Then, this January, the government introduced a confusing restriction that refund of IGST would be denied if the supplier to an exporter had taken some benefits, including import, without IGST payment. Following this, a messy clarification in May said the restriction would not apply to capital goods.
Now comes the latest amendment to the said Rule 96 (10), followed by a clarification (Circular 59 of September 4, 2018) that the restriction on refund will apply not only to EOUs and import under advance authorisation but also where GST exemption has been availed of on import of capital goods under EPCG authorisation.
What does this mean? Simply that EOU, AAH and EPCG authorisation holders which import without IGST payment have no option but to export without payment of IGST under a legal undertaking. They are to then claim refund of any unutilised credit manually, under Rule 89 of the said CGST Rules, 2017. A process involving much paperwork, uncertainty, delay and corruption. Secondly they have to return all the refund granted till date of IGST paid on export goods.
Third, if they prefer to forgo IGST exemption on import and take credit of the IGST paid, then they may continue to export on payment of IGST under claim of refund under Rule 96.
The government says those directly purchasing or importing supplies, on which the benefit of reduced tax incidence or no tax incidence under certain specified notifications has been availed of, shall not be eligible for refund of IGST paid on export of goods or services. Conceptually, it can justify its stand for import or domestic procurement of inputs but not for import under the EPCG scheme.
The draconian aspect is retrospective application of the change. From the exporter’s perspective, the present situation is worse than the pre-GST days. An additional anomaly is that this restriction is applicable for goods covered under GST but not for those subject to excise duty. In sum, the Union finance ministry is piling on one problem after another on exporters.
It seems preoccupied with its own woes, without any attempt to understand the difficulties of exporters at the ground level. It is now for the Federation of Indian Export Organisations to explain these difficulties to the ministry and persuade it to reverse such decisions.