Refund under GST

[Rajesh Kumar]

Sir/Madam

A manufacturer sales goods to a merchant exporter at concessional rate @0.1%. Merchant export exports the said goods.

Now the supplier of goods is want to file refund. Under which category he will file refund I.e. either he required to file under inverted duty structure or export of goods without payment of duty ?

[KASTURI SETHI]

Refund can be filed under the category of 'Inverted Duty Structure' by the manufacturer who supplies to the Merchant Exporter at concessional rate of 0.1%. Such filing of refund is covered under Section 54 (3)(ii) of CGST Act which is as follows :-

Section 54 (3) of CGST Act Subject to the provisions of sub-section (10), a registered person may claim refund of any unutilised input tax credit at the end of any tax period :

Provided that no refund of unutilized input tax credit shall be allowed in cases other than -

(i) zero rated supplies made without payment of tax;

(ii) where the credit has accumulated on account of rate of tax on inputs being higher than the rate of tax on output supplies (other than nil rated or fully exempt supplies), except supplies of goods or services or both as may be notified by the Government on the recommendations of the Council

Sales/supply of goods to merchant-exporter at the rate of 0.1%, is neither nil rated nor wholly exempt. It is partly exempted supply..Hence eligible for refund claim under Section 54 (3)(ii) of CGST Act.

[SHARAD ANADA]

Agree with Kasturi Sir

Also refer para 59 of Circular No. 125/44/2019 - GST. The same is reproduced here under

59. Notification No. 40/2017 and notification No. 41/2017 – Integrated Tax (Rate) both dated 23.10.2017 provide for supplies for exports at a concessional rate of 0.05% and 0.1% respectively, subject to certain conditions specified in the said notifications. It is clarified that the benefit of supplies at concessional rate is subject to certain conditions and the said benefit is optional. The option may or may not be availed by the supplier and / or the recipient and the goods may be procured at the normal applicable tax rate. It is also clarified that the exporter will be eligible to take credit of the tax @ 0.05% / 0.1% paid by him. The supplier who supplies goods at the concessional rate is also eligible for refund on account of inverted tax structure as per the provisions of clause (ii) of the first proviso to sub-section (3) of section 54 of the CGST Act. It may also be noted that the exporter of such goods can export the goods only under LUT / bond and cannot export on payment of Integrated tax.

[KASTURI SETHI]

Sh.Sharad Anada Ji,

Thanks a lot for posting relevant extract of Board's circular.

[Shilpi Jain]

The merchant exporter can file refund only under inverted duty since he is not the exporter of goods

[KUMAR Narasimhan]

Dear Mam,

Supply to Merchant Exporter can file the refund as Inverted Duty Structure. but Merchant Exporter who exports the Goods to file the refund under Refund of ITC on Export of Goods & Services without Payment of Tax. Please clarify.

[KUMAR Narasimhan]

Also please clarify the Merchant Exporter Incurred some other expenses in the port which is subject to 18% gst for the related shipment. Is he eligible to claim only the concessional rate of ITC or he can avail the 18% ITC also incurred in the port

AI Summary

Manufacturer Can Claim Refund Under Inverted Duty Structure for 0.1% Sales to Merchant Exporters per Section 54(3)(ii) CGST Act A manufacturer sells goods to a merchant exporter at a concessional rate of 0.1%, and the merchant exports these goods. The manufacturer seeks a refund and inquires whether to file under 'inverted duty structure' or 'export of goods without payment of duty.' It is clarified that the refund can be filed under the 'Inverted Duty Structure' as per Section 54(3)(ii) of the CGST Act. This is because sales to a merchant exporter at 0.1% are partly exempt and not nil-rated. Additionally, merchant exporters can claim ITC on expenses incurred at ports subject to 18% GST.