GST Accumulated after IGST Refund

[DEEPAK SHARMA]

Sir,

A RMG manufacturer claiming IGST on every export shipment (@ 5%), his raw material attracts GST @ 12%. however the unit claiming IGST on export from 4 years. due to higher rate of GST on inputs, they are unable to set off all ITC on account of IGST on export, as the output rate of GST is lower (5%).

Resulting they having much ITC available in their ECL.

Please suggest how it can be refunded.

[Rajagopalan Ranganathan]

Sir,

In my opinion, you cannot claim a refund of unutilized input credit since you are exporting the goods on payment of IGST. Refund of input tax paid on goods used in the manufacture of export goods only when the goods are exported under the letter of undertaking without payment of IGST.

[Amit Agrawal]

I agree with Shri Rajagopalan Ranganathan Ji!

Furthermore, refund - on account of duty-inverted structure as allowed under clause (ii) of first proviso to Section 54 (3) of the CGST Act, 2017 - will also be NOT available in given circumstances due to specific restrictions by way of third proviso to Section 54 (3) which reads as follows:

"Provided also that no refund of input tax credit shall be allowed, if the supplier of goods or services or both avails of drawback in respect of central tax or claims refund of the integrated tax paid on such supplies."

So, in my view, refund of unutilized ITC for past 4 years cannot be claimed now in given circumstances.

These are ex facie views of mine and the same should not be construed as professional advice / suggestion.

[KASTURI SETHI]

No hope at all. Only one of the conditions is fulfilled. I agree with both experts.

[Shilpi Jain]

Atleast ensure that the future exports are made without payment of tax and refund of ITC is claimed. This will ensure future accumulation does not happen at the same rate.

Past credits you may have to see if can be used for any other domestic supply liability.

AI Summary

Refund of input tax credit unavailable where exports made on payment of IGST; use LUT for future refunds. Refund of accumulated input tax credit is not available where exports were made on payment of IGST; refunds of ITC for exported goods are available only when exports are made under a letter of undertaking without payment of tax, and duty-inversion refunds are barred where the supplier has availed drawback or claimed IGST refund, leaving past accumulated credits non-refundable and usable only against other domestic liabilities if possible.