SME Chatroom: 'IGST refund rules for exports by EOUs need to be reviewed'

Business Standard brings you the fortnightly Q&A on SMEs

Q. We are an EOU, exporting our goods through Chennai Customs. We pay IGST on all our imported inputs and do not claim GST refund on any goods procured from domestic sources. When we export on payment of IGST, the Customs are refusing the refund on the ground that we have imported our capital goods without IGST payment. Is their stand correct?

Rule 96(10)(b) of the CGST Rules, 2017 says that the person claiming IGST refund should not have availed the benefit of notification 78/2017-Cus dated October 13, 2017, that covers imports of capital goods and inputs by the EOU without IGST payment, and also the benefit of notification 79/2017-Cus dated October 13, 2017, that covers imports of inputs under advance authorisation and imports of capital goods under EPCG authorisations by DTA units without IGST payment. However, the said Rule 96(10)(b) has an exception, in the sense that the refund is not to be denied where the person claiming refund has imported capital goods without IGST payment under the EPCG scheme.

A similar dispensation should have been made available to the EOUs. I think it is a drafting flaw that the exception does not cover import of capital goods without IGST payment under the notification for the EOU scheme also. In my opinion, the Chennai Customs are reading the provisions strictly, taking undue advantage of the flawed wording of Rule 96(10)(b) of the CGST Rules, 2017, and seeking to deny refund. You should take up the matter with the CBIC through your Export Promotion Council and get Rule 96(10)(b) suitably amended. Since that may take time, a quick clarification from CBIC will help avoid unnecessary litigation.  

Q. Our overseas buyer is proposing 20 per cent advance payment and the balance against shipping documents, but he wants a third party to pay the 80 per cent balance. Is this allowed?

Para A3(v) of the RBI Master Direction no.16/2015-16 dated January 1, 2016 (as amended), on Export of Goods and Services deals with payment from a third party against exports. It does not deal with a situation where part payment is to be received from a third party. In my opinion, that does not mean such an arrangement is not allowed, so long as the other conditions mentioned in Para A3(v) are fulfilled.

Q. Are we required to submit copies of our shipping bills or bills of export to banks after every shipment?

No. In case of exports through non-EDI Customs stations, one copy of the shipping bill marked “Exchange Control (EC) Copy”, duly endorsed by the customs, must be submitted to the AD bank within 21 days from the date of export.  However, where the shipments are made through EDI Customs stations, the EC copy of the shipping bill is not printed in terms of CBEC’s Circular No. 55/2016-Customs dated November 23, 2016, and data of the shipping bill is integrated with EDPMS, there is no requirement of submission of the EC copy of the shipping bill with the AD bank.

Business Standard invites readers’ SME queries related to GST, export and import matters. You can write to us at smechat@bsmail.in