'Merchant exporters procuring goods at 0.1% GST must export under LUT'

A Bombay HC Bench held that well-established foreign brands with a base in India and providing services out of India aren't eligible for SFIS benefit

We are merchant exporters. We procure goods from manufacturers on payment 0.1 per cent tax. Can we export the goods on payment of IGST and claim refund of the same?

No. You have to export under letter of undertaking without payment of IGST. Of course, you can take credit of the 0.1 per cent and claim refund of the same, as well as the input tax credit availed in respect of other inputs or input services to the extent used in making such export of goods. Please see notification 75/2017-Central Tax dated December 29, 2017 that amends the relevant CGST Rules. 

We have a query regarding regularisation of our export transaction in EDPMS system. We are in the power sector with focus on EPC solutions in transmission & distribution in West Africa. We made a few supplies under Exim Bank’s Line of Credit to Ghana Electricity Board in 2014. On completion of shipment, post-shipment documents were processed through Exim Bank and Exim Bank has issued BRC. These were linked to DGFT and further, we have claimed Chapter-3 benefits accordingly. Now, we have come to know from our bankers that the said transactions are still in open mode in their EDPMS system, as Exim Bank is not an Authorised Dealer to issue BRC. What can we do in this regard, as the banker wants to close the transactions?

Apparently, while filing the shipping bill, you have mentioned the name of your bank, instead of Exim Bank, as the authorised dealer through whom foreign exchange will be realised. Thereafter, you have presented the documents to Exim Bank, who have negotiated the documents and given you the BRC. Your bank is nowhere in the picture in the transaction but for your mentioning their name as the bank through whom foreign exchange will be realised. Now, what you can do is ask your bank to write to Exim Bank, and on the basis of their communication, regularise the transaction.  

The DGFT has issued notices to service providers with foreign brands to refund export benefits of ‘Served from India Scheme (SFIS)’ from FY 2009-10 onwards. We have received one such Notice. We request you to guide us how to tackle the situation now and to proceed further to safeguard our interest.

In the case of Yum Restaurants (I) Pvt Ltd [2015 (320) ELT 781 (Del)], a Single Bench of the Delhi High Court held that Indian subsidiaries of foreign entities are eligible for SFIS. However, in the case of Naman Hotels Pvt Ltd [2015 (326) ELT 513(Bom), a Division Bench of the Bombay High Court held that well established foreign brands having a base in India and providing services out of India are not eligible for SFIS benefit. This judgment took into consideration the Delhi High Court decision and differed from that decision. So, it has greater force. I doubt if the government will relent on its claim.  You can at best take your chances with the judiciary. The odds are against you.