Claim settled by ECGC can be considered for incentives under FTP

We are a Star Export House. We have exported some item to a foreign buyer under two invoices. We have received drawback and service tax refund on these immediately thereafter. The buyer has defaulted on the payments, being bankrupt. ECGC of India has settled the claims @ 80 per cent and 90 per cent. We intend to reverse and return the drawback and service tax refund received by us for these two invoices. Should we reverse and return the entire amount or only the pro rata amount of the bill settled by ECGC? Can the claim settled by ECGC be considered for eligibility of export incentives?

According to Rule 16A(5) of the Central Excise, Customs and Service Tax Duty Drawback Rules, 2017, “where sale proceeds are not realised by an exporter within the period allowed under the Foreign Exchange Management Act, 1999 (42 of 1999), but such non-realisation of sale proceeds is compensated by the Export Credit Guarantee Corporation of India Ltd under an insurance cover and the Reserve Bank of India writes off the requirement of realisation of sale proceeds on merits and the exporter produces a certificate from the concerned Foreign Mission of India about the fact of non-recovery of sale proceeds from the buyer, the amount of drawback paid to the exporter or the claimant shall not be recovered.” So, you need not refund the drawback where you meet the conditions prescribed above. However, in the notification 41/2012-ST dated June 29, 2012, there is no such relaxation. So, you have to refund the entire amount. For benefits under FTP, Para 2.85 of HBP will apply. It says, “Payment through ECGC cover would count for benefits under FTP”. So, a claim settled by ECGC can be considered for eligibility of incentives under FTP and drawback but not for service tax refund.

An exporter chooses to avail full drawback during the transitional period (i.e. July, August and September 2017), using stocks as on June 30, 2017, and carries out exports. Can he avail of input tax credit on material purchased in the months of July, August and September 2017? 

The CBEC Circular no. 22/2017-Cus dated June 30, 2017 clarifies that the exporter may, for exports made during July-September 2017, continue to claim the composite rates, i.e. rates and caps given under columns (4) and (5) respectively of the Schedule of AIRs of duty drawback, subject to certain additional conditions. The conditions imposed for claiming these composite rates aim to ensure that exporters do not claim composite AIRs of duty drawback and simultaneously avail input tax credit of Central Goods and Services Tax (CGST) or Integrated Goods and Services Tax (IGST) on export goods, or on inputs and input services used in manufacture of export goods, or claim refund of IGST paid on export goods. Further, an exporter claiming composite rate shall also be barred from carrying forward Cenvat credit on export goods or on inputs or input services used in manufacture of export goods in terms of the CGST Act, 2017.

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