In case of zero-rated supply of goods or services or both without payment of tax under bond or letter of undertaking in accordance with the provision of sub-section (3) of section 16 of the Integrated Goods and Service Tax Act, refund of input tax credit shall be granted as per the following formula :
Refund Amount = (Turnover of zero-rated supply of goods + Turnover of zero-rated supply of services)*Net ITC/ Adjusted Total Turnover.
Definition of “Adjusted Total Turnover” : Section 2(112), of CGST Act defines the term “turnover in State” or “turnover in Union territory” means the aggregate value of all taxable supplies (excluding the value of inward supplies on which tax is payable by a person on reverse charge basis) and exempt supplies made within a State or Union territory by a taxable person, exports of goods or services or both and inter-State supplies of goods or services or both made from the State or Union territory by the said taxable person but excludes central tax, State tax, Union territory tax, integrated tax and cess.
The GST refund amount as per formula is Rs. 35 Crores, however the actual GST input used for the export is Rs. 50 crores. Thereby short of Rs. 15 Crores, due to the following reasons.
- Adjusted total turnover means the aggregate value of all taxable supplies, A Limited’ssales portfolio comprises multiple commodities and multiple rate of GST, i.e Pig Iron, Scrap etc., which attract 18% GST and Coal, Coke, Coal Tar, Minerals, etc., which attracts 5% GST and Precious Metals falls under 3% GST. Said refund claim is against the unutilized input Tax credit of Pig Iron (18% GST) procured for export. While calculating adjusted total turnover for refund purpose aggregate of all turnover need to be considered. However, net ITC includes, ITC of 3%, 5% and 18% GST, hence the refund claim is getting reduced because of lower rate of ITC and lower rate of GST turnover included in the adjusted total turnover.
- During the month of July 2017 A limited has procured Chrome Ore/Concentrate on FOB basis from B limited and exported, since the goods cleared for export from mine to Port during june 2017 under ARE-1, B limited raised the sales Invoice without GST, hence Net ITC is reduced and Adjusted Total Turnover is increased by the value of Chrome export.
- A limited imported Gold Bullion during the month of June 2017 (Pre-GST Era), but sales made during the month of July and Aug 2017, hence there are no ITC against the gold purchase and the Adjusted Total Turnover included the above Turnover.
- Goods procured for export during the month of Sept 2017, but export made during the month of Oct 2017, while calculating refund amount the ITC of Oct 2017 considered where as the ITC pertaining to the export is lying in the Sept 2017, hence the refund amount based on the said formula is much less than the actual.
- The Section 12 of Customs Act, 1962 provides for levy of duty on import of goods or export of goods from India. The Section 2 of the Customs Tariff Act, 1975 provides for levy of export duty on the goods specified in the Schedule-II of the Act. The second proviso to Section 54(3) of the GST Act provides that the refund of unutilized tax credit shall not be allowed in case where export goods are subject to export duty. Thus, the facility of refund of unutilized credit is restricted to goods which are not subjected to export duty. A limited’s adjusted total turnover includes export turnover of goods which are subject to export duty i.e Chrome Ore/Concentrate however, refund of unutilized tax credit pertaining to Chrome ore/concentrate procurement cannot be claimed, hence refund amount based on the said formula is coming much less.
- GST on supply for export reduced to 0.1% by Notification No. 40/2017-Central Tax (Rate) dated. 23.10.2017, till 23.10.2017 A limited purchased good for export on payment of full GST and after 23.10.2017 purchased goods for export on payment of reduced rate of GST. Procedure for refund claim on the export transaction made on reduced rate of GST is not specified. If we follow the said formula for claiming refund and include the export turnover in the adjusted total turnover, the resultant refund amount shall not be correct.
Kindly suggest is there any way out to claim full refund of Rs. 50 crores against the unutilized ITC accumulated due to export procurement.
CAclubindia
