Refund of RCM in case of Export of Services without payment of Tax

[vishwanath shetty]

Taxpayer is in the business of Export of Services without payment of Tax. he had filed LUT in Dec 2023. in Jan 2024 he made RCM payment for import of services (Software purchase/ subscription fee). can he apply for refund of ITC on RCM.

[Sadanand Bulbule]

In terms of Section 16[2] of the IGST Act, a registered person making zero-rated supply is eligible to claim unutilised ITC under RCM, subject to usual conditions. So you are also eligible for refund of IGST paid under RCM on import of services. Refer CBIC Circular No.125/44/2019-GST dated 18/11/2019 for more clarification.

[KASTURI SETHI]

Relevant extract of Circular No.125/44/2019-GST dated 18.11.2019 as amended.

Clarification on calculation of refund amount for claims of refund of accumulated ITC on account of inverted tax structure

"53. Sub-section (3) of section 54 of the CGST Act provides that refund of any unutilized ITC may be claimed where the credit has accumulated on account of rate of tax on inputs being higher than the rate of tax on output supplies (other than nil rated or fully exempt supplies). Further, sub-section (59) of section 2 of the CGST Act defines inputs as any goods other than capital goods used or intended to be used by a supplier in the course or furtherance of business. Thus, inputs do not include services or capital goods. Therefore, clearly, the intent of the law is not to allow refund of tax paid on input services or capital goods as part of refund of unutilized input tax credit. It is clarified that both the law and the related rules clearly prevent the refund of tax paid on input services and capital goods as part of refund of input tax credit accumulated on account of inverted tax structure".

[Shilpi Jain]

You can select the period of refund so that such period includes Dec and Jan. If that is done you can claim refund. Though the amount of refund would depend on what other turnover you have for the period of refund.

[KASTURI SETHI]

In this context, the judgement of  Supreme Court in the case of  UNION OF INDIA & ORS. VERSUS VKC FOOTSTEPS INDIA PVT LTD. - 2021 (9) TMI 626 - SUPREME COURT and  Gujarat High Court judgement in the case of  VKC FOOTSTEPS INDIA PVT. LTD. VERSUS UNION OF INDIA & 2 OTHER (S) - 2020 (7) TMI 726 - GUJARAT HIGH COURT  are worth reading.

AI Summary

Refund of input tax credit on RCM may be available for zero-rated service exports, subject to conditions and period selection
A registered supplier making zero-rated supplies under a filed Letter of Undertaking may claim refund of unutilised input tax credit arising from IGST paid under the reverse charge mechanism on import of services, subject to statutory conditions and calculation rules; CBIC Circular No.125/44/2019-GST clarifies that refunds under the inverted tax structure do not include tax on input services or capital goods, and selection of the refund period will affect the refundable amount.