ITC Refund for same period | Third Proviso to section 54(3) | IDS | EXPWP

[Nikunj Kishorbhai Tosar]

A few articles/experts view says that where IGST refund claimed on export with payment of tax, ITC refund is restricted under inverted duty structure for the same refund period considering the third proviso to section 54(3).

However, ITC refund on export under LUT is granted along with IGST Refund of export with payment of tax for same refund period eventhough the third proviso is also applicable to it.

Para 40 of the Circular 125/44/2019 - Interpretation:

“The third proviso to sub-section (3) of section 54 of the CGST Act states that no refund of input tax credit shall be allowed in cases where the supplier of goods or services or both avails of drawback in respect of Central tax. It is clarified that if a supplier avails of drawback in respect of duties rebated under the Customs and Central Excise Duties Drawback Rules, 2017, he shall be eligible for refund of unutilized input tax credit of Central tax/ State tax/ Union Territory tax / Integrated tax/ Compensation cess. It is also clarified that refund of eligible credit on account of State tax shall be available if the supplier of goods or services or both has availed of drawback in respect of Central tax.”

In my view, refund is restricted as follows:

Sr	Drawback benefit availed	Refund of accumulated ITC available
1	Duties rebated under the Customs and Central Excise Duties Drawback Rules, 2017,	Yes, Refund of IGST/CGST/SGST/UTGST/Cess component available
2	Central Tax	No, refund of SGST component available

 There is no such restriction that if IGST Refund claimed on account of export with payment of tax then refund of unutilized ITC cannot be made  as per the  interpretation given in the said circular.

Your guidance on this matter will be highly appreciated.

[Rajan Kumar and associates]

As per the Gujarat High Courts decision in the case of Amit Cotton Industries vs. Principal Commissioner of Customs - 2019 (7) TMI 472 - GUJARAT HIGH COURT, a taxpayer can claim both a refund of IGST paid on exports and a refund of unutilized ITC under an inverted duty structure for the same period, as long as there is no double benefit.

AI Summary

ITC refund restriction under third proviso may not preclude concurrent IGST refund for exports where no double benefit arises.
The third proviso restricts ITC refund where drawback has been availed in respect of Central tax, but administrative interpretation permits refund of eligible credit when duties are rebated under the Customs and Central Excise Duties Drawback Rules, 2017; consequently, claiming IGST refund on exports with payment does not automatically preclude refund of unutilised ITC for the same period, provided there is no double benefit.