Material export for testing / trail run of imported machine

Hello ,

We need one Clarification on Job Work under GST Rule.

Case : We are Importing one Machine from Germany ( Unregistered Dealer). For Testing / Trial run of this machine, we need to Export some Raw material on FOC Basis to Machine Supplier. For FEMA compliance we will take GR waiver from our Bank Also.

Question –

Can we take the Input Credit on Purchase of This Raw Material?
Should we need to pay the IGST on Export of this Raw Material ? ( Material Export only for the Testing purpose and it will be return back within One year).
If in Future this material will consume/ Scrap in trial Run and will not return back to India. Then Should we need to reverse original Input credit of this Raw material.
If our Raw material Supplier will direct dispatch the Raw material to our Machine Supplier at Germany and raise the invoice in our Name as Bill to Party and mention Machine Supplier name as Ship to Party, In this scenario are we eligible to take the credit of IGST/SGCT –CGST.

My views are given below:

1. Yes, you can take the ITC. You have suffered tax and its credit is your right unless the same is barred in law. There does not appear to by any such restriction.

2. You can export the material either under bond or on payment of IGST and claim its refund/rebate. When the material is imported in a year's time, it will be taxed under Customs Act to custom duty, IGST AND cess etc.

3. In case (in future), you are not able to import back the material, there is no need to reverse the credit. since the goods have not been consumed in India at this stage, the goods need not suffer any consumption tax in your hands. But in such cases where the goods are not returned , the waiver by the RBI is difficult.

4. The credit is admissible, since the tax has been suffered by you and section 10(1)(b) of IGST makes a specific provision in this regard.