GST refunds under rule 89(4B) and 89(4)

[Prabhakar Jebakumar]

Dear all.. I am an exporter of fabrics making zero rated sales without payment of tax. I have made export of goods under Advance Authorisation and normal exports with LUT. I have utilised common inputs and input services to export normally and also under AA. I have filed refund under 89(4B) for the exports made with advance authorisation with the formula prescribed under rule 89(4). Also, I have applied proportionate refund for exports under LUT for the common inputs. Can I claim refund of the common input tax credits both under rule 89(4B) and 89(4). As common credits are used, I have included the same ITC availed for refunds u/r 89(4B) in the net ITC calculation for refunds u/r 89(4) also.. Eg. I have ITC of Rs 1lakh related to input. The same Input is used in both normal exports and exports under AA scheme.. hence I have applied refund both u/r 89(4B) and 89(4) by including RS. 1lakh in net ITC calculation as it is a common input . Is it right as rule 89(4) says ITC availed for refunds u/r 89(4) should be excluded from net ITC calculation.. Or I should fully exclude the ITC availed for refund in 89(4B) for net ITC calculation u/r 89(4).Kindly clarify.. Thanks in advance.

[Shilpi Jain]

Purchase against AA on payment of taxes and export of manufactured goods are 2 separate transactions.

You should be eligible for refund for both these transactions as per the provisions of the law. There is no restriction in law in this regard. The formula itself excludes the ITC relating to purchase under AA when you apply for export refund.

[Shilpi Jain]

In the case of VSM Weavess India (P.) Ltd. v. Assistant Commissioner [2024 (1) TMI 924 - MADRAS HIGH COURT]. - it was held that Claiming refund under zero rated supply will not disentitle from claiming refund under inverted duty structure.

Similarly, merely because refund is claimed under AA, export refund should not be denied.

[Prabhakar Jebakumar]

Thank you Shilpa Jain mam for your reply.. Please do clarify.. whether I am entitled to refund u/r 89(4) for the sameITC (Commoninput) availed for refund claim u/r 89(4B) ( as ITC availed for refund claim u/r 89(4A) & (4B) shall be excluded from net ITC calculation).

[ArvindKumar P]

To my understanding, the Rule requires you to allocate common ITC pertaining to inputs and input services to zero-rated supplies falling within the scope of Rule 89(4B) and such allocated ITC should not be included in "Net ITC" for claiming refund unde Rule 89(4).

[Shilpi Jain]

For deemed export you should get credit of the GST paid on the purchases made against AA.

Common credits and others you should be able to encash as a refund filed under export

AI Summary

GST refund allocation: allocate common input tax credit to AA refunds and exclude it from net ITC for LUT refunds. Exports under advance authorisation and exports under LUT are separate transactions with refund entitlement for each, but any common ITC allocated to supplies refunded via the advance authorisation route must be excluded from the 'net ITC' calculation when claiming a proportionate refund for LUT exports; allocate common credits to the AA-type mechanism and remove those amounts from the net ITC base for the LUT refund claim.