The circular provides clarifications regarding the regularization of refunds of Integrated Goods and Services Tax (IGST) availed in contravention of rule 96(10) of the CGST Rules, 2017. This specifically addresses cases where exporters had imported certain inputs without payment of integrated taxes and compensation cess.
Key Issues Addressed
- Background on Rule 96(10) of CGST Rules
- Rule 96(10) bars the availment of refunds of IGST paid on the export of goods or services if certain concessional/exemption notifications have been availed on inputs/raw materials imported or procured domestically.
- Clarification on Regularization of Refunds
- Issue: Whether refunds of IGST paid on exports can be regularized if the registered person initially imported inputs without payment of IGST and compensation cess but later paid these taxes along with interest.
- Clarification:
- An explanation inserted in sub-rule (10) of rule 96 by Notification No. 16/2020-CT dated 23.03.2020, with retrospective effect from 23.10.2017, states that benefits of the specified notifications are not considered availed if IGST and compensation cess are paid on inputs.
- If inputs were initially imported without payment of IGST and compensation cess but these taxes are paid later along with
interest, it can be considered that the benefits of the notifications were not availed for the purpose of sub-rule (10) of rule 96.
- Therefore, refunds of IGST on exports in such cases may not be considered in contravention of sub-rule (10) of rule 96.
- Procedure for Regularization
- If IGST and compensation cess on imported inputs are paid later along with interest, and the Bill of Entry is reassessed through the jurisdictional Customs authorities, the refund of IGST on exports will not be considered in contravention of rule 96(10).