Circular No. 18/18 /2017 – GST: Refund of unutilized input tax credit of GST paid on inputs in respect of exporters of fabrics.

Important Keyword: F. No. 354/320/2017-TRU-Pt.1, Circular No. 18/18 /2017-GST, section 54(3) CGST Act 2017, Notification No. 5/2017-Central Tax.

F. No. 354/320/2017-TRU-Pt.1
Government of India
Ministry of Finance
Department of Revenue
Tax Research Unit
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North Block, New Delhi
16 November 2017

Circular No. 18/18 /2017 – GST

To,

The Principal Chief Commissioners/Chief Commissioners/ Principal Commissioners/ Commissioner of Central Tax (All) /
The Principal Director Generals/ Director Generals (All)

Madam/Sir,

Subject: Clarification on refund of unutilized input tax credit of GST paid on inputs in respect of exporters of fabrics – regarding.

Doubts have been raised regarding the restrictions of refund of unutilized input tax credit of GST paid on inputs to manufacturer exporters of fabrics [falling under chapters 50 to 55 and 60 and headings 5608, 5801, 5806] under GST.

2.1 The matter has been examined. In this context, subsection 3 of section 54 of the CGST Act, 2017 provides as under:

(3) Subject to the provisions of sub-section (10), a registered person may claim refund of any unutilized input tax credit at the end of any tax period: Provided that no refund of unutilized input tax credit shall be allowed in cases other than—
(i) zero rated supplies made without payment of tax;
(ii) where the credit has accumulated on account of rate of tax on inputs being higher than the rate of tax on output supplies (other than nil rated or fully exempt supplies), except supplies of goods or services or both as may be notified by the Government on the recommendations of the Council.

2.2 Based on the recommendations of the Goods and Services Tax Council, Notification No. 5/2017-Central Tax (Rate) dated 28.06.2017 [as amended from time to time] has been issued under clause (ii) of the proviso to sub-section (3) of section 54 of the Central Goods and Services Tax Act, 2017 restricting refund of unutilized input tax credit of Goods and Services Tax paid on inputs in respect of certain specified goods, including input tax credit of Goods and Services Tax paid on inputs.

2.3. However, the aforesaid notification having been issued under clause (ii) of the proviso to sub-section (3) of section 54 of the Central Goods and Services Tax Act, 2017, restriction on refund of unutilised input tax credit of GST paid on inputs will not be applicable to zero rated supplies, that is (a) exports of goods or services or both; or (b) supply of goods or services or both to a Special Economic Zone developer or 4 Special Economic Zone unit.

2.4 Accordingly, as regards export of fabrics it is clarified that, subject to the provisions of sub-section (10) of the section 54 of the Central Goods and Services Tax Act, 2017, a manufacturer of such fabrics will be eligible for refund of unutilized input tax credit of Goods and Services Tax paid on inputs [other than the input tax credit of Goods and Services Tax paid on capital goods] in respect of fabrics manufactured and exported by him.

3. Difficulty, if any, in the implementation of this circular should be brought to the notice of the Board.

Yours faithfully

Rahil Gupta
Technical Officer (TRU)

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