New confusion in GST's many rules

Merchant exporters which procure goods on payment of only 0.1% GST are now barred from exporting on payment of IGST and claiming refund of this

The The finance ministry’s new year gift is a notification reducing the Goods and Services Tax (GST) rate for manufacturers under the composition scheme, from two per cent to one per cent. The GST rate of five per cent for restaurants remains unchanged. Others under the composition scheme need to now pay GST at one per cent only on their taxable turnover. 

Merchant exporters which procure goods on payment of only 0.1 per cent GST are now barred from exporting on payment of Integrated GST (IGST) and claiming refund of this. They may, however, export under a letter of undertaking without payment of IGST and claim refund of unutilised credit of the 0.1 per cent, as well as any other input tax credit availed of in respect of other inputs or input services to the extent used in making such export of such goods. 

Similarly, advance authorised holders, export-oriented units and holders of export promotion capital goods authorisations, who procure goods locally under claim of refund of GST paid on deemed export, are also barred from exporting on payment of IGST and claiming refund on this. They can claim refund of input tax credit, availed of in respect of other inputs or input services used in making zero-rated supply of goods or services or both. The turnover of supplies for which such refunds are claimed need not enter into the calculation while claiming refund of unutilised credit on account of other zero-rated export made without IGST payment. 

These changes were made on December 29 through amendments in the Central GST Rules but made effective retrospectively, from October 23, 2017. Why these changes and how exporters should deal with export already made on payment of IGST hasn’t been made clear. Meanwhile, refunds to exporters have been held up on one pretext or the other.  

The Central Board of Excise and Customs (CBEC) has issued a circular clarifying the revised due dates for filing of returns, applicability and quantum of fees for filing returns after due dates and amendment/corrections/rectification of errors in the returns. It says the GSTR-3B (format) does not contain provisions for reporting of differential figures for past month(s). So, the said figures may be reported on a net basis, along with the values for the current month itself, in appropriate tables. The amount remaining for adjustment, if any, may be adjusted in the GSTR-3B of subsequent month(s). Where such adjustment is not feasible, refund may be claimed. Where adjustments have been made in GSTR-3B of multiple months, corresponding adjustments in GSTR-1 returns should also preferably be made in the corresponding months, says CBEC.

While all these confusing changes are being made, the government has added to the compliance burden on the trade by making e-way bills mandatory from February 1. How far this will help government revenues is a matter of doubt but there is widespread apprehension that unhindered movement of goods will be affected. The benefits of e-way bills are far from clear for those who have to comply with the new requirement.  

Whatever may be the government’s motivations, the impression it gives is of reacting to developments without thinking through the consequences. The widespread perception at the ground level is  of a clueless administration, muddling along.  

E-mail: tncrajagopalan@gmail.com