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

AI Summary

Amendment to Rule 89(4)(C) GST: Exporters Challenge Calculation of Zero-Rated Supplies Value for Fairness Under Article 226 A query was raised regarding the amendment to Rule 89(4)(C) of the Goods and Services Tax (GST) effective from March 23, 2020, concerning the calculation of the value of zero-rated supplies. The rule states that the turnover of zero-rated goods is the lesser of the actual export value or 1.5 times the domestic supply value. The concern is that exporters with a small percentage of domestic sales might find this calculation unfair, as it undervalues their exports. A response suggested challenging the rule's validity in the High Court under Article 226 of the Indian Constitution.