Definition of Turnover of Zero-rated supply of goods for refund in GST

[Navid Mukadam]

Dear Experts

In case of ITC refund, refund is based on formula in which Zero rated turnover is required. Formula is (Net ITC*Zero-rated turnover/Total adjusted Turnover)

On 23.03.20, The CBIC vide Notification No.16/2020-Central Tax, has amended clause (c) of Rule 89 (4) which provides definition of “Turnover of Zero-rated supply of goods” and the amended definition is as under:

“(C) “Turnover of zero-rated supply of goods” means the value of zero-rated supply of goods made during the relevant period without payment of tax under bond or letter of undertaking or the value which is 1.5 times the value of like goods domestically supplied by the same or, similarly placed, supplier, as declared by the supplier, whichever is less, other than the turnover of supplies in respect of which refund is claimed under sub-rules (4A) or (4B) or both.”

Sir,

Vide this amendment, export value will be lower of actual export value and 1.5 times of domestic sale value.

It seen complicate definition, please suggest

1.What's meaning of' like goods domestically supplied by the same or, similarly placed, supplier, as declared by the supplier,'

2. we have 99% of Sale in exports and in such scenario if we go by 1.5 time of domestic value actually supplied we will be at loss and not be able to get the actual amount of ITC refund

for example it total turnover of exports is 52cr, zero rated turnover is 50 cr (considering FOB value) domestic supply is 25 lacs only and net ITC is 3cr the as per formula

25lcs*(1.5))*50cr/52cr = 2.14 lacs only. how is this justified

or whether the domestic value will be calculated product wise if they have been sold domestically on assumption basis

3.whether 1.5 times of domestic sale will be calculated for product wise or for total taxable value of domestic sale and how to compare it with export sale product wise or total export sale.

4.How it will be calculate.

Hence please provide expert advice at the earliest.

[Shilpi Jain]

Please note that this provision has been quashed by the decision of the Karnataka HC having citation 2023 (4) TMI 46 - KARNATAKA HIGH COURT.

So you can cite this and claim your amendment without restricting it to 1.5 times of domestic turnover.

Absurd provisions inserted vide the rules without any power from the principal Act.

AI Summary

Turnover cap on zero-rated supplies removed, allowing full ITC refund calculation without domestic-value limitation after successful challenge Amendment defined Turnover of zero-rated supply of goods as the lesser of actual zero-rated exports made without tax payment under bond or letter of undertaking and 1.5 times the value of like goods domestically supplied by the same or similarly placed supplier, affecting the ITC refund formula (Net ITC x Zero-rated turnover / Total adjusted turnover). The provision was subsequently quashed by judicial decision, permitting claimants to seek refunds without applying the 1.5-times domestic-value limitation.