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

Garment manufacturer struggles with unutilized ITC due to GST rate mismatch; refund blocked under CGST Act, 2017. A ready-made garment manufacturer faces an issue with accumulated input tax credit (ITC) due to a higher GST rate on raw materials (12%) compared to the output GST rate on exports (5%). Despite exporting goods with IGST payment for four years, they cannot claim a refund on unutilized ITC. Experts in the forum agree that a refund is not possible due to specific restrictions under the CGST Act, 2017, particularly when goods are exported with IGST payment. They suggest ensuring future exports are done without IGST payment to prevent further accumulation of ITC.