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The section 16 (3) reiterated below grants two options to the exporters of Goods or Services or both (a) to export goods or services under Letter of Undertaking (LUT)/Bond and claim refund of Input Credit, or (b) to export goods or services on payment of IGST applicable (for purpose of this article the payment is to in as payment by utilisation of Input Credit available) to the product or service exported and claim refund of IGST paid.

The option to be exercised should be well planned in advance before the start of the month by the exporter so as to obtain the maximum possible amount of ITC as refund.

The amount of refund in option (a) is very clear but in case of option (b) the refundable amount is dependent on variables for the month viz. Domestic turnover, export turnover and ITC availed during the month.

The refund in case of export of Goods with payment of IGST is simple and is paid to the exporter in his designated bank accounted automatically provided the shipping bills and GST1 have properly been filed. The amount of refund shall be equal to the amount of IGST paid.

In case of export of goods or Service under LUT/Bond the Exporter has to apply for refund of Input Credit which is calculated as per following formula specified under rule 96 (4) of the CGST Rules:

Decision making tool for Export with Payment of IGST or under LUT/Bond

Refund Amount = (Turnover of zero-rated supply of goods + Turnover of zero-rated supply of services) x Net ITC ÷Adjusted Total Turnover

Where, -

  1. "Refund amount" means the maximum refund that is admissible or lowest of the below:
  1. Value calculated as per above formula
  2. ITC Ledger Balance as on date (Matched/Confirmed ITC)
  3. ITC Availed for the return period mentioned in Refund Application

(B) "Net ITC" means ITC availed during the relevant period excluding ITC availed for which refund is claimed under sub-rules (4A) or (4B) of rule 89 or both;

(C) "Turnover of zero-rated supply of goods" means Turnover of zero-rated supply of goods during the relevant period under bond/LUT excluding the turnover of supplies in respect of which refund is claimed under sub-rules (4A) or (4B) of section 89 or both;

(D) "Turnover of zero-rated supply of services" means export of services under bond/LUT where payment has been received during the relevant period or has already been received in advance and export of service has taken place during the relevant period.

It may be noted that the advance received during the relevant period against which export of service has not been effected shall not be included.

(E) “Adjusted Total Turnover” means the sum total of the value of supply of goods in relevant period plus export of services calculated as per (D) above plus value of supply of services in domestic area minus value of exempt supplies other than export supplies and value of supplies in respect of which refund is claimed under sub-rule (4A) or sub-rule (4B) or both during the relevant period

(F) “Relevant period” means the period for which the claim has been filed or period of a month as the exporter is required to file refund application month-wise

It may be noted that there is no requirement of proving input output ratio or to relate the ITC with inputs used for export of Goods or services during the relevant period.

Now consider the following example for product XYZ:

Table A

 

S. No.

Month relevant period

Export of Goods under LUT Rs.

Domestic supply of Goods Interstate & Intra State

Rs.

Exempted Supplies

Rs.

Output

GST Rate

Output GST on Export

Rs.

Output GST on Domestic Turnover

Rs.

Output GST if IGST paid on Export

Rs.

ITC Availed

ITC Utilised

Rs.

ITC refundable

Rs.

1

2

3

4

5

6

7

8

9

10

11

12

1

April

1,00,00,000

3,00,00,000

5,00,00,000

5%

NIL

15,00,000

5,00,000

70,00,000

15,00,000

17,50,000

2

May

10,00,00,000

NIL

NIL

5%

NIL

NIL

50,00,000

1,40,00,000

NIL

1,40,00,000

3

June

4,00,00,000

3,00,00,000

2,00,00,000

5%

NIL

15,00,000

10,00,000

700,000

15,00,000

2,80,000

4

July

5,00,00,000

5,00,00,000

2,00,00,000

5%

NIL

25,00,000

25,00,000

25,00,000

25,00,000

12,50,000

Table B

 

Sr.

Particular

Reference
from
Table A or B

April

Rs.

May

Rs.

June

Rs.

July

Rs.

A

Adjusted Turn over

=3+4

4,00,00,000

11,00,00,000

7,00,00,000

10,00,00,000

B

Export Turnover or
Turnover of

Zero rated Goods

=3

1,00,00,000

10,00,00,000

4,00,00,000

5,00,00,000

C

Net ITC availed

=10

70,00,000

1,40,00,000

7,00,000

25,00,000

D

ITC Balance before

refund for the month

55,00,000

1,72,50,000

24,50,000

21,70,000

E

Refund as per Formula

=B x C/A

17,50,000

1,27,27,273

4,00,000

12,50,000

F

Refund Eligible

Min. of

C,D or E

17,50,000

1,27,27,273

4,00,000

12,50,000

 

Calculation of amount of refund as per rule 89 (3) of CGST Act

 

Conclusion:

On comparison of Columns 9 and 12 of Table A, it may be appreciated that in some month it was beneficial to avail export under LUT/Bond and in some months, it was beneficial to Export under payment of full duty and therefore the exporter should plan before start of the month to export under LUT or after payment of IGST based on estimated turnover of domestic supply and export supply in the month, the estimated amount of ITC on inward supplies in the month.


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Category GST, Other Articles by - CA Suresh Jain 



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