is to be considered for determination of Adjustable Turnover for the period under consideration for Refund claim which is to be determined as per Rule 89(4)(E)?

Can you please elaborate? Please provide your valuable guidance in the matter, as always.

With Regards,

Vinay V Kunte

[Rajagopalan Ranganathan]

Sir,

In my opinion you have to invoke the writ jurisdiction of High Court under Art. 226 of Constitution of India challenging the wires of the said rule.

[Rajagopalan Ranganathan]

Sir,

Please read "vires" instead of "wires". The error is regretted.

AI Summary

Vires challenge to valuation cap on zero rated supplies can be pursued via writ petition to contest the rule. Amendment caps the recognised turnover of zero-rated supply at the lesser of: value supplied without payment under bond/letter of undertaking or 1.5 times the value of like goods supplied domestically by the same or similarly placed supplier. Where domestic sales are a small part of total turnover, the 1.5x comparator can unduly limit the value attributed to zero rated exports and thereby reduce the adjustable turnover used for refund claims, prompting consideration of a writ challenge to the rule's vires.