09 March 2018
Whether GST paid on capital goods used to manufacture goods exported under LUT can be claimed as refund?
This specific query arises because following two provision of the GST Act and Rules.
1. Section 16(3) of the IGST Act, 2016 provides that a registered person making zero rated supply shall be eligible to claim refund under either of the following options, namely:–– (a) he may supply goods or services or both under bond or Letter of Undertaking, subject to such conditions, safeguards and procedure as may be prescribed, without payment of integrated tax and claim refund of unutilised input tax credit; 2. Rule 89(4) of CGST Rules, 2017 provides the formula for refund of unutilised ITC on zero rated supply wherein definition of "Net ITC" is as follows. "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."
The IGST Act use the words "unutilised input tax credit" whereas CGST Rules use the word "input tax credit on inputs and input services". Due to this contradiction my query arise whether or not refund of GST paid on capital goods used to manufacture goods exported under LUT can be claimed as refund?
09 March 2018
In this regard it can be taken a view that Rule can never go beyond the Statute. Statute shall prevail over the rule. However this area is expected to be a matter of litigation/
10 March 2018
However, there is no restriction on refund of IGST paid on export of goods using input tax credit availed on receipt of capital goods. One can opt for another route of export of goods with payment of IGST and claim refund of such IGST paid by him.
So there is inequality between both options provided by section 16(3) of the IGST Act for export.
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