Enquiry notices are being issued by investigation authorities to numerous exporters on guaranteeing compliance with Rule 96(10) of Central Items and Providers Tax Guidelines 2017 (CGST Guidelines). This text intends to debate the problems below Rule 96(10).

IGST Exemption Launched Beneath Export Promotion Schemes

There are numerous export promotion schemes applied by the Authorities of India. For instance, Advance Authorization (“AA”) scheme applied via Chapter four of the Overseas Commerce Coverage (“FTP”) 2015-20 learn with relevant Customs Notification. The mentioned scheme permits import of inputs, with out fee of Fundamental Customized Obligation (BCD) and Built-in Items and Service Tax (IGST), topic to fulfilment of sure circumstances and obligations. The exemption from IGST was not launched initially on the time of introduction of GST. Nonetheless, with illustration from exporters for avoiding capital blockage, authorities launched exemption from IGST from 13.10.2017. By the use of a number of extensions, the mentioned exemption is now out there as much as 31.03.2021. Additionally, GST paid on home procurement of products are refunded on provides made to AA holder. Related exemption from IGST can also be out there below Export Oriented Unit (EOU) scheme laid out below Chapter 6 of FTP. The item of those above schemes is to keep away from working capital blockage for exporters in fee of taxes.

Right here Comes Rule 96(10) Of CGST Guidelines, 2017

Subsequent to exemption granted from GST below the above mentioned export promotion schemes, Rule 96 of the CGST Guidelines was amended. The mentioned amendments sought to impose some circumstances and restrictions with a view to grant refund of GST on zero-rated provide. Rule 96(10) prevents sure class of exporters from availing the choice of exporting completed items or providers or each, on fee of IGST below Rule 96. That’s, such exporters should essentially export completed items, with out fee of IGST below LUT/Bond. Additional, even after export with out fee of IGST below Bond/LUT, a technique is supplied for availing the refund of unutilized ITC.

The category of exporters restricted below Rule 96(10) are the next:

Advance authorization holders importing or regionally procuring inputs with out fee of GST EOU importing or regionally procuring inputs/capital items with out fee of GST Service provider exporters procuring completed items regionally at lowered particular price

The above class of exporters pays Nil or negligible GST/ Cess on the import or home procurement of uncooked materials/ capital items. Therefore, exports of products or providers on fee of IGST after availing the advantage of mentioned notification and consequent refund of mentioned IGST might result in liquidation of such ITC which isn’t associated to the mentioned exports of products or providers. Therefore, the target of insertion of Rule 96(10) and related amendments in enter tax credit score refund guidelines appears to plug that hole. It prevents the exporter from drawing upon ITC which is said to different home provides which aren’t utilized within the exports of products or providers. Round No. 45/19/2018-GST dated 30.5.2018 additionally clarifies that Rule 96(10) has been inserted to make sure that the exporter doesn’t make the most of the ITC availed on different home provides acquired for making the fee of IGST on export of products or providers.

The Preliminary Mishap In Wordings Of The Rule

When the restriction on advance authorization and EOU scheme holders was launched in January 2018, the wordings of the rule created lot of confusion among the many exporters. As an alternative of referring to exporter having availed the advantage of specified notifications, the rule wrongly referred to provider to the exporter having availed the advantage of specified notifications. Therefore, it meant that the exporters had been restricted from claiming refund of IGST paid on export provided that provider to exporter has availed the advantage of specified notifications. If he himself had imported or regionally procured inputs with out fee of GST, then he was not barred below the mentioned rule.

We are able to seek advice from the identical as the inaccurate rule.

The Authorities tried to right the authorized place in September 2018 retrospectively i.e. with impact from 23.10.2017. Nonetheless, contemplating the backlash from exporters, the inaccurate rule was once more restored from October 2018 onwards and the brand new right rule was prospectively utilized. CBIC has additionally clarified on related strains.

Additional, a proof has been retrospectively added in Rule 96(10) to offer that if an advance authorization or EOU scheme holder import inputs on fee of IGST whereas concurrently claiming the advantage of BCD exemption, he wouldn’t be barred below the mentioned rule.

Interpretation Disputes

The key dispute pending for clarification or correction from authorities is software of Rule 96(10) to EOU who avails IGST exemption for import or native procurement of capital items. That is in view of the truth that EPCG scheme holders are exempted from the rule. It’s for the courts to resolve whether or not the mentioned differentiation created between related export promotion schemes relies on any intelligible differential to not violate Article 14 of the Structure of India. Additional, the federal government additionally must make clear whether or not the restriction below the mentioned rule is relevant up until perpetuity (when as soon as any enter is imported with out fee of GST) or whether or not the identical applies supply-wise.

The creator hopes that the federal government will give you an in depth round on guaranteeing compliance with Rule 96(10) to unfold its consciousness as nicely to make clear sure authorized ambiguities.



Views expressed above are the creator’s personal.


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