QUESTION

refund of ITC in Case of a Logistic Company for FY 2017-18. The logistic company is engaged in supply of following categories of Services:- · Taxable Domestic Supply (i.e. Freight, Handling Charges, Terminal Charges, etc). · Zero Rated Supply (i.e. i.e. Freight, Handling Charges, Terminal Charges etc). · Exempted Supply (i.e. Air Freight Charges exempt from 25.01.2018 onwards.) The Company wants to claim refund of ITC for 3rd and 4th Quarter of FY 2017-18. What will be the manner of calculation to determine the eligible amount of ITC which the company is entitled to claim from the department per the GST Act? In the above scenario where Air Export Freight being both taxable and exempted supply for the quarters under consideration.

ANSWER

Facts of the case:  
The logistic company is engaged in Taxable Domestic Supply,   Zero Rated Supply, Exempted Supply.  Determination of the eligible amount of ITC which the company is entitled to claim as refund.

Law applicable:
As per SECTION 54 OF CGST ACT refund can be claimed only in following situations:
(3) Subject to the provisions of sub-section (10), a registered person may claim refund of any unutilized input tax credit at the end of any tax period:

Provided that no refund of unutilized input tax credit shall be allowed in cases other than''

(i) zero rated supplies made without payment of tax;

(ii)'where the credit has accumulated on account of rate of tax on inputs being higher than the rate of tax on output supplies (other than nil rated or fully exempt supplies), except supplies of goods or services or both as may be notified by the Government on the recommendations of the Council:

Provided further that no refund of unutilized input tax credit shall be allowed in cases where the goods exported out of India are subjected to export duty:

Provided also that no refund of input tax credit shall be allowed, if the supplier of goods or services or both avails of drawback in respect of central tax or claims refund of the integrated tax paid on such supplies.

The manner of calculating amount of refund is prescribed in rule 89 as follows:

CGST RULE 89

(4) In the case of zero-rated supply of goods or services or both without payment of tax under bond or letter of undertaking in accordance with the provisions of  sub-section  (3) of section 16 of the Integrated Goods and Services Tax Act, 2017 (13 of 2017), refund of input tax credit shall be granted as per the following formula -

Refund Amount = (Turnover of zero-rated supply of goods + Turnover of zero-rated supply of services) x Net ITC /Adjusted Total Turnover

Where, -

(A) "Refund amount" means the maximum refund that is admissible;

(B) "Net ITC" means input tax credit availed on inputs and input services during the relevant period other than the input tax credit availed for which refund is claimed under sub-rules (4A) or(4B)or both;

(C) "Turnover of zero-rated supply of goods" means the value of zero-rated supply of goods made during the relevant period without payment of tax under bond or letter of undertaking, other than the turnover of supplies in respect of which refund is claimed under sub-rules (4A) or(4B)or both;

(D) "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;

(E) Adjusted Total Turnover" means the sum total of the value of-
(a) the turnover in a State or a Union territory, as defined under clause (112) of section 2, excluding the turnover of services; and
(b) the turnover of zero-rated supply of services determined in terms of clause (D) above and non-zero-rated supply of services, excluding-
    (i) the value of exempt supplies other than zero-rated supplies; and
    (ii) the turnover of supplies in respect of which refund is claimed under sub-rule (4A) or sub-rule (4B) or both, if any, during the relevant period.
(F) Relevant period' means the period for which the claim has been filed.

Conclusion:
Refund can be claimed for zero rated supplies as per above said formula prescribed in rule 89. However refund cannot be claimed of ITC accumulated on account of Exempted supplies.