Registered individuals under the Central Goods and Services Tax Act, 2017 (CGST Act) can export goods and services by either paying the Integrated Goods and Services Tax (IGST) or using a Bond or Letter of Undertaking (LUT) without paying it. If IGST is paid or if there is unutilized input tax credit (ITC), taxpayers can claim a refund as per Section 54 of the CGST Act. However, Rule 96(10), amended in October 2018, complicated the refund process by barring exporters who received supplies under certain notifications from claiming IGST refunds, leading to recovery actions by tax authorities. To address these issues, the GST Council met on September 9, 2024, and made two key recommendations.
Recent developments on Rules 96(10), 89(4A) & (4B) of the CGST Rules in India
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Author: Ivana Picajkić
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Fiscal subject related
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Content accuracy validation date:
14.11.2024
Content accuracy validation time:
08:24h
Registered individuals under the Central Goods and Services Tax Act, 2017 (CGST Act) can export goods and services either by paying the Integrated Goods and Services Tax (IGST) or without paying it using a Bond or Letter of Undertaking (LUT). If IGST is paid on exports, or if there is unutilized input tax credit (ITC) from exports made under a Bond or LUT, taxpayers can claim a refund according to Section 54 of the CGST Act and related rules.
However, Rule 96(10) of the CGST Rules, which was amended in October 2018, complicated matters. It stated that exporters who had received supplies benefiting from certain specified notifications could not claim refunds on IGST paid for exported goods. This rule effectively barred many exporters from receiving refunds, similar to an e-commerce site denying refunds for discounted purchases.
As a result, many exporters faced challenges when trying to claim IGST refunds, leading to recovery actions by tax authorities for alleged violations of Rule 96(10).
To address these issues, the GST Council met on September 9, 2024, and made two key recommendations:
- For Past Cases: Exporters can regulate their situation by paying back the IGST and compensation cess (tax) they received under specified notifications, along with interest. This allows them to claim their IGST refunds without being penalized for past violations,
- For Future Cases: The Council recommended removing Rule 96(10) and related rules (89(4A) and (4B)) entirely, simplifying the refund process for exporters.
Following these recommendations, the Ministry of Finance issued a notice on September 10, 2024, confirming that exporters could regularize their claims by paying the necessary amounts. On October 8, 2024, the government officially removed Rules 96(10), 89(4A), and (4B).
These changes are seen as a significant relief for Indian exporters, streamlining the refund process and promoting easier business operations and exports.
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