Refund of accumulated ITC in case of Third Country Exports

[manish rupani]

My client is engaged in exporting goods which are procured from China and directly shipped to customer in Africa. Goods do not come to India. Though we are showing the supply as Export without payment of duty in GSTR 1, actually this is a supply from one non-taxable territory to another non-taxable territory and does not fall in the definition of a GST supply. Client is paying a very big commission in India to procure such export orders and due to which the GST paid on the commission invoice is getting accumulated as ITC credit.  As per the rules of refund of accumulated ITC credit, only in 2 cases it is allowed.

1] On export of goods without payment of duty [considered as zero rated supply]

2] Inverted duty structure. Both above are not applicable to my client as I cant apply for refund under exports as there is no shipping bill from India. Any solutions to get refund ?

[Shilpi Jain]

Are there no other business transactions that this client is having where this ITC can be used?

[manish rupani]

No domestic supplies which can used to offset the accumulated itc

[KASTURI SETHI]

Not eligible for refund in both scenarios. 

AI Summary

Direct offshore shipment with no domestic import leaves accumulated GST input tax credit non-refundable under Section 54 refund rules Supplier procures goods abroad and arranges direct shipment from foreign supplier to foreign customer, declaring exports in returns though goods never enter domestic territory, so the transaction arguably falls outside GST taxable supply. Substantial GST input tax credit has accumulated on commissions paid in India. Statutory refund of accumulated ITC is available only for zero-rated exports (with export documentation) or inverted duty structures; neither applies here and there are no domestic outputs to utilize the ITC. Consequently the accumulated ITC cannot be refunded under current GST rules.