Export of goods on payment of IGST | Goods Return

[Nikunj Kishorbhai Tosar]

Fact of the case:

Export of goods made with payment of IGST, and refund received of it against the unutilized ITC. Subsequently the customer returned the partial goods due to quality issues. the rejected goods were imported and IGST paid on filing the Bill of Entry.

Question 1: whether the refund received is required to be paid back with interest considering the Rule 96B - 'Recovery of refund of unutilised input tax credit or integrated tax paid on export of goods where export proceeds not realised'.

Question 2: to record the rejected goods imported - a credit note (export with payment of tax) can be generated, and liability can be reduced in GSTR-1

Export of Goods	Amount
Export Invoice With payment of tax	Liabilty Increased	5,00,000
Impact on ITC	ITC Decreased	-5,00,000
Refund Received	Cash Increased	5,00,000
	Total (A)	5,00,000
Goods Retuned	Amount
Credit note with payment of tax	Liab Decreased	-5,00,000
Impact on ITC	ITC Increased	5,00,000
Refund to be paid back	Cash Decreased	-5,00,000
	Total (B)	-5,00,000
Net Impact	(A) - (B)	-

Thanks in Advance.

AI Summary

Exported goods returned due to quality issues don't trigger Rule 96B refund repayment with interest requirements A taxpayer exported goods with IGST payment and received a refund against unutilized input tax credit. The customer subsequently returned partial goods due to quality issues, which were re-imported with IGST paid on the Bill of Entry. The query concerns whether the refund must be repaid with interest under Rule 96B and the proper accounting treatment for returned goods. Legal experts clarified that Rule 96B applies only when export proceeds are not realized within FEMA timelines, not for commercial returns due to quality issues. Since goods were physically returned and IGST paid on re-import, Rule 96B does not apply and the refund need not be repaid with interest. For accounting treatment, a credit note can be issued under Section 34 to reduce outward liability in GSTR-1, and IGST paid on re-import can be claimed as input tax credit under Section 16. The consensus is that proportionate adjustment should be made to maintain tax neutrality and avoid unjust enrichment, though not mandatorily under Rule 96B.