Rule 86(4B) of the CGST Rules 2017

[Vasudev Mehta]

Respected Sir/Madam,

For the period 2018-19 to 2021-22, The Company was availing the benefit of notification under Notn 78/2017. The Company claimed refund under Rule 89(4) instead of Rule 89(4B). The Company is exporting as well as selling goods locally. The Department is contending that this is erroneous refund and seeks recovery of refund since the company has not filed under any other category. According to Circular 125/44/2019 only merchant exporter is required to file application under Rule 89(4B) under the category of Any Other who are availing benefit of Notification No 40/2017 and 41/2017. hence, i feel the contention of department is completely incorrect and this is not erroneous refund since the calculation will be same under both Rule 89(4) or Rule 89(4B). Further Circular cannot override the Act. No where in the Act it is mentioned that the refund application has to be done under Any Other Category. I seek experts views on this.

AI Summary

Refund classification under Rule 89(4B) affects refundable ITC for exporters; misclassification can trigger recovery or adjustments.
Rule 89(4) refunds net input tax credit apportioned by turnover without requiring linkage to specific inputs used in exports, whereas Rule 89(4B) permits refund of ITC on inputs imported under customs notifications (no IGST paid) and ITC on other inputs/services only to the extent they are used in making exports; the refundable amount can therefore differ materially. Circular guidance may require merchant exporters to apply under Rule 89(4B) procedurally, but misclassification is a procedural lapse unless it results in an excess refund, in which case recovery as an erroneous refund may follow.