In 50th GST council meeting recommendation was made for, provisions of section 123 of Finance Act, 2021, amending section 16 of IGST Act, to be notified with effect from 01.10.2023 and notification to be issued under section 16(4)of IGST Act. 2017 to provide for restriction of IGST refund route in respect of exports of tobacco, pan masala & other similar items as well as mentha oil.
CBIC Amendment in Section 16 of IGST Act 2017 Effective from October 1, 2023
- The Central Board of Indirect Taxes and Customs (CBIC) has issued a notification (No. 27/2023–Central Tax) dated July 31, 2023.
- This notification is in response to Section 123 of the Finance Act, 2021, which introduces amendments to Section 16 of the CGST Act, 2017.
Below is notification No.27/2023
Section 16 of IGST Act: Zero Rated Supply after Amendment
(1) “zero rated supply” means any of the following supplies of goods or services or both, namely: –
(a) export of goods or services or both; or
(b) supply of goods or services or both 1 [for authorised operations] to a Special Economic Zone developer or a Special Economic Zone unit.
(2) Subject to the provisions of sub-section (5) of section 17 of the Central Goods and Services Tax Act, credit of input tax may be availed for making zero-rated supplies, notwithstanding that such supply may be an exempt supply.
2[(3) A registered person making zero rated supply shall be eligible to claim refund of unutilised input tax credit on supply of goods or services or both, without payment of integrated tax, under bond or Letter of Undertaking, in accordance with the provisions of section 54 of the Central Goods and Services Tax Act or the rules made thereunder, subject to such conditions, safeguards and procedure as may be prescribed:
Provided that the registered person making zero rated supply of goods shall, in case of non- realisation of sale proceeds, be liable to deposit the refund so received under this sub-section along with the applicable interest under section 50 of the Central Goods and Services Tax Act within thirty days after the expiry of the time limit prescribed under the Foreign Exchange Management Act, 1999 (42 of 1999.) for receipt of foreign exchange remittances, in such manner as may be prescribed.
(4) The Government may, on the recommendation of the Council, and subject to such conditions, safeguards and procedures, by notification, specify-
(i) a class of persons who may make zero rated supply on payment of integrated tax and claim refund of the tax so paid;
(ii) a class of goods or services which may be exported on payment of integrated tax and the supplier of such goods or services may claim the refund of tax so paid.]
Key Changes:Amendment of section 16:
In the Integrated Goods and Services Tax Act, 2017 (13 of 2017), in section 16,––
- Sub-section (1), Clause (b):
- after the words “supply of goods or services or both”, The words “for authorised operations” will be added to this clause.
Change in Definition of Zero Rated Supply of SEZ Units and SEZ Developers a condition added which is – To come under definition of zero rated supply, supply of goods or services must be for Authorised operations only
for sub-section (3), the following sub-sections shall be substituted, namely:––
“(3) A registered person making zero rated supply shall be eligible to claim refund of unutilised input tax credit on supply of goods or services or both, without payment of integrated tax, under bond or Letter of Undertaking, in accordance with the provisions of section 54 of the Central Goods and Services Tax Act or the rules made thereunder, subject to such conditions, safeguards and procedure as may be prescribed:
Provided that the registered person making zero rated supply of goods shall, in case of non-realisation of sale proceeds, be liable to deposit the refund so received under this sub-section along with the applicable interest under section 50 of the Central Goods and Services Tax Act within thirty days after the expiry of the time limit prescribed under the Foreign Exchange Management Act, 1999 (42 of 1999) for receipt of foreign exchange remittances, in such manner as may be prescribed.
- Earlier Refund in case of Export is allowed in both situations – Export with payment of Tax and Export without payment of tax, but now from 1 October 2023 onwards refund is allowed in case of export without payment of tax only under section 16(3)
- In case of non-realization of sale proceeds, the registered person making zero-rated supply of goods is liable to deposit the refund received, along with applicable interest u/s 50 of the Central Goods and Services Tax Act. This deposit must occur within 30 days after the expiry of the time limit prescribed under the Foreign Exchange Management Act, 1999, for receipt of foreign exchange remittances.
Section 16(4) : The Government may, on the recommendation of the Council, and subject to such conditions, safeguards and procedures, by notification, specify––
(i) a class of persons who may make zero rated supply on payment of integrated tax and claim refund of the tax so paid;
(ii) a class of goods or services which may be exported on payment of integrated tax and the supplier of such goods or services may claim the refund of tax so paid.”
Refund of export with payment of Tax can be claimed if government notify, and good news is that there is already a notification is there for this 01/2023 Dated 31 July 2023 of IGST Act in which all goods and services are notified under this except Below:
the Central Government on the recommendations of the Council, hereby notifies all goods or services (except the goods specified in column (3) of the TABLE below) as the class of goods or services which may be exported on payment of integrated tax and on which the supplier of such goodsor services may claim the refund of tax so paid:
Effective Date:
- These amendments will be effective from October 1, 2023, as per the notification issued by the Central Government.
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