QUESTION
Taxable person had exported goods in July, 2017 and claimed for refund of
accumulated ITC for said month. Refund was rejected on account of reason that
export was made with higher drawback claim. Later on rejected amount was not
credited back to Credit Ledger of taxable person by Department & same was
claimed by taxable person in March, 2019 GSTR – 3B and same was intimated in
writing to Department by taxable person. Kindly assist in following issue a)
Whether taxable person is eligible for said credit amount (Rejected amount of
Refund of July, 2017) which was taken by him March, 2019 GSTR – 3B or same needs
to be reversed? b) Whether credit of State Tax is allowed and only Central Tax
is to be reversed as clarified by CBIC in circular? c) Whether Madras HC ruling
in this matter has been delivered? – Matter argued by Avinash Poddar – Or any
other Judicial precedent in this matter? d) What is the responsibility of GST
Auditor and how this should be dealt while conducting GST Audit?
ANSWER
As per Duty Drawback rule, there are two types of Drawbacks:
1. All Industry Rate
2. Brand Rate Fixation
All Industry Rate is fixed on the basis of calculations done by Ministry of
Commerce. It is on account of Custom Duty loaded directly/indirectly in the cost
of goods exported. This drawback is given to the exporter on the basis of
shipping bill irrespective of the fact whether any export is made by the
exporter or not. Since all industry rate is fixed for custom duty loaded on the
price, it can be claimed along with ITC.
The second type of drawback is Brand Rate Fixation. Under this scheme the
exporter claims drawback of tax actually paid by him whether it is GST/Custom.
Amendment in FTP vide N/N 28/2015-2020 dt 31/10/2019 provides availability of
Brand Rate Fixation as follows:
a) Claim drawback of custom portion on the basis of import documents with ITC of
GST u/s 16 of CGST Act.
b) Claim of custom duty paid on import on the basis of import documents with GST
paid on import as well as domestic procurement. With this ITC of GST cannot be
claimed.
As per CBIC Circular No.37/11/2018-CGST
2. Non-availment of drawback: The third proviso to sub-section (3) of section
54 of the CGST Act states that no refund of input tax credit shall be allowed in
cases where the supplier of goods or services or both avails of drawback in
respect of central tax.
2.1 This has been clarified in paragraph 8.0 of Circular No. 24/24/2017 ' GST,
dated 21st December 2017. In the said paragraph, reference to 'section 54(3)(ii)
of the CGST Act' is a typographical error and it should read as 'section
54(3)(i) of the CGST Act'. It may be noted that in the said circular reference
has been made only to central tax, integrated tax, State / Union territory tax
and not to customs duty leviable under the Customs Act, 1962. Therefore, a
supplier availing of drawback only with respect to basic customs duty shall be
eligible for refund of unutilized input tax credit of central tax / State tax /
Union territory tax / integrated tax / compensation cess under the said
provision. It is further clarified that refund of eligible credit on account of
State tax shall be available even if the supplier of goods or services or both
has availed of drawback in respect of central tax.
Circular No.24/24/2017-GST dt.21.12.2017
8.0 It is also clarified that the drawback of all taxes under GST (Central
Tax, Integrated Tax, State/Union Territory Tax) should not have been availed
while claiming refund of accumulated ITC under section 54(3)(i) of the CGST
Act. A declaration to this effect forms part of FORM GST RFD-01A as well.
In view of the above said Circulars if you have taken Drawback then you are not
eligible to claim ITC of such duty/tax.