CBEC issues circular relating to refund of ITC for fabric exporters

Refund of unutilized input tax credit of GST paid on inputs in respect of exporters of fabrics

Circular No. 18/18/2017-GST

F. No. 354/320/2017-TRU-Pt.1
Government of India
Ministry of Finance
Department of Revenue
Tax research Unit
****

North Block, New Delhi
16th November 2017

To,
The Principal Chief Commissioners/Chief Commissioners/ Principal Commissioners/
Commissioner of Central Tax (All) /The Principal Director Generals/ Director Generals (All)
Madam/Sir,
Subject: Clarification on refund of unutilized input tax credit of GST paid on inputs in respectof exporters of fabrics – regarding.
Doubts have been raised regarding the restrictions of refund of unutilized input tax credit of GST paidon inputs to manufacturer exporters of fabrics [falling under Chapter 50 to 55 and 60 and headings 5608, 5801, 5806] under GST.
2.1 The matter has been examined. In the context, subsection 3 of section 54 of the CGST Act,2017 as under :

“(3) Subject to the provisions of subsection (10) a registered person may claim refund of anyunutilized input tax credit at the end of any tax period :

Provided that no refund ofunutilized input tax credit shall be allowed in cases other than –

(i) Zero rated supplies made without payment of tax ;

(ii) where the credit has accumulated on account of rate of tax on inputs being higher than the rate of tax on output supplies (other than nil rated or fully exempt supplies), except supplies of goods or services or both as may be notified by the government on the recommendations of the Council.

2.2 Based on the recommendations of the GST council, Notification no. 5/2017- Central Tax(Rate) dated 28.06.2017 [as amended from time to time] has been issued under clause (ii) of proviso to sub section (3) ofsection 54 of CGST Act,2017 restrictingrefundofunutilized input tax credit of GSTpaid on inputs in respect of certain specified goods, includinginput tax creditof GSTpaid on inputs.
2.3However, the aforesaid notification having been issued under clause(ii) of proviso to sub section (3) ofsection 54 of CGST Act, 2017, restriction on refund ofunutilized input tax credit of GSTpaid on inputs will not be applicable to zero rated supplies, that is (a) exports of goods or services or both; or (b) supply of goodsor servicesor both to a Special Economic Zone developer or a Special Economic Zone unit.
2.4Accordingly, as regards export of fabrics it is clarified that, subject to the provisions of sub section (10) of the section 54 of CGST Act,2017, a manufacturer of such fabrics will be eligible for refund of unutilized input tax credit of GST paid on inputs [other than the input tax credit on GST paid on capital goods] in respect of fabrics manufactured and exported by him.
3. Difficulty, if any, in the implementation of this circular should be brought to the notice of the Board.

Yours Faithfully,

Rahil Gupta
Technical Officer (TRU)