Refund of IGST paid on goods exported on consignment basis

Paradox of Refund of IGST paid on goods exported on consignment basis

In case of export on consignment basis, it has been clarified by Circular No. 108/27/2019-GST dated 18-07-2019 read with Customs Notification 45/2017 dated 30-06-2017 that:

i. Goods are removed on the basis of delivery challan and not on tax invoice

ii. LUT is not required because no supply is involved

iii. Shipping bill is issued at the time of export and

iv. Confirmed sale is treated as zero rated supply

v. If goods are not brought back in 6 months, goods are deemed to have been sold and IGST is required to be paid

vi. Unsold goods can be re-imported with in 6 months without payment of IGST on imports

vii. Refund can not be claimed on mere sending of goods outside India

viii. Refund can be claimed for unutilized ITC only and refund can not be claimed for IGST paid on exports

ix. Refund can be claimed only against zero rated supply, on issue of tax invoice

However in Venus Jewel [2024] 161 taxmann.com 313 (Bombay) decided on 8-04-2024:

a. Goods (Diamonds) were exported outside India on consignment basis on payment of IGST of 5.26 crores against shipping bills and unsold goods were re-imported from July 2017 to Dec 2018

b. Due to mismatch in shipping bill details and invoices, IGST refund was not processed.

c. Even refund for lower of two value was not granted on account of mismatch between GST portal and Customs data.

d. Further refund was also stuck because shipping bill date preceeded the date of invoice which is normal feature for goods sent on consignment, because confirmed sale takes place later than export on consignment basis.

e. The assesse was advised by revenue to apply for refund u/s 54 on 3-02-2022 but when it was applied, refund was rejected as time barred

Held by High Court that :

1. The impugned refund is not covered by Circular dated 18-07-2019

2. Reason of non-compatibility with the electronic portals as prevalent under the GST regime, cannot be a ground for the petitioner being denied the refund. [para 47]

3. It also cannot be expected that merely because the electronic portals did not make appropriate provisions, the entitlement of the petitioner to receive the refund being an entitlement under the IGST Act, could be defeated.[Para 48]

4. Any internal or departmental conflicts cannot cause prejudice to the assessee. Such approach on the part of the authorities is certainly not conducive to international trade and commerce. Considering the clear position in law in the present case, the petitioner was entitled to the refund of the IGST amounts [Para 53]

5. In these circumstances, we are also of the opinion that in cases where exports involving payment of IGST are concerned, in which refund applications are made, a special mechanism is required to be devised so that both electronic portals are compatible, and refund of duties, which could not be retained, are processed expeditiously and the assessee do not suffer on account of ineffective systems being followed by the CGST as also the Customs Authorities.

6. Although some circulars are issued to clarify the position, however, no effective steps are being taken to appreciate the core issues as involved in each of such cases and refunds are not being processed. The present case is a clear example of such confusion. Unless the loose ends on such issues are tied up and a robust mechanism is immediately created and implemented, trade and commerce would continue to suffer.[Para 54]

7. IGST was not payable on such goods and therefore, legitimately it was required to be refunded, it was a patent error on the part of the respondents to drag the petitioner into the proceedings of refund application under Section 54 of the CGST Act which itself in the present circumstances was not applicable. [Para 55]

8. The assessee was also held to be entitled to Interest on refund within a period of three weeks from today along with simple interest at the rate of 9% p.a., failing which the petitioner shall be entitled for realization of further interest at the rate of 9% till its actual payment.

Regards

CA Vinamar Gupta