Clarification on Refund of IGST for Exporters Who Avail Input Concessions

Introduction: This circular provides clarity on the refund of Integrated Goods and Services Tax (IGST) in cases where exporters have imported inputs without paying IGST and compensation cess under specific customs notifications. It addresses concerns raised by trade and field formations on the regularization of such refunds.

Issue: Exporters who availed concessional/exemption benefits under Notification No. 78/2017-Customs and Notification No. 79/2017-Customs by importing inputs without payment of IGST and compensation cess were uncertain whether they could later claim refunds for IGST paid on exports after settling unpaid taxes on the imported inputs.

Rule 96(10) of CGST Rules: Bars the refund of IGST paid on exports if inputs were imported under concessional/exemption schemes without IGST or compensation cess payment.

Clarification Provided: If exporters subsequently pay IGST and compensation cess along with interest on such imported inputs, they can claim IGST refunds on exports. These refunds will not be considered a violation of Rule 96(10).

Explanation Retrospective: The amendment made via Notification No. 16/2020 clarifies that benefits are deemed not availed if only Basic Customs Duty (BCD) exemption was utilized, and IGST was eventually paid. This provision applies retrospectively from 23.10.2017.

Regularization Process: Exporters must reassess their Bill of Entry with the jurisdictional customs authority after paying IGST and compensation cess, ensuring the refund of IGST paid on exports aligns with compliance.

Conclusion: Exporters who initially availed input concessions but later pay IGST and compensation cess can now claim IGST refunds on exports. This clarification helps regularize refunds and brings uniformity to rule implementation. Public notices should be issued to spread awareness, and any difficulties in implementing the instructions should be reported to the Board.

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