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GST: Submission requesting for relaxation under Rule 96A of CGST Rules for realisation of exports proceeds

As per Rule 96A of Central Goods and Services Tax Rules, 2017 (CGST Rules), every exporter exporting goods or services without payment of integrated tax is required to furnish a Letter of Undertaking (LUT). The purpose of furnishing LUT is to bind the exporter to pay GST along with the interest, in case he fails to realise payment within 12 months from date of invoice or within such period as extended by the Commissioner.

It may be noted that one of the conditions prescribed under S. 2(6) of Integrated Goods and Services Tax Act, 2017 (IGST Act) to qualify as export of services is that the payment should be received by the supplier in convertible foreign exchange, irrespective of date of receipt of consideration.

As per Foreign Exchange Management Act, 1999 read with Master Direction on Export of Goods and Services (RBI master direction), a service exporter is required to realise export proceeds within prescribed timelines. In case the exporter is not able to realise the proceeds within the said period, then exporter can approach Authorised Dealer (AD) bank for extension in period of realisation.

Rule 96A(1)(b) of CGST Rules separately requires a company to seek extension from the Commissioner in case exports proceeds are not realised within the prescribed time period, even where permission for extension is sought from the RBI. This leads to duplication of efforts and adds to compliance burden for the companies.

Further, there are cases where companies are asked to make payment of GST and interest immediately on completion of 12 months from invoice date, if export collections are not realised. In such cases, the export status is restored as soon as foreign currency is realised. Accordingly, tax paid on export of services becomes eligible for refund to the taxpayer. 

However, GST provisions do not provide any specific category under which refund can be claimed. Although taxpayers opt to file the refund claim in ‘Any other’ category, there have been instances where tax authorities have disputed the refund claim in absence of specific provisions.

In this regard, we have made a submission to GST officials on October 25, 2021 to recommend the following:

  • Extension received from RBI/ AD bank for realisation of export proceeds should also be deemed to be received under Rule 96A of CGST rules. Similar type provision existed under Rule 6(8) of the CENVAT Credit Rules, 2004.
  • Specific provision/ clarification to be issued to allow exporter refund of GST and interest paid once the export proceeds are realised after the specified due date. In other words, exporter should be refunded GST paid along with interest in cases where export proceeds have been received after expiry of 12 months from the date of export as mentioned in Rule 96A of CGST Rules.

A positive response on our request will provide clarity and will facilitate ease of doing business for exporters in India.

We will keep you posted on further developments in this regard. 

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