Recent changes in CGST Rules relating to export of goods and refund thereof

by | Apr 2, 2020 | Insight, Outlook

In furtherance to previous update wherein we shared recent notifications issued post 39th GST Council meeting, the following key changes have been made in the Central Goods and Services Tax Rules, 2017 (‘CGST Rules’):

  1. Value of zero-rated supply of goods restricted to 1.5 times of value of like domestic goods for claiming input stage refund
  • For claiming input stage refund on zero-rated supply of goods, value of such goods shall not exceed 1.5 times of value of like goods domestically supplied by the same or similarly placed supplier.

NITYA Comments: This provision seems to have been introduced to check over-valuation of export goods. In our view, over-valuation of goods should have been a subject matter of Customs and FEMA laws. There was no need to introduce such requirement under GST law. Further, there is no clarity on scope of expression ‘like goods domestically supplied by the same or similarly placed supplier’ and is likely to trigger disputes. Notably, the said restriction does not apply in case of output stage refund.

  1. Output stage refund allowed to AA holder and EOUs procuring inputs on payment of IGST
  • The benefit of output stage refund has been extended to Advance Authorization (AA) holder and EOUs who procure inputs on payment of IGST. The benefit has been granted retrospectively with effect from October 23, 2017 i.e. date from which such restriction has been introduced.

 NITYA Comments: Even prior to the amendment, this was a logical interpretation of restriction under Rule 96(10) of the CGST Rules. Going forward, AA holder and EOUs can consider applying for output stage refund (being a simpler option than claiming input stage refund).

  1. Recovery of refund (input stage and output stage) where export proceeds not realized
  • In respect of export goods where export proceeds are not realized within the time period permitted under the Foreign Exchange Management Act, 1999, refund of GST paid on export of goods or ITC on inputs and input services shall be recovered along with interest. On subsequent submission of evidence of realization of export proceeds within 3 months from date of realization, refund will again be granted. Further, such recovery shall not be made where RBI waives-off the requirement to realize sale proceeds.

NITYA Comments: This recovery provision can be challenged on the ground that when Section 16 of the Integrated Goods and Services Tax Act, 2017 does not impose any such restriction, the CGST Rules cannot impose the same. In the trailing update, we incorrectly mentioned that the restriction does not apply to output stage refund.

Interestingly, undertaking of revised Form GST RFD-01 refers to proviso to Section 16 of the Integrated Goods and Services Tax Act, 2017 (‘IGST Act’) where no such proviso exists.

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