Delay in recovery of Export Proceeds

[V Rajalakshmi]

During the year the company has written off export debtors as bad debts (export of goods ) in the books of account I would like to check with you the impact of GST on such non-recovery of export proceeds.

Thanks

Rajalakshmi.V

[KASTURI SETHI]

In case export proceeds are not received, the supply will be treated as supply for home consumption and GST along with interest would be demanded by way of issuance of SCN. All export benefits will be forfeited.

[V Rajalakshmi]

Thank you sir

[Amit Agrawal]

Followings are my humble views:

1. Just because of non-receipt of consideration in convertible foreign exchange against goods exported (on account of bad debts), Dept. has got no legal provision in present GST law/s to demand GST on such supply.

1.1 Mere non-receipt of consideration in foreign exchange does not later status of this supply from 'Export of goods' to domestic supply.

2. If you have not claimed any refund of 'unutilised input tax credit or integrated tax paid' against such exported-goods, then, I feel that there is no adverse implications for you under present GST law just because of non-receipt of consideration in convertible foreign exchange in given scenario.

Above are strictly my personal views and same should not be construed as professional advice / suggestion.

[KASTURI SETHI]

Dear Sir,

It is not an issue of non-receipt of 'convertible foreign exchange' or 'Indian Currency'. Export proceeds NOT received.

[KASTURI SETHI]

Non-receipt of export proceeds means contravention of the provisions of FEMA.

Just for knowledge sake, case law is posted. Para no.7 is crucial.

2008 (9) TMI 216 - RAJASTHAN HIGH COURT NAZNEEN Versus DIRECTOR OF ENFORCEMENT, NEW DELHI

 

[Amit Agrawal]

Kindly allow me to rephrase my views. Followings are my humble views:

1. Just because of non-receipt of export-proceeds against goods exported (on account of bad debts), Dept. has got no legal provision in present GST law/s to demand GST on such supply.

1.1 Mere non-receipt of export-proceeds does not later status of this supply from 'Export of goods' to domestic-supply.

2. If you have not claimed any refund of 'unutilised input tax credit or integrated tax paid' against such exported-goods, then, I feel that there is no adverse implications for you under present GST law just because of non-receipt of export-proceeds in given scenario.

Above are strictly my personal views and same should not be construed as professional advice / suggestion.

[KASTURI SETHI]

Dear Sir,

Such situation calls for waiver from RBI otherwise the issue will not be closed.

[Honey Vig]

Sir, Read Rule 96B

 

[Shilpi Jain]

Rule 96B does not have any statutory provision backing till date. Provisions are proposed to be included in sec 16 of IGST Act, but these are not yet effective.

So agree with views of Mr. Amit as of now.

Also, suggested that in case the requierment is written off by RBI, as suggested by Kasturi sir, it would be safer position for the assessee.

[KASTURI SETHI]

Govt. has gained nothing by such export. Needless to say Govt. provides incentives/benefits to the exporters for earning foreign exchange.Hence the very purpose of export is defeated in allowing export.

[V Rajalakshmi]

The refund of ITC has been claimed by the company for the given year, so I am also of the view that at least the refund claimed in proportionate to the turnover written off to be added to the liability, kindly share your views, please.

[KASTURI SETHI]

No doubt about recovery of refund by the department in the absence of export proceeds. To qualify the supply as export, all conditions should be fulfilled.

[Ganeshan Kalyani]

I agree with the view of experts.

[Shilpi Jain]

It is only when there is ambiguity in the law, purposive interpretation should be resorted to.

The fact that there is no condition in the law to receive CFE for export of goods to be zero-rated, that condition cannot be attached to deny refund.

The option that Govt always has is amend the law retrospectively. Else cannot deny

[V Rajalakshmi]

what will be the impact if the exporter exports the goods without availing LUT and take the route off with payment of tax?

[Amit Agrawal]

W.r.t. last post from Ms. V Rajalakshmi, my views are as under:

A. Rule 86B (inserted vide Notification No. 16/2020 – Central Tax dated 23-03-2020) - at best - covers the situation where refund of 'ITC' was claimed against goods exported without payment of taxes under LUT (i.e. under clause (a) of unamended Section 16 (3)).

B. Said Rule 86B does not cover situation where goods were exported with payment of taxes and refund was claimed against taxes so paid (i.e. under clause (b) of unamended Section 16 (3)).

C. Amended Section 16 (3) (as inserted vide Finance Act, 2021) is NOT yet made operational.

Hence, there is no legal mechanism available to GST Dept. to recover refund already granted to your client (i.e. refund of taxes paid by your client against 'goods exported' under clause (b) of unamended Section 16 (3)).

Above are strictly my personal views and same should not be construed as professional advice / suggestion.

[Amit Agrawal]

There is mistake in above post of mine. Said Rule 86B indeed prescribes recovery of refund granted even against 'goods exported' under clause (b) of unamended Section 16 (3). My apologies!

[Sanjay Palapu]

Can we get the refund of ITC paid on delayed receipt of proceeds under the LUT for services?

Thanks

Sanjay

[Amit Agrawal]

Dear Shri Sanjay Palapu Ji,

To get better responses to your query and not to get mixed up / confused with fact/s of any other query, it is suggested that you should raise a separate / independent query sharing all your relevant facts and points of doubt / concern.

AI Summary

Non receipt of export proceeds: GST reclassification risks and recovery where refunds or credits were claimed.
Non-receipt of export proceeds raises competing GST positions: one view treats such supplies as reclassified to domestic supply attracting GST, interest and forfeiture of export benefits; opposing views stress absence of a statutory provision that automatically changes export character solely due to non-receipt and note recovery risks where refunds or ITC have been claimed. Rule 86B and proposed amendments to section 16(3) are referenced but not fully operative; FEMA and RBI waiver/write-off considerations are relevant where proceeds remain unrealized.