CONSTITUTIONAL VALIDITY OF RULE 96(10) OF CGST RULE, 2017

[KANHAIYA AGRAWAL]

My client imports some goods under an advance authorization scheme for job work purposes. After compilation of job work, export and clear the goods with payment of GST option. And also got the refund of IGST after filing the GSTR-3B.

Now my client got the notice from customs and directed the GST department to collect the GST with interest which was sanctioned earlier as this is not legal due to Rule 96(10) of CGST Act-2017.

My client is in opinion that

The effect of Rule 96(10) is an indirect violation of Section 16 of the IGST Act which provides for zero rated supply.

We haveclaimed refund of duty after payment of duty while clearing the goods so the Government has not received any revenue. Alternatively, the we could have cleared the goods under L.U.T. route, then also it was not required to pay any duty for the same. There is no loss revenue to the government in both the cases.

[Shilpi Jain]

Yes. Rule 96(10) has been challenged in certain Courts. You can also challenge the rule by filing a Writ or tagging to the already pending matters.

[Padmanathan KV]

Matter is pending before most High Courts now. consider filing a writ petition.

[Shilpi Jain]

You would be glad to know that the Kerala HC in the case of Sance laboratories has struck down this rule! Sance Laboratories Pvt. Ltd. Vs. Union of India and Ors. [2024 (11) TMI 188 - KERALA HIGH COURT]

AI Summary

Validity of Rule 96(10): recovery of GST from exporters challenged as conflicting with zero-rated supply principles. Rule 96(10) of the CGST Rules is contested for causing post-clearance demands of GST and interest after exporters who imported goods for job work claimed IGST refund; this is argued to conflict with Section 16 IGST's zero-rated supply principle. The rule has been challenged before multiple High Courts, one of which has struck it down, and taxpayers have been advised to seek relief by filing writ petitions or linking to pending challenges.