Top Stories Understanding Notice on Applicability of ITC in Export of Items Exempted from GST [Find Draft Format Here] This Article delves into the complexities of availment of Input Tax Credit on the export of Exempt and Zero-Rated Supplies. Read on to know more By Avinash Kurungot – On October 11, 2024 11:27 am – 2 mins read India, being a leading exporter of numerous goods and services has numerous regulatory components in place as part of the Goods and Services Tax ( GST ) regime to govern exports. One of the primary elements to be carefully scrutinized is the availability of Input Tax Credit ( ITC ) while exporting goods that are generally exempt from GST. The concept of ITC comes as a boon for businesses, permitting them to claim credit for the taxes paid on purchases, reducing their overall tax burden. The GST framework is straightforward for the most part, but businesses often run into a hitch while dealing with items exempted from the payment of GST. Complete Draft Replies of GST ITC Related Notices,

Click Here Exempt Supplies and Zero-Rated Supplies under the GST Regime: “Exempt Supplies”, as the name suggests refers to goods or services that attract a nil rate of tax or are wholly exempted under the GST regime; exempt supplies are defined under Section 2(47) of the Central Goods and Services Tax ( CGST ) Act, 2017. Similarly, zero-rated supplies, as per Section 16(1) of the CGST Act, 2017 include exports and supplies made to Special Economic Zones ( SEZs ). Unlike exempt supplies, Zero-Rated supplies permit the export business to claim refund of accumulated ITC. Legal Provisions pertaining to Export of Exempted Items: Section 2(5) of the CGST Act, 2017 defines “export of goods” as taking goods out of India to a place outside of India; any such export is considered a zero-rated supply under GST law. “Zero-rated supply” as defined by Section 16 of the IGST Act, 2017 encompasses export of goods or services or both or supply of goods or services or both to a Special Economic Zone developer or a Special Economic Zone unit.

Complete Draft Replies of GST ITC Related Notices, Click Here However, it is to be noted that availability of ITC on inputs used in the export of exempted goods is allowed, even though the goods are exempted from tax domestically as per Section 16(2). Circular No. 45/19/2018-GST dated 30.05.2018 issued by the Ministry of Finance also confirms the applicability of ITC on the export of exempted goods.The provision has been clarified through the Circular to accelerate export and  makes exporters eligible for refund of unutilized ITC. Furthermore, it also negates the requirement of bonds or Letter of Undertaking ( LUTs ) in such cases.

Reversal of ITC is only applicable when businesses have both taxable and tax-exempt domestic supplies, in a situation where the concerned business deals exclusively in exports, there arises no requirement for the reversal of ITC. Thus it can be understood that Exporters of Exempted goods in India can benefit from the multiple statutory provisions that permit them to claim refunds of accumulated ITC without reversal, provided that the goods can be classified as zero-rated supplies. It is quite important for business owners to be aware of their statutory rights and responsibilities, and ensure that they make use of all the legal provisions at their disposal to effectively run their business. Complete Draft Replies of GST ITC Related Notices, Click Here Draft Reply: By clicking the blue button below, subscribers can access a draft format of the reply to GST Show Cause Notice issued against the availment of accumulated unutilized ITC in case of Export of Exempted Items