Clarification regarding applicability of Section 16 of the GST Act, 2017, relating to zero rated supply for the purpose of Compensation Cess on exports

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.... assessees, Exporter, Trade and Industry and all concerned are invited to TRU'S Circular No. 1/1/2017-Compensation Cess issued under F. No. 354/136/2017-TRU dated 26th July, 2017, whereby, the Tax Research Unit, Central Board of Excise & Customs has clarified regarding applicability of Section 16 of the IGST Act, 2017 relating to the issue of zero rating of exports with reference to Compensation Cess has been examined. 2. In this regard Section 8 of the Goods and Services Tax (Compensation to States) Act, 2017 hereinafter referred to as [GSTC Act, 2017] provides for levy and collection of Compensation Cess and reads as under: "8.(1) There shall be levied a cess on such intra-State supplies of goods or services or both, as provided....

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....nterstate supplies, they will be liable to Compensation Cess. This however will not be in line with the principle that no taxes be exported, and exports have to be zero rated. 5. Provisions relating to zero rating of exports are "16 (1) "zero rated supply" means any of the following supplies of goods or services or both, viz (a) Export of goods or services or both: or (b) Supply of goods or services or both to a Special Economic Zone developer or a Special Economic Zone unit. (2) Subject to the provisions of Sub-Section (5) of Section 17 of the Central Goods and Services Tax Act, credit of input tax may be availed for making zero-rated supplies, notwith standing that such supply may be an exempt supply. (3) A....

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....to assessment, input tax credit, non-levy, short-levy, interest, appeals, offences and penalties, shall, mutatis mutandis, apply in relation to the levy and collection of the cess leviable under Section 8 on the inter-State supply of goods and services, as they apply in relation to the levy and collection of Integrated Tax on such inter-State supplies under the said Actor the rules made there under: Provided that the input tax credit in respect of cess on supply of goods and services leviable under Section 8, shall be utilised only towards payment of said cess on supply of goods and services leviable under the said section. 7. Therefore, Sub- Section (2) of Section 11 of the Goods and Services Tax (Compensation to States) Act 2017 provi....