Denial of Integrated GST refund to Advance Authorization License Holders

What is Advance Authorization Scheme?

•  Advance Authorization is issued to allow duty-free import of input, which is physically incorporated in export product (making normal allowance for wastage). In addition, fuel, oil, the catalyst which is consumed/utilized in the process of production of export product, may also be allowed.
•  Advance Authorization is issued for inputs in relation to the resultant product, on the following basis:

(i)As per Standard Input Output Norms (SION) notified (available in Hand Book of Procedures); OR

(ii) On the basis of self-declaration as per paragraph 4.07 of Handbook of Procedures. OR

(iii) Applicant-specific prior fixation of the norm by the Norms Committee. OR

(iv) On the basis of Self Ratification Scheme in terms of Para 4.07A of Foreign Trade Policy. (APPENDIX -4K)

Eligibility for Advance Authorization

The Advance Authorization Scheme is available to either a manufacturer exporter directly or a merchant exporter tied with a supporting manufacturer. The authorization is available for the following:

1. Physical exports

2. Intermediate supply

3. Supplies made to specified categories of deemed exports

4. Supply of ‘stores’ on board of a foreign going vessel/aircraft provided that there are specific Standard Input Output Norms (SION) in respect of items supplied.

Duties exempt under the Advance Authorization Scheme

• Proviso to Sec. 5(1) of the IGST Act, 2017 provides that the integrated tax on goods imported into India shall be levied and collected in accordance with the provisions of section 3 of the Customs Tariff Act, 1975. Accordingly, the IGST on the goods imported into India is leviable u/s 3(7) of the Customs Tariff Act, 1975.
• Now Notification No. 18/2015 – Customs dt. 01.04.2015 as amended by Notification No. 79/2017 dt. 13.10.2017 grants exemption w.e.f. 13.10.2017 from the payment of IGST on goods imported into India against a valid Advance Authorization issued by the Regional Authority in terms of paragraph 4.03 of the FTP.
• Said exemption as per the current status is available till 31.03.2021.

Section 16 of IGST Act

• Any supply of goods or services for export of goods or services or both means Zero Rated Supply.

• As per Section 16(3) of the IGST Act, a registered person is eligible to take refund under either of the following options:

• Under Bond or LUT without payment of integrated tax and claim refund of input tax credit or

• Supply Goods on payment of integrated tax and claim refund of tax paid on goods or services or both in terms of section 54 of CGST Act.

Related Topic:
Important issues in GST refund resolved

Amended Section 16 of IGST Act

• Section 16 of the IGST Act is sought to be amended so as to restrict the zero-rated supply on payment of integrated
tax only to a notified class of taxpayers or notified supplies of goods or services and link the foreign exchange remittance in case of export of goods with the refund.

Sec. 16(3) provides two routes for claiming the refund.

• Now this has been proposed that the option of making the supply on payment of integrated tax shall only be granted to a notified class of taxpayers or notified supplies of goods or services.

• Now, wait for the amendment related to notified categories.

• Otherwise barring the situations covered under Rule 96(10) (Maybe restriction for Advance Authorization Holders), the exporters should be permitted to claim refunds under the with payment route.

• To recover the refunds in the context of export of goods if foreign exchange remittance is not received within thirty days after the expiry of the time limit prescribed under the Foreign Exchange Management Act, 1999 ports.

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