QUESTION
 

One of my client is registered under GST and he wish to make export sale in Nepal and Bhutan. Can he claim his refund of ITC which is show on portal. 

Answer
 

Facts of the case:  Person registered under GST and wish to make export sale in Nepal and Bhutan. Can he claim his refund of ITC which is shown on portal.  

Law Applicable: SECTION 2 of IGST Act

(5) 'export of goods' with its grammatical variations and cognate expressions, means taking goods out of India to a place outside India.

SECTION 54 OF CGST ACT

(3) Subject to the provisions of sub-section (10), a registered person may claim refund of any unutilised input tax credit at the end of any tax period:

Provided that no refund of unutilised 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 unutilised 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.

Circular No-8

k) Realization of export proceeds in Indian Rupee: Attention is invited to para A (v) Part- I of RBI Master Circular No. 14/2015-16 dated 01stJuly, 2015 (updated as on 05th November, 2015), which states that 'there is no restriction on invoicing of export contracts in Indian Rupees

 in terms of the Rules, Regulations, Notifications and Directions framed under the Foreign Exchange Management Act, 1999. Further, in terms of Para 2.52 of the Foreign Trade Policy (2015-2020), all export contracts and invoices shall be denominated either in freely convertible currency or Indian rupees but export proceeds shall be realized in freely convertible currency. However, export proceeds against specific exports may also be realized in rupees, provided it is through a freely convertible Vostro account of a non-resident bank situated in any country other than a member country of Asian Clearing Union (ACU) or Nepal or Bhutan'. Further, attention is invited to the amendment to section 2(6) of the IGST Act, 2017 which allows realization of export proceeds of services in INR, wherever allowed by the RBI

Accordingly, it is clarified that the acceptance of LUT for supplies of goods or services to countries outside India or SEZ developer or SEZ unit will be permissible irrespective of whether the payments are made in Indian currency or convertible foreign exchange as long as they are in accordance with the applicable RBI guidelines.

Interpretation: The export of goods as defined under Section 2(5) of IGST Act without making any discrimination of destination country.

As per section 54 of CGST Act read with Rule 96A  you can claim refund of the ITC on exports made under LUT. 

You have an additional /alternative route to claim refund Under section 54 of the CGST Act.

For the country of Nepal And Bhutan there is relaxation given under Circular no 08 to receive payment in Indian rupees as reproduced above.

Conclusion: You can claim refund of ITC shown on portal in case of Export to Nepal and Bhutan. (Reply dt. 31.07.2020)