“Export” is considered as a major contributor to any economy and therefore, government makes all possible efforts to increase it. For this purpose, exports are kept free from any kind of taxes including Goods and Service Tax.
To substantiate such principle, export of goods or services or both has been classified as “Zero Rated Supply” under Integrated Goods and Service Tax, 2017 (“IGST Act”) and accordingly, such supply is not liable to Goods and Service Tax (“GST”). To claim benefit of such “zero rated supply”, GST law provides for either of the following options:
- Exporter may export goods without payment of GST and later on can claim refund of GST paid on procurements, i.e., inputs and Input services or
- Exporter may export goods on payment of IGST and later on can claim refund of such GST paid.
1. Manner of claiming refund on Export and issue arised
For the purpose of claiming refund, IGST Act has specified a pre-requisite that export related information entered into GSTR-1 by supplier (such as Invoice Number, invoice date, shipping bill number, shipping bill date and Invoice amount) shall get transmitted to customs systems to check authenticity of export transaction claimed by supplier.
For the purpose of transmitting information to Customs EDI, a validation has been introduced that IGST paid on export in any particular month as declared in Table 3.1(b) of GSTR-3B* should not be less than export declared in Table-6A of GSTR-1**.
*Section – 3.1 Tax on outward and reverse charge inward supplies-3.1(b)-Outward Taxable supplies (Zero Rated)
**Table 6A- Exports Invoices
2. Mismatch of Information in Table 3.1 (b) of GSTR-3B with Table-6A of GSTR-1
Central Board of Indirect Taxes and Customs (“CBIC” or “Department”) has received number of representations from exporters wherein it was highlighted that exporters have committed mistakes while filing GSTR-1 and GSTR-3B as exporter has inadvertently declared IGST paid on export supplies as IGST paid on interstate domestic outward supplies (i.e. Table 3.1(a)) instead of Outward taxable supples (Zero rated) (i.e., Table 3.1(b)) while filing GSTR-3B. Therefore, exports declared in Table-6A of GSTR-1 did not match with exports declared in Table 3.1(b) of GSTR-3B.
Consequently, GSTN failed to transmit export related data to customs EDI and therefore, IGST refund of exporters could not be processed.
3. Issuance of Circular 12/2018-Customs dated 29th May, 2018
Considering the transitional period of GST, Central Board of Indirect Taxes & Customs (“CBIC” or “Department”) issued circular No. 12/2018-customs dated 29th May, 2018 wherein it specified the manner of sanctioning pending IGST refund for the period of 1st July, 2017 to 31st March, 2018 wherein records have not been transmitted from GSTN to DG System.
4. Procedure of sanctioning of refund
CBIC has envisaged 2 cases where short refund or no refund has been granted to exporter and accordingly, it has clarified procedure of sanctioning refund in such cases in following manner:
4.1 Cases where no short payment of IGST
- Step-1: As exporters declared IGST paid on exports as IGST paid on interstate outward supply, accordingly, customs policy wing will prepare the list of exporters whose cumulative IGST paid as per GSTR-3B (i..e, IGST paid on exports, as declared in Table 3.1(b), and IGST paid in inter-state outward supply, as declared in Table 3.1(a)) is greater than or equal to IGST cumulative IGST amount indicated in GSTR-1 for the same period. Custom policy wing will share such list with GSTN.
- Step-2: GSTN shall send the confirmatory mail to these exporters regarding transmission of their records to custom EDI system.
- Step-3: Exporters whose refund is sanctioned by department shall be required to submit a certificate from chartered accountant for the period of 01.07.2017 to 31.03.2018 stating that there is no discrepancy between IGST amount refunded on exports and IGST amount paid by exporters for exports. Such certificate is required to be submitted before 31st October, 2018 to custom office of port of export.
If export is made from multiple ports, exporter is at liberty to choose any of the port of export for submission of certificate.
- Step-4: Exporter shall submit a copy of certificate to jurisdictional GST office (central/state). Non-submission of CA certificate will adversely affect the refund of exporter in future.
- Step-5: Board will share the list of exporters to whom refund has been granted with DG(Audit)/DG(GST)
Above sanctioned refunds shall be subject to post refund audit scrutiny.
4.2 Cases where there is short payment:
- Step-1: On preparation of list by custom wings, a list will be prepared of such exporters whose payment of IGST (as declared in Table 3.1(a) and Table 3.1(b) of GSTR-3B) is less then IGST payable as per sales declared in GSTR-1 for the period of 1st July, 2017 to 31st March, 2018. Custom policy wing shall share the list of such exporters with GSTN and all chief commissioners of Customs.
- Step-2: An informatory email will be send to all exporters who have deposited short IGST in their GSTR-3B informing them about their short payment.
- Step-3: Exporter will be required to make payment of such short IGST in GSTR-3B of subsequent months to ensure that entire IGST claimed in GSTR-1 has been paid. Further, exporter will be required to submit proof of such payment with Assistant/Deputy Commissioner of customs in charge of port from where export is made. In case of multiple exports, exporter is at the liberty to choose either of the port.
- Step-4: Exporters shall submit the copy of self-deposit of IGST (self-attested copy of challan) with concerned custom office at the port of export.
However, where amount of IGST refund amount is more than INR 10 lacs then exporter is required to submit a certificate from chartered accountant that shortfall of GST has been paid.
- Step-5: Exporter shall file an undertaking that they will return refund amount it is found to be not due to them.
- Step-6: The Customs zones shall compile list of exporters (GSTIN only), who have come deposited short payment of IGST and also complied with other prescribed requirements.
- Step-7: Such compiled list may be forwarded to Customs policy wing, DG (Audit) and DG (GST). Customs policy wing shall in further forward such list to GSTN. On receipt of the list of exporters from Customs policy wing, GSTN shall transmit the records of those exporters to Customs EDI system.
- Step-8: The exporters whose refunds is either processed or sanctioned shall submit another certificate from Chartered Accountant before 31st October, 2018 to the same Customs office at the port of export stating that there is no discrepancy between the IGST amount refunded on exports and the actual IGST amount paid on exports of goods.
Further, a copy of the certificate shall also be submitted to the jurisdictional GST office (Central/ State). The concerned Customs zone shall provide the list of GSTINs who have not submitted the CA certificate to the Board by the 15th November 2018.
- Non submission of CA certificate shall adversely affect the future IGST refunds of the exporter.
5. Post Refund audit
Refund one sanctioned or granted shall still be subject to departmental audit. DG (Audit) shall include such GSTINs to which refund has been granted wide using procedure given in Circular 12/2018 for conducting Audit under the GST law. The inclusion of IGST refund aspects in Audit Plan of those units may be ensured by DG (Audit).
Further, if departmental Audit detects any case of excess refunds to the exporters under this circular then detail of such refund shall be forwarded to concerned GST formation for appropriate action. Jurisdictional GST officer shall verify the details of such payment particulars at its end.
6. Circular No. 25/2019-Customs dated 27th August, 2019-Extension of benefit given under circular 12/2018-Customs for the period of April 2018 to March, 2019
Various exporters got benefited through procedure give under circular 12/2018-customs and also incidences of errors reduced substantially. However, some exporters have continued to made such error in F.Y. 2018-19 also,
Accordingly, to overcome problems faced by exporters during the period of April, 2018 to March, 2019, CBIC issued circular No. 25/2019-customs dated 27th August, 2019 post consultation with GST Law committee to extend the benefits given under circular 12/2018-customs to the period of financial year April, 2018 to March, 2019 also. Accordingly, provisions given under Circular 12/2018-customs for the period of 01.07.2017 to 31.03.2018 shall mutatis mutandis apply for the period of April, 2018 to March, 2019.
Accordingly, in respect of guidelines given in Para 3A and 3B of circular 12/2018-customs, comparison of IGST paid as per Table 3.1(b) of GSTR-3B and details furnished in Table 6A of GSTR-1 shall be carried out on cumulative basis for the period of April, 2018 to March, 2019. Further, a certificate shall be required from a chartered accountant evidencing that there is no discrepancy between the IGST amount refunded on exports under this circular and actual IGST amount paid on export of goods for the period of April, 2018 to March, 2019 and exporter is required to furnish such certificate by 30th October, 2019.
Concerned custom zone shall provide the list of GSTINs who have not submitted the CA certificate to the board by 15th November, 2019.