Rule 96(10)

Dear Friends

I will like to draw your attention towards Rule 96(10) of CGST Rules

(10) The persons claiming refund of IGST paid on exports of goods or services should not have received supplies on which the supplier has availed the benefit of the Government of India, Ministry of Finance,

Notification No. 48/2017-CT dated the 18-Oct-17 published in the Gazette of India, Extraordinary, Part II, Section 3, Sub-section (i), vide number G.S.R 1305 (E) dated the 18-Oct-17 or           

Notification No. 40/2017-CT(R) 23-Oct-17 published in the Gazette of India, Extraordinary, Part II, Section 3, Sub-section (i), vide number G.S.R 1320 (E) dated the 23-Oct-17 or                    

Notification No. 41/2017-IT(R) dated the 23-Oct-17 published in the Gazette of India, Extraordinary, Part II, Section 3, Sub-section (i), vide number G.S.R 1321 (E) dated the 23-Oct-17 or           

Notification No. 78/2017-Customs dated the 13-Oct-17 published in the Gazette of India, Extraordinary, Part II, Section 3, Sub-section (i), vide number G.S.R 1272(E) dated the 13-Oct-17 or

Notification No. 79/2017-Customs dated the 13-Oct-17 published in the Gazette of India, Extraordinary, Part II, Section 3, Sub-section (i), vide number G.S.R 1299 (E) dated the 13-Oct-17.   

Now Consider the following example:

X of Delhi supplies goods to Y of Punjab who exports them to USA.

Now X takes benefit of Notification No. 41-2017 IT(R) and supplies goods Y at concessional rate of IGST 0.1%. The goods are otherwise taxable at say 18%.

Now when Y exports them the applicable rate of IGST to him is 18%.

Now Y pays IGST to Government :

Output IGST 18%

Less: Input IGST 0.01%

IGST paid say Rs. 10000

Now as per rule 96(10) since X took benefit of Notification 41, Y is not entitled to claim refund of Rs. 10000.

What sense does that make? How can exporter be denied benefit of refund of IGST when it’s an accepted principle that exports are tax –free.

In such a case exporter has no option but to always export under LUT/Bond and never pay IGST first and claim refund.

Please guide am I missing something here.

I surely must be because else the rule 96(10) is making no sense to me.

Regards

Shivani