IGST Refund Exemption for Exporters: Ignorance of Rule 96(10)

Major Relief to Exporters claiming IGST refunds – Ignorance of Rule 96 (10) of CGST Rules as per Central Tax Notification 20/2024-Central Tax Notification dated 8 October 2024, 2017

Summary: Rule 96(10) of the CGST Rules, 2017 restricts registered persons from exporting taxable goods against payment of IGST while claiming refund if they have received material availing of certain notifications. Key notifications include exemptions for goods imported by those authorizing supplies against Prior Authorisation, Export Promotion Capital Goods Permit and Export Oriented Units (EOUs). The GST department has initiated legal proceedings, including summons and show-cause notices, for alleged erroneous IGST refunds, penalties and imposition of interest under the CGST Act. This strict interpretation creates difficulties for exporters, potentially disrupting business operations and deterring foreign investment.

In response, exporters challenged Rule 96(10) in the High Courts, resulting in recent decisions such as the Kerala High Court declaring this. “ultra vires” As per IGST Act. In addition, facilities are provided for Advance Permit holders and exporters with the 233/27/2024-GST Circular.

Also, adding Notification No. 20/2024 – Central Tax dated 08 October 24Central Government informed Ignoring Rule 96(10), Exporters are experiencing great relief as a result of the implementation of CGST Rules recommended by the GST Council.

Brief History of Refunds Under Rule 96 (10) of CGST Rules, 2017

Rule 96(10) of the CGST Rules restricts the “registered person” from exporting taxable goods against payment of IGST and claiming refund of IGST paid, if the exporter/supplier receives materials from which the following Notifications benefit. was taken advantage of.

Communiqué No. 48/2017 – Central Tax dated 18-10-2017 with summarized contents

• Supply of goods by a registered person subject to Prior Authorization.
• Supply of capital goods by a person registered against an Export Promotion Capital Goods Permit
• Supply of goods to the Export Oriented Unit by a registered person
• Procurement of gold by the bank or Public Institution specified in this Regulation Communiqué No. 50/2017 – Customs dated 30 June 2017 (as amended) Against Prior Authorization.

Communiqué No. 40/2017 – Central Tax (Rate) dated 23-10-2017 with summarized contents

• The rate is 0.05% on intra-State supplies of dutiable goods by a supplier registered for export to a registered buyer, subject to specified conditions.

Communiqué No. 41/2017 – Integrated Tax (Rate) dated 23-10-2017 with summarized contents

• Integrated Duty rate of 0.1% on inter-State supplies of dutiable goods by a supplier registered for export to a registered buyer, subject to specified conditions.

Customs Communiqué dated 78/2017-13-10-2017 with summarized contents

• Exempting goods imported by EOUs from integrated duty and compensation exemption

Customs Communiqué No. 79/2017 – Dated 13-10-2017 with summarized contents

• Exploring amendments to various Customs exemption notifications to exempt Integrated Duty/Exemption on imports of goods under AA/EPCG. Schemes

Considering the above scenario, the GST department has initiated legal proceedings by issuing summons and issuing show-cause notices for allegedly erroneous IGST refunds. This includes tax collection not exceeding 24% in accordance with Article 50 of the Law. Central Goods and Services Tax Act 2017 and the imposition of penalty equivalent tax in accordance with Article 74 of the Act.

Difficulties in applying for IGST refund on export of Goods and Services

• Strict interpretation of the rule or its retroactive application can create uncertainty in the business world.
• It disrupts the smooth functioning of exporters and export-oriented businesses.
• Foreign investors and trading partners may perceive such developments negatively and undermine confidence in India’s business environment.
• It can deter foreign investment by hindering efforts to expand international trade.
• Accumulation of ITC and amplification of the cascading effect.

In response, the exporters filed petitions in the relevant High Courts challenging the validity of Rule 96(10) of the CGST Rules. They want ongoing rescue operations to be stopped.

A statement was made to exporters

233/27/2024-GST circular dated 10 September 2024issued and through this Circular, Advance Authorization Holders and 100% EOUs are granted exemption from recovery of past Refunds. However, such relief will be subject to the following conditions:

1. Bill of Entry to be Amended in accordance with Customs Law 149 (for entries)

2. Payment of IGST and GST Compensation Duty as applicable on such imports.

3. Payment of interest (from date of import to present)

Game Changer and Festival Gift for Exporters:

at 8^he October 2024, CBIC issued another Notification No. 20/2024 – Central Tax dated 08^he October 2024, Central Government informed Violation of Rule 96(10) of CGST Rules, 2017 As recommended by the GST Council. The relevant paragraphs of the said notification are reproduced below for convenience.

“6. In article 86 of the said rules, the words, parentheses and numbers in subparagraph (4B) and subparagraph (b) are “against the sub-rule (10) of Rule 96″ shall be disregarded.”

The above notification is a much loved welcome move for exporters which will provide a huge relief to the Indian Industrial economy. SCN, Contact & Request Notices etc. under the influence of Rule 96(10). Exporters within the scope of this scope can now breathe easy. This will ensure a simple and expedited procedure for refunds. It will also make it easier to do business in India and promote exports.

Triggered the relevant Decision and relief part

about this Sance Laboratories Pvt. Ltd. / UOI & Ors, The Kerala High Court in a series of writ petitions declared Rule 96(10) of the Central Goods and Services Tax Rules, 2017 (‘CGST Rules’) as follows: “ultra vires It is under Section 16 of the Integrated Goods and Services Tax Act, 2017 (“IGST Act”) and is clearly unenforceable due to its arbitrary nature.

Solution

This change streamlines procedures and ensures that export-related refunds will no longer be considered a breach of the previous provisions, provided that the reassessment of the Registration Bill is completed. No refunds should be made by the Central Government during the 23 years.^third October 2017 and 8^he October 2024, the rule’‘unconstitutional’ Exporters will now be able to benefit from hassle-free refunds of IGST.

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