The CGST rules: Helpful amendments, court decisions for exporters

CBIC had issued its circular prescribing the procedures for the payment of IGST and compensation cess (CC) along with interest by the importers who had violated the pre-import condition

Exporters have good news. The government has issued necessary notification omitting Rule 89(4A), Rule 89(4B), and Rule 96(10) from the Central Goods and Services Tax Rules, 2017 (CGST Rules). Two useful decisions have also come in from the courts. 

Rules 89(4A) and 89(4B) of the CGST Rules made it difficult to claim refund of unutilised input tax credit (ITC) of goods and services tax (GST) paid on inputs and input services in situations when any of the other inputs were procured without any GST payment under certain schemes of the Foreign Trade Policy, such as Advance Authorisation Scheme or Export Oriented Units scheme or where refund of the GST paid on other inputs procured under Deemed Exports Scheme was claimed or where a merchant exporter had procured the export goods with 0.1 per cent GST payment. Rule 96(10) of the CGST Rules denied the facility of making payment of integrated goods and services tax (IGST) under a refund claim in similar situations. In its 54th meeting held on September 9, 2024, the GST Council had taken a decision to do away with these unnecessary restrictions. The government has now given effect to the GST Council decisions by carrying out necessary amendments to the CGST Rules 2017. This will help exporters liquidate the accumulated ITC balances as explained in my earlier article (Please see here: Kudos to CBIC for dropping difficult CGST Rules, reducing compliance burden).

Following the directions of the Supreme Court in the case of Cosmo Films Ltd. [2023 (5) Centax 286 (SC)] regarding pre-import conditions in advance authorisations, the Central Board of Indirect Taxes and Customs (CBIC) had issued its circular no. 16/2023-Cus, dated June 7, 2023, prescribing the procedures for the payment of IGST and compensation cess (CC) along with interest by the importers who had violated the pre-import condition. The demand for interest could be contested as pointed out in my column (Please see here: 'Interest demand in pre-import regularisation cases can be contested'). Now, the West Zone Customs, Excise and Service Tax Appellate Tribunal at Ahmedabad has held in the case of Chiripal Poly Films Ltd. [2024-VIL-876-CESTAT-AHM-CU] that no interest is payable in such situations because Section 3(12) of the Customs Tariff Act, 1975 does not provide for collection of interest in such matters.  Exporters must take note of this useful judgment and consider filing applications for refund of any interest they have already paid.

The Gujarat High Court, in the case of Cosmo Films Ltd. [ [2020] 120 taxmann.com 417/[2021] 83 GST 596/2020 (43) G.S.T.L. 577 (Guj.)] had wrongly held that the Rule 96(10) of the CGST Rules, 2017, as amended by notification 54/2018-CT dated October 9, 2018 will have retrospective effect from October 23, 2017. Based on this case law, the GST department had raised a number of demands. Responding to several special civil applications from the exporters to amend the order dated October 20, 2020 in the above referred judgment, the Gujarat High Court has now passed rectification order IA dated September 19, 2024 [(2024) 22 Centax 553 (Guj.)] making it clear that the Rule 96(10) of the CGST Rules, 2017 as amended by the notification no.54/2018-CT will have only prospective effect from October 9, 2018. It is a great relief for exporters, who had received unreasonable demands from the GST department.  

Exporters should take note of the helpful court decisions and useful amendments to the CGST Rules by the government. 

Email : tncrajagopalan@gmail.com