22-Jan-2019 advance authorisation refund analysis rule 96

The Article is in relation to Notifications issued for removal of pre-import condition for Advance Authorisation, corresponding exemptions of IGST and Compensation Cess for specified Deemed Exports, conditions to be complied by the Authorisation Holder in respect of duty exempted imports made after discharge of export obligation and analysis of refund provisions as per Rule 96(10) of Central Goods and Services Tax Rules, 2017.

1.Removal of pre-import condition for Advance Authorisation and Exemptions of IGST and Compensation Cess for specified Deemed Exports 

  • The Directorate General of Foreign Trade has issued Notification No. 53/2015-20 dated 10 January 2019 (‘Notification’) inter alia amending para 4.14 of the Foreign Trade Policy 2015-20 i.e. duties exempted under Advance Authorization schemes.

Scenario prior to the aforesaid Notification:-

  • As per the said Notification, the exemption has also been extended to ‘Deemed Exports’.

  • Imports under Advance Authorisation are exempted from payment of integrated tax and compensation cess for making supplies under the following deemed exports categories specified in Notification 48/2017 dated 18 October 2017:-  

    • Supply of goods by a registered person against Advance Authorisation
    • Supply of capital goods by a registered person against Export Promotion Capital Goods Authorisation
    • Supply of goods by a registered person to Export Oriented Unit
  • Also, the pre import condition required to be fulfilled by the Advance Authorization holder is now removed.

  • The aforesaid benefits are available from 10 January 2019 till 31 March 2019 unless further extended.

With reference to the above pre import condition prior to the amendment, Writ Petition was filed in Gujarat, Punjab and Haryana High Court. However, as per the amendment, removal of pre import condition will provide much needed relief to the exporters.

1.Conditions to be complied by the Authorisation Holder in respect of duty exempted imports made after discharge of export obligation 

  • The Customs Authorities vide Notification 1/2019 dated 10 January 2019 has specified the additional conditions to be fulfilled by the Advance Authorization holder. Refer below the summary of the said Customs Notification:-

Scenario 1 - Imports against Advance Authorisation made after discharge of export obligation and input tax credit availed under GST for manufacture of such final products exported

Following conditions are to be complied by the Advance Authorization holder:-

  • The material imported under the Advance Authorization post exports should be used in manufacture and supply of taxable goods.
  • The Advance Authorization holder needs to furnish a bond with customs binding himself to use the imported material for manufacture and supply of taxable goods
  • The Advance Authorization holder will have to submit and a certificate from a Chartered Accountant within six months from the date of import that the imported material have been so used.
  • However, imported materials may be cleared without furnishing a bond in case the Advance Authorization holder pays the integrated tax and compensation cess at the time of import of materials.

Scenario 2 - Imports against Advance Authorisation made after discharge of export obligation and Input Tax Credit not availed under GST for manufacture of such final products exported

  • The Advance Authorization holder needs to furnish proof to the effect that no Input Tax Credit has been availed for the inputs used in manufacture and export of final products. In such cases, no bond is required to be furnished with Customs Authorities.

1.Analysis of refund provisions with respect to Advance Authorisation as per Rule 96(10) of Central Goods and Services Tax Rules, 2017  

With reference to the above context, it is also relevant to analyze the refund provisions as per Rule 96(10) of Central Goods and Services Tax Rules, 2017:-

1.Notification No. 39/2018 dated 4 September 2018 – Effective 23 October 2017

  • Notification No. 39/2018 dated 4 September 2018, effective 23 October 2017, prescribes the conditions to be fulfilled by the exporter claiming refund of integrated tax paid on export of goods or services. However, the said Notification is rescinded vide Notification 53/2018 dated 9 October 2018

2.Notification No. 53/2018 dated 9 October 2018 effective from 23 October 2017

  • Notification 53/2018 dated 9 October 2018, effective 23 October 2017, prescribes the conditions to be fulfilled for claiming refund of integrated tax paid on export of goods and services by the exporter

The following conditions are prescribed:-

  • The supplier (who is supplying goods/ services to exporter) should not have availed the benefit of below mentioned Notifications:-

    • Notification No. 48/2017- Central Tax dated 18 October, 2017 – Deemed exports against Advance Authorisation, EPCG Authorisation or supply of goods to EOU; or
    • Notification No. 40/2017 Central Tax (Rate) dated 23 October, 2017 - Tax rate of 0.05% CGST and 0.05% SGST percent for intra-state supply of taxable goods by a registered supplier to a registered recipient for export.; or
    • Notification No. 41/2017-Integrated Tax (Rate) dated 23 October, 2017 - Tax rate of 0.1% IGST on inter-State supply of taxable goods by a registered supplier to a registered recipient for export subject to specified conditions.
    • Notification No. 78/2017-Customs, dated 13 October, 2017 – Exemption from integrated tax from import of goods by Export Oriented Unit; o

Notification No. 79/2017-Customs, dated 13 October, 2017 – Exemption from integrated tax on import of goods under Advance Authorization / Export Promotion of Capital Goods scheme.

  • The net effect of the changes would be that any exporter who himself/herself imported any inputs/capital goods in terms of Notification Nos. 78/2017-Customs and 79/2017-Customs both dated 13 October, 2017 shall be eligible to claim refund of the integrated tax paid on exports till the date of the issuance of the Notification No. 54/2018 – Central Tax dated 9 October, 2018. 

Notification No. 54/2018 dated 9 October 2018

  • As per Notification No. 54/2018 dated 9 October 2018, effective 9 October 2018, exporters who are importing goods in terms of Notification Nos. 78/2017- Customs and 79/2017-Customs both dated 13 October, 2017 would not be eligible for refund of IGST paid on exports.

  • However, exporters who are receiving capital goods under the EPCG scheme, either through import in terms of Notification No. 79/2017-Customs dated 13 October, 2017 or through domestic procurement in terms of notification No. 48/2017-Central Tax, dated 18 October, 2017, shall continue to be eligible to claim refund of IGST paid on exports and would not be hit by the restrictions

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