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CBIC makes clear refund of accumulated ITC

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NEW DELHI : The Central Board of Indirect Taxes and Customs (CBIC) has said that exports of goods having NIL rate of export duty will be eligible for refund of unutilised input tax credit (ITC). The move is seen as putting an end to litigation and also bringing relief to exporters.

No input tax credit for CSR activities, says Gujarat AAR

This clarification is a follow-up to the decision taken by the GST Council on September 17. The clarification is in two parts — the first one states which exported goods will have restrictions for availment of refund of accumulated ITC and which will not. Goods that are actually subjected to export duty — on which some export duty has to be paid at the time of export — will have restrictions while goods that are not subject to any export duty and in respect of which either NIL rate is specified or are fully exempted from payment of export duty would not be covered by the restriction for unused ITC refund.

Contrary to legal position

This clarification has come at a time when Odisha High Court stayed the show cause notice denying the refund on export of iron ore chargeable to NIL rate of duty. GST provisions state that refund of unutilised input tax credits would not be available where the goods exported out of India are chargeable to export duty.

‘No reversal of ITC on manufacturing process loss’

In the said matter, the petitioner is exporting iron ore which is chargeable to NIL rate of duty, for which the revenue contends that there is distinction amid NIL rate of duty and exempted from export duty. The Tax Department, in its notice, averred that such goods are to be treated as “chargeable to export duty” and therefore, denied the refund of unutilised ITC.

The petitioner had claimed that the impugned notices were without jurisdiction and the understanding that where the export duty payable is NIL, ITC should be denied was contrary to the legal position explained by the Supreme Court in Associated Cements Companies Ltd v. Commissioner of Customs. The matter is likely to be heard in the context of the latest clarification.

Pragmatic approach needed

Sandeep Sehgal, Director-Tax and Regulatory, AKM Global, a tax and consulting firm, said that the GST department ought to take a pragmatic approach. Refund of ITC in case of export of items having NIL rate of export duty should be allowed as the existing circular anyway allows the same on items that are exempt from export duty. “This will put to rest a lot of litigation and will benefit exporters of such goods,” he said.

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