CBIC clarifies on GST refunds related to deemed export, zero-rated supplies

Our Bureau New Delhi | Updated on March 12, 2021

The Central Board of Indirect Taxes and Customs (CBIC) has come out with a clarification on GST refunds related to deemed export supply and zero-rated supply.

The board said that representations have been received on the difficulties being faced by the recipients of the deemed export supplies in claiming refund of tax paid in respect of such supplies since the system is not allowing them to file refund claim under the aforesaid category unless the claimed amount is debited in the electronic credit ledger.

Deemed export supply

The circular said though there is no restriction on recipient of deemed export supplies in availing ITC of the tax paid on such supplies when the recipient files for refund claim, but some restrictions emerged on account of Master Circular of 2019. Explaining this, Aditya Singhania, Founder at Singhania's GST Consultancy & Co, said supply of goods against Advance Authorization, supply of capital goods against EPCG authorisation, supply of goods to EOU and supply of gold by a bank or PSU against Advance Authorisation are categorised as deemed exports in GST with effect from October 18, 2017 in order to prevent cash blockage of exporters due to upfront payment of GST on imports as well as on domestic procurements. For this purpose, the rule was amended to allow either recipient or supplier of such supplies to claim refund of tax.

When a recipient has to claim refund of unutilised ITC, it is obvious that amount to be claimed as refund has to be debited from the electronic credit ledger maintained at GST portal. Since there were various circulars issued on GST refunds, in 2019, CBIC released a Master Circular wherein it was inadvertently mentioned that the recipient has to furnish an undertaking that he has not availed ITC on invoices for which refund can be claimed, which is practically not possible, as in order to claim the refund of unutilised ITC, one has to first avail ITC and thereafter debit the same from the credit ledger.

“The debiting of ledger is important as in order to ensure that there is no dual benefit to the claimant by way of ITC that can be used in offsetting the liabilities as well as refund. Master Circular has been modified to this extent which placed restriction in the said Circular,” he said.

Zero-Rated Supply

It has been decided to extend the relaxation provided for filing refund claims where the taxpayer inadvertently entered the details of export of services or zero-rated supplies to a Special Economic Zone Unit/Developer in table 3.1(a) instead of table 3.1(b) of FORM GSTR-3B till March 31.

Adjusted Total Turnover

The CBIC clarified that the value of export/ zero-rated supply of goods to be included while calculating ‘Adjusted Total Turnover’ will be same as being determined according to the amended definition of ‘Turnover of zero-rated supply of goods.’ Earlier, doubts were raised as to whether the restriction on turnover of zero-rated supply of goods to 1.5 times the value of like goods domestically supplied would also apply for computation of ‘Adjusted Total Turnover’ for calculation of admissible refund amount.

Singhania explained that doubt emerged as rule only amended the definition of ‘Turnover of zero-rated supply of goods’ and did not amend the definition of ‘Adjusted Total Turnover’, due to which one of the interpretations that Adjusted Total Turnover has to be considered by taking sum of domestic value and exports as per amended definition, was leading to significant loss of refund as it curtailed the ITC benefit of the value of the exports over and above 1.5 times of domestic valuation of goods.

Published on March 12, 2021

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