Critical Amendment Proposed in Zero Rated Supplies under IGST Act

At the present Sec. 16 of the IGST Act deals with zero rated supplies under GST. The Finance bill 2021 has proposed some changes in section 16 and the same is produced below:

As per section.16 (1) of IGST Act, zero rates supplies means

1. The export of goods or services both or
2. Supply of goods or services or both to Special economic zone or special economic zone developer

Amendment

It is proposed to amend in clause (b) that 'Supply of goods or services or both for authorised operations to a Special Economic Zone developer or a Special Economic Zone unit'

With this amendment not all the supply of goods or service or both eligible for zero rated, the supplies should be for authorised operations

As per section.16 (3) of IGST Act, A registered person making zero rated supply shall be eligible to claim refund under either of the following options, namely:

(a) he may supply goods or services or both under bond or Letter of Undertaking, subject to such conditions, safeguards and procedure as may be prescribed, without payment of integrated tax and claim refund of unutilised input tax credit; or

(b) he may supply goods or services or both, subject to such conditions, safeguards and procedure as may be prescribed, on payment of integrated tax and claim refund of such tax paid on goods or services or both supplied'

Amendment

It is proposed to amend in this section as below

• A Class of persons who may make the zero rated supply on payment of integrated tax and claim the refund of the tax so paid
• A class of goods or services which may be exported on payment of integrated tax and the supplier of such goods or services may claim the refund of tax so paid.'

With this amendment, as currently all the exporter and goods eligible for the both the option i.e. export without duty by LUT or export with payment of IGST and claim the refund of the tax paid not available to all the exporters.

Only some notified exporters and goods are eligible for the option of exporting the goods or services or both with payment of IGST and claim the refund of the tax paid

Amendment

It is also proposed to amend in this section as below

Exporter exporting the goods or services or both either with payment of tax or without payment by LUT, they are eligible to claim the refund of unutilised input tax credit on supply of Goods or services or both, now this amendment proposed such exports are linked with the realisation of foreign exchange would be mandatory for availing refund of unutilised ITC for Zero rates supplies. In case of non-realisation of export proceeds liable to deposit the refund received along with applicable interest.