Refund - Credit note for export of services issued with IGST

[Bishan Shah]

Dear Experts,

We are providing recruitment outsourcing services to our clients located outside India and its fulfilling otherwise all the criteria of export of services as envisaged under 2(6) of IGST Act, 2017. For one transaction we have issued Commercial invoice to the client located in USA and based on tax invoice in INR currency paid IGST. At the time of Filing GSTR-1 the same has been reported as Export of services with payment of IGST and in 3B also the same is reported as zero rated supply.

Later, Credit note for the said commercial invoice has been issued to the Client and accordingly credit note in INR with IGST also issued.

Now, we have paid IGST at the time of issuance of tax invoice however refund is not claimed as amount is not received and now credit note has been issued.

So, the question is whether refund can be claimed of IGST paid at the time of export invoice ? If yes, under which category?

[Amit Agrawal]

With the understanding that you have issued said credit-note u/s 34 with IGST for whole value involved (i.e. as per original tax-invoice) & thereby, used IGST (paid earlier) for your other liabilities as per sub-section (2), there is no question / possibility of claiming refund of IGST paid against original tax-invoice.

I hope I understood your facts right, because claiming refund of IGST paid against original invoice - with my understanding of facts, as explained above - means trying to get double benefit (as you have issued credit-note u/s 34 with IGST and taken benefit of sub-section (2) thereunder). Such 'double benefit' is not allowed under law.

And, issuance of credit-note u/s 34 for entire amount means no services were supplied (& exported) in first place. And if so, there is no question of claiming refund of IGST paid upon 'services exported'.

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

[Padmanathan KV]

I agree with Ld Amit ji. Once credit note has been issued for the entire amount, you have to reduce the IGST in the credit note against subsequent payment of IGST in GSTR-3B. Thus, there is no question of claiming refund of IGST paid on export once it is adjusted in subsequent month by way of credit note.

Assuming you do not have any IGST liability to adjust in the future, you can claim refund against the credit note under "excess tax paid" category.

[Shilpi Jain]

Disclose the credit note in Form GSTR-3B. However, this can be done by way of adjusting the liability of GST on any normal domestic supplies i.e. adjust the tax payment on domestic supplies with this credit note.

In case this CN is used to set off any IGST payment on export of services then there would be a mismatch in that month of tax paid on supplies disclosed in GSTR-1 and 3B and there could be an issue with refund.

Then while filing GSTR-9 & 9C, the proper classification of the invoices and the credit notes can be done. Consider also making an intimation tothe department explaining this transaction.

Once Issuance of credit note is adjusted against the tax liability no more refund to be claimed.

[Aditya Gondiker]

Dear Experts,

If the said scenario occurs in case of export of goods with payment of tax where the assessee had exported goods with payment of tax and received the rebate upon linking with ICEGATE and due to any valid reason if the said supply is cancelled, should a financial credit note be raised to adjust the accounts in the books and IGST received should be paid through DRC-03?

[Shilpi Jain]

What was the reason for cancellation of the supply?

Also the amount of refund to be returned will have to be done by way of a paying it and you need to ensure that the said amount is credited back to your electronic credit ledger.

Dept may demand interest on the amount of refund returned back

AI Summary

Company Can't Claim IGST Refund After Issuing Credit Note Under Section 34, Must Adjust Against Future Liabilities. A company providing recruitment outsourcing services to clients outside India issued a commercial invoice with IGST for a client in the USA, reporting it as an export of services. After issuing a credit note for the entire transaction, they inquired whether a refund of the IGST paid could be claimed. Experts advised that since the credit note was issued under Section 34, using IGST for other liabilities, claiming a refund would result in a double benefit, which is not permitted. Instead, the IGST should be adjusted against future liabilities, and any refund would fall under 'excess tax paid' if no liabilities exist.