The exporters need not give in to the unreasonable demands of the DRI.
In response to my last Monday article (‘Notifications on GST exemptions puzzle exporters’), some readers have sought clarifications. Here, I opine on some of the queries raised by them.
The notification 54/2018-CT dated October 9, 2018, operates with prospective effect. In my opinion, the judgment of the Gujarat High Court in the case of Cosmo Films that it is effective from October 23, 2017, is incorrect. In fact, I think the judgment contains more errors.
The Department of Revenue Intelligence (DRI) has taken advantage of this judgment and asked exporters to pay up IGST on their imported inputs wherever they have claimed refund of IGST paid on their export goods from October 23, 2017, onwards. I have no doubt that any proceedings based on the said high court judgment on the retrospective effect of the said notification 54/2018-CT can be legally challenged. The exporters need not give in to the unreasonable demands of the DRI.
The explanation inserted to Rule 96(10)(b) of the CGST Rules, 2017, through notification 16/2020-CT dated January 23, 2020, operates with retrospective effect from October 23, 2017. It merely clarifies that the said Rule 96(10)(b) comes into play only when IGST exemption is claimed on imports.
The Notification 53/2018-CT dated October 9, 2018, substitutes Rule 96(10) of the CGST Rules, 2017, with retrospective effect from October 23, 2017. So, the earlier notifications (No. 3/2018-CT dated 23rd January 2018 and 39/2018-CT dated September 4, 2018) regarding the said Rule 96(10) have no relevance at this point of time.
The said notification 53/2018-CT restricts claiming refund of IGST paid on export goods only when the supplier has availed the benefit of the notifications mentioned therein, not otherwise. It cannot operate on imports as foreign supplier cannot claim exemption from IGST. It can operate when the exporter procures goods from EOU who have claimed IGST exemption on their imports or under deemed exports when the suppliers have claimed IGST exemption on their imports or refund of GST paid on the deemed export supplies. It can also operate when the merchant exporters have procured their export goods on payment of 0.1 per cent GST. This is the position for exports made from October 23, 2017, to October 8, 2018.
For exports made from October 9, 2018, the provisions of the said Rule 96(10) as substituted by the said notification 54/2018-CT will apply. In such cases, restriction on claiming refund of IGST paid on export goods operates when the exporter has availed the benefit of the notifications mentioned therein. It can operate where exemption from IGST has been claimed on imports under advance authorisations or by EOU and when the exporter procures goods from EOU or under deemed exports where refund of GST paid on deemed export supply has been claimed. It can also operate when merchant exporters have procured their export goods on payment of 0.1 per cent GST.
So, for the period between October 23, 2017, to October 8, 2018, the exporters must review the exemptions or refunds claimed by their suppliers, and for the period thereafter, they must review the exemptions or refunds claimed themselves or on their procurements under deemed exports or as merchant exporters.
The exporters, therefore, must study and be guided by the said notifications 53/2018-CT and 54/2018-CT and not get misled by the demands of the DRI.