Claiming GST refund as an exporter? Here’s what you need to know

When a taxpayer involved in export operations files their Goods and Services Tax returns, they are entitled to claim a refund as export supplies fall under the category of zero-rated supplies. This refund can be claimed on unutilised input tax credit if the export supply was made without payment of integrated goods and services tax (IGST) or a refund on IGST liability if the same was paid at the time of making the supply.

However, taxpayers must remember that there are certain restrictions and violating the same could lead to rejection of the refund claim.

Goods Imported under Advance Authorisation and exported outside India

Goods can be exempted from basic customs duty and integrated tax at the time of importation under the Advance Authorisation clause. Although exports are zero-rated and taxes paid are eligible for a refund, but since the taxpayer has not paid any IGST Tax at the time of importing the goods, the refund of IGST Tax at the time of export is not available in terms of restrictions under rule 96(10)(b) CGST Rules, 2017.

Goods Imported under EPCG and exported outside India

The Export Promotion Capital Goods (EPCG) scheme of the Foreign Trade Policy allows the import of goods at zero customs duty. While this allows exemption of basic customs duty and IGST on import of capital goods, this scheme requires the exporter to export equivalent to 6 times the duty saved on the import of capital goods within 6 years from the date of issuance of the authorization.

Goods purchased at concessional rate and exported outside India

Finally, this clause entitles the supplier of goods to levy tax at the rate of 0.1% that is if the goods are supplied to the exporter. The rate of 0.1% is irrespective of the actual rate of goods exported. However, the said concession of tax is subject to fulfilment of the various conditions. While this clause is beneficial to merchant exporters, they must note that the supply must happen without bringing such goods to the exporter’s factory/business premises. In this context, a registered premise doesn’t mean the additional place, principal place, or godown of a registered taxpayer as declared under GST law. So if goods were delivered to the factory or godown of the exporter, the Customs department might disallow an exemption.

Often, exporters fail to make a note of these restrictions before filing for refunds which lead to litigations.