REVERSAL OF ITC ON RE-IMPORT OF GOODS EXPORTED UNDER LUT

[Raghunandhaanan rvi]

Dear Experts,

Our client exported goods from a manufacturing unit referred to as 'A,' located in Madhya Pradesh, under a Letter of Undertaking (LUT) without paying Integrated Goods and Services Tax (IGST).

Due to quality issues, the buyer rejected the goods and re-imported them to India. However, the re-import was directed to another manufacturing unit of 'A' located in Tamil Nadu. The Bill of Entry was filed using the Tamil Nadu address as the consignee, even though the Importer Exporter Code (IEC) is the same for both units.

The goods were cleared under Customs Notification No. 45/2017-Customs, and IGST was paid while reversing all export benefits received. They were delivered to the Tamil Nadu unit.

The questions are as follows:

1. Do goods exported under LUT from a Madhya Pradesh factory require reversal of input tax credit (ITC)? If yes, what is the procedure, and what relevant section, circular, or notification applies?

2. Is it correct that the goods were re-imported to the Tamil Nadu unit instead of the original Madhya Pradesh unit? The Tamil Nadu unit has paid IGST on the re-imported goods as per Notification 45/2017—Customs.

3. Which manufacturing unit can claim ITC on the IGST paid on the re-import if the Bill of Entry lists the Tamil Nadu unit as the consignee but other documents show the address of the Madhya Pradesh unit?

4. How does the Madhya Pradesh unit account for the re-imported goods because the Madhya Pradesh unit avails itself of export benefits, while the Tamil Nadu unit reverses the same?

Please clarify

[Shilpi Jain]

While re-importing, there was no need of paying IGST as per clause 5 in the table in the referred notification.

Also have a look at Circular No. 21/2019-Customs dated 24^th July, 2019.

Consider applying for refund of IGST paid on re-import.

[Raghunandhaanan rvi]

Ms. Shilpi Madam,

Thank you for your prompt response. The circular you mentioned addresses the re-importation of goods that were exported for exhibition or consignment and are not considered for supply. Serial No. 1(d) of Notn 45/2017-Customs states that payment of Integrated Goods and Services Tax (IGST) is mandatory for re-imported goods.

We have the following queries:

1. Goods were re-imported to a manufacturing unit in Tamil Nadu, even though they were originally exported from Madhya Pradesh.

2. IGST and other incentives were refunded, as per notification 45/2015 Sl.No. 1(d) and a bill of entry was filed with the consignee at the Tamil Nadu address.

In this scenario, how should the Madhya Pradesh unit account for the re-import and the reversal of IGST?

I look forward to your guidance.

AI Summary

Client Seeks Guidance on IGST Payment and ITC Reversal for Re-Imported Goods Under LUT; Refund Advised A client exported goods from a Madhya Pradesh unit under a Letter of Undertaking (LUT) without paying IGST. The goods were rejected due to quality issues and re-imported to a Tamil Nadu unit, where IGST was paid, reversing export benefits. The client seeks clarification on whether input tax credit (ITC) reversal is required, the correct procedure, and which unit can claim ITC given the consignee discrepancy. An expert suggests that IGST payment was unnecessary per a specific notification and advises applying for a refund. Further queries address accounting for the re-import at the Madhya Pradesh unit.