IGST Refund taken by EOU contrary to Rule 96(10)

[ROHIT GOEL]

Dear experts,

An EOU has taken refund of IGST paid on exports after 9th Oct 2018 even though after such date as per Rule 96(10), EOU claiming IGST and BCD exemption on imports was not allowed to take IGST refund and could only take ITC refund.

Now assessee served notice to repay the amount with interest and penalty. However, situation is revenue neutral since as per calculation by Rule 89, unutilised ITC refund for the same period would have been more than refund already taken. However, there is violation of Rule 96 and therefore procedural lapse at end of assessee.

Is there any legal grounds available with assessee to argue matter in its favour?

[Shilpi Jain]

One point which can be taken is that Section 16 of IGST did not give any power to impose any restriction on claiming of refund. Hence the restriction on the EOU not to claim refund of IGST paid is not valid in law.

[Amit Agrawal]

With due respect, I am unable to agree with views of Ms. Shilpi Jan Mam in her post at serial No. 1 above, due to following reasons:

Section 16 (3) of the IGST Act, 2017 reads as follows:

(3) A registered person making zero rated supply shall be eligible to claim refund under either of the following options, namely:––

(a) he may supply goods or services or both under bond or Letter of Undertaking, subject to such conditions, safeguards and procedure as may be prescribed, without payment of integrated tax and claim refund of unutilised input tax credit; or

(b) he may supply goods or services or both, subject to such conditions, safeguards and procedure as may be prescribed, on payment of integrated tax and claim refund of such tax paid on goods or services or both supplied,

in accordance with the provisions of section 54 of the Central Goods and Services Tax Act or the rules made thereunder."

[Shilpi Jain]

he may supply goods or services or both, subject to such conditions, safeguards and procedure as may be prescribed, on payment of integrated tax and claim refund of such tax paid on goods or services or both supplied,

in accordance with the provisions of section 54 of the Central Goods and Services Tax Act or the rules made thereunder

This provision if you see does not allow prescribing any restrictions... no doubt in that. It only allows prescribing Conditions safeguards and procedure. If we have a look at certain other provisions under GST there will be a specific mention of restrictions also allowed to be prescribed.

Also refund is allowed as per 54 rule. Though the restrictions imposed on eou is as per rule 96. Hope this clarifies.

[Amit Agrawal]

I respectfully differ, Ms. Shilpi Jain Mam.

In my view, subject issue under discussion here about Rule 96 (10) of the CGST Rules, 2017 - what you call 'restrictions' - is duly covered within the terms used u/s 16 (3) of the IGST Act, 2017 (i.e. subject to such conditions, safeguards and procedure as may be prescribed).

In continuation of above, u/s 16 (3), a registered person making zero rated supply is eligible to claim refund under either of the given two options in accordance with the provisions of section 54 of the Central Goods and Services Tax Actor the rules made thereunder.

In my view, Rule 96 (10) of the CGST Rules, 2017 is duly valid under law being one of conditions and / or safeguards prescribed to grant refund u/s 16 (3) of the IGST Act, 2017 read with Section 54 of the CGST Act, 2017 or Rule 96 of the CGST Rules, 2017.

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

[Amit Agrawal]

& I respect contrary views.

[Shilpi Jain]

Error in my earlier post.

Refund u/s 54 and not rule 54.

Also if we look at certain provisions like ITC itself it reads as

Every registered person shall, subject to such conditions and restrictions as may be prescribed......

What Amitji states is a possible stand which the Department can take to state that restrictions are included in the safeguards.

AI Summary

Restriction on IGST refund for zero-rated exports shapes EOU refund claims despite input tax credit neutrality. Export-oriented unit claimed IGST refund despite Rule 96(10) barring EOUs claiming IGST and BCD exemption from taking IGST refunds; revenue demanded repayment with interest and penalty, although unutilised input tax credit refunds may exceed the amount, and the legal dispute centers on whether subordinate rules can restrict refund eligibility under the statutory grant permitting refunds 'subject to such conditions, safeguards and procedure'.