CBIC has clarified that where exporters have opted/ preferred to take drawback at higher rate in place of IGST refund for the period 01/07/2017 to 30/09/2017, there is no justification in re-opening the issue at this stage and the exporters will not be allowed to avail IGST refund after initially claiming the benefit of higher drawback.
CBIC Customs Circular 37/2018 dt. 09/10/2018: CBIC clarifies that IGST refund not Allowed to Exporters after claiming benefit of higher duty drawback rate
Sub: Cases where IGST refunds have not been granted due to claiming higher rate of drawback OR where higher rate and lower rate were identical
1. Numerous representations have been received from exporters/ export associations, regarding cases where IGST refunds have not been granted because higher rate of drawback has been claimed or where higher rate and lower rate were identical.
2 The issue has been examined extensively in this Ministry. The legal provisions related to Drawback claims are as under:
2.1 Notes and condition (11) of Notification No. 131/2016 Customs (NT) dated 31/10/2016 (as amended by Notification No. 59/2017 Customs (NT) dated 29/06/2017), under which All Industry Rates of Drawback had been notified and which were applicable for availing composite rates during period in question (i.e. 01/07/2017 to 30/09/2017), prescribed that ‘The rates and caps of drawback specified in columns (4) and (5) of the said Schedule shall not be applicable to export of a commodity or product if such commodity or product is:
(d) exported claiming refund of the integrated goods and services tax paid on such exports.
2.2 Notes and Condition (12A) of Notification No. 131/2016 Customs (NT) dated 31/10/2016 (as amended by Notification No. 59/2017 Customs (NT) dated 29/06/2017 and 73/2017 Customs (NT) dated 26/07/2017 prescribed that ‘The rates and caps of drawback specified in columns (4) and (5 ) of the said Schedule shall be applicable to export of a commodity or product if the exporter satisfies the following conditions, namely:
(ii) If the goods are exported on payment of integrated goods and services tax, the exporter shall declare that no refund of integrated goods and services tax paid on export product shall be claimed;
2.3 In terms of Rules 12 and 13 of the Customs, Central Excise Duties and Service Tax Drawback Rules, 1995, the shipping bill itself is treated as claim for drawback in terms of the declarations made on the shipping bill.
2.4 The declarations required in terms of above Notes and Conditions and provisions of the Drawback Rules are made electronically in the EDI System. When composite drawback rate was claimed (by declaring suffix A or C with Drawback serial number), exporter was required to tick DBK002 and DBK003 declarations in the shipping bills. In fact, for period 01/07/2017 to 26/07/2017, a manual declaration was also required to be given as the changes made on 26/07/2017 were made applicable for exports made from 01/07/2017 onwards.
2.5 By declaring drawback serial number suffixed with A or C and by making above stated declarations, the exporters consciously relinquished their IGST/ ITC claims.
3. It has been noted that exporters had availed the option to take drawback at higher rate in place of IGST refund out of their own volition. Considering the fact that exporters have made aforesaid declaration while claiming the higher rate of drawback, it has been decided that it would not be justified allowing exporters to avail IGST refund after initially claiming the benefit of higher drawback. There is no justification for re-opening the issue at this stage.
This is wrong stand taken by CBIC. Because in the initial period of operation of GST, exporters were not aware that if they claimed 1% Duty Drawback then they would not be allowed refund of IGST on Inputs. Rate of Duty Drawback available was 0.15% if they wanted refund of IGST or Inputs GST. Now exporters have paid GST of at least 5% on inputs or would have charged 5% IGST. No exporter would prefer to take benefit of 0.85% Duty Drawback against refund of IGST/ Input GST which was at least 5%. But they were not knowing it. Because relevant circulars were not brought to their notice either by their GST advisers or Shipping Agents. Actually an opportunity should be given to pay back higher drawback amount with interest to avail refund of GST.
Legally the CBIC clarification is right, but still ways are open for claiming the drawback. The exporter first get the Shipping Bill amended and revert back the claim if any taken or make the shipping Bill free shipping Bill by converting the same. After conversion of Shipping Bills they will be eligible to claim refund of IGST paid.
It is unfair to claim ignorance when the CBIC has published the notification, blaming the GST advisor and shipping agents. It’s like want the cake and eat it too. You cannot decide only to take from the Govt. and not pay.
Dear Sir, Drawback amount is 1.8 percent in column A and B both for granite. We claimed drawback of 88,000 rupees and GST stuck is more than 15 lac. What ignorance you are talking about, you must accept that GST was applied in hurry mode, no one was prepared for it. Even govt official were also not prepared/ ready for this automatic process.
If assessee has claimed drawback @ 1.5% of FOB value on pharma products (Chapter 3004) and also claimed refund of IGST paid on exports during the FY 2019-20, is it eligible to avail both ??
There was no self declaration given to ports by the exporters on this. And even it was not asked as the people approving the shipping were also not aware of this. When CBIC own people were not aware of this rule then how they can expect exporters and their CHAs to know this. This rule came into affect from 1.7.2017 and it was published on 29.06.2017. Why so short notice. How each and everyone will be aware of this?
this is totally unacceptable, government is not there to collect taxes only, they have to help us out.
It is a totally wrong practice. The draw back rate has been made 2% in our product w.e.f. 01.10.2017. The same was required to be done w.e.f. 01.07.2017 and during the intervening period the rate of drawback was same for lower rate and higher rate i.e. 2%. What will happen for the duty that has been paid by the exporter. If they cannot grant refund then in such case the exporter should be allowed re-credit in the Electronic Credit ledger.
Totally wrong practice done by govt and CBIC. As per the regular practice of CHA, they have filled shipping bill with higher rate of drawback. in our plastic product, DBK rate is 1.8% (Rs. 29000) and we have paid IGST 18% (357000) as we wanted to claim refund after export procedure done. still we have not received due to higher dbk rate selection.
Pre GST, exporters were enjoying all benefits, exemption from VAT (against H Form) and Customs duty draw back of 1%. Once GST regime started, most of small exporters were not aware of the anomalies in the GST rules. Now small exporters are struck with working capital funds blocked by ITC in GST.
We should get the options to refund the drawback amount along with interest to the government and to claim refund of the IGST. Otherwise, for just 1.5% to 2% drawback amount, we will loose the 18% IGST.
Any resolution of the issue? There are many such victims who’ve got peanuts like duty drawback and got substantial amount of IGST paid and stuck!