Question52: As per Rule 89(4) of CGST
Rules, 2017, for refund of ITC on zero rated supply against LUT, `Turnover of
zero-rated supply of services` has been defined as follows :-
Turnover of zero-rated supply of services` means the value of zero-rated supply
of services made without payment of tax under bond or letter of undertaking,
calculated in the following manner, namely:-
Zero-rated supply of services is the aggregate of the payments received during
the relevant period for zero-rated supply of services and zero-rated supply of
services where supply has been completed for which payment had been received in
advance in any period prior to the relevant period reduced by advances received
for zero-rated supply of services for which the supply of services has not been
completed during the relevant period.
Please clarify this definition with the suitable example.
Answer For Example. XY ltd in Gujarat has total receipt of Rs 30 lakh for
export of architect designing service in the month of October. In this month
company has also completed one architect service for which consideration of Rs.4
lakh is already received in July. In the same month company received an advance
payment of Rs 10 lakh for future export of architect service.
In accordance of Rule 89(4)
Zero rated supply of service = total payment received for zero rated supply of
service + value of services completed for which advance received in earlier
period - advance for which supply of service is not completed
Thus zero rated supply of service for the relevant period of Oct for calculation
of Refund Amount.
= 30 lakh+4 lakh -10 lakh
= 24 lakh.
We take this opportunity to inform you that this formula is not correct in
practical The Rule provide refund of net ITC the net ITC is the total credit
availed which may in practical be wrong
For example you have taken credit of 10 lakh because of bulk purchase in month
of may and have clearance of rs 1 lakh in domestic and 1 lakh in export
according to the formula refund claim due will rs five lakh against export of rs
1 lakh
We think there is need to do correction and the refund should be as per
consumption of material like draw back. (REPLY dt. 2/2/2018)