The Central Board of Indirect Taxes and Customs (CBIC) has announced that the exports of goods having a NIL rate of export duty will be eligible for a refund of unutilized input tax credit (ITC). This move is regarded to put an end to litigation while also bringing relief to exporters.

This clarification is a follow-up to the decision taken by the GST Council on September 17 which is in two parts, the first part states which exported goods will have restrictions for availing of refund of accumulated ITC and which will not. Goods that are actually subjected to export duty (on which some export duty has to be paid at the time of export) will have restrictions whereas goods that are not subject to any export duty and in respect of which either NIL rate is specified or are fully exempted from payment of export duty will not be covered by the restriction for unused ITC refund. This clarification has come at a time when Odisha High Court has stayed the show cause notice denying the refund on the export of iron ore chargeable to NIL rate of duty. GST provisions state that the refund of unutilized input tax credits will not be available where the goods exported out of India are chargeable to export duty. In the said matter, the petitioner is exporting iron ore which is chargeable to NIL rate of duty, for which the revenue contends that there is contrast amid NIL rate of duty and exempted from export duty. The Tax Department, in its notice, stated that such goods are to be treated as “chargeable to export duty” and hence, denied the refund of unutilized ITC. The petitioner claimed that the impugned notices were without jurisdiction and the understanding that where the export duty payable is NIL, ITC should be denied was contrary to the legal position explained by the Supreme Court in Associated Cements Companies Ltd vs. Commissioner of Customs. The matter is likely to be heard in the context of the latest clarification.

According to Sandeep Sehgal, Director-Tax and Regulatory, AKM Global, the GST department ought to take a practical approach. Refund of ITC in case of export of items having NIL rate of export duty should be acknowledged as the existing circular allows the same on items that are exempt from export duty. He told that this will put to rest a lot of litigation and will benefit exporters of such goods.