Transitional ITC not to be included for refund of ITC

Transitional ITC not to be included for refund of ITC 

GST provided exporters with two simple options. First was to pay IGST on export and then claim refund of tax paid. The other option was to make exports under LUT and then claim the refund of input tax credit relevant to that export.

The formula given for the calculation of refund as amended time to time is: 

Refund Amount = (Turnover of zero-rated supply of goods + Turnover of zero-rated supply of services) x Net ITC ÷Adjusted Total Turnover

Where, –

(A) “Refund amount” means the maximum refund that is admissible;

(B) “Net ITC” means input tax credit availed on inputs and input services during the relevant period other than the input tax credit availed for which refund is claimed under sub-rules (4A) or (4B) or both.

It is important to note that net ITC means the ITC availed during the period of refund. Many exporters were looking for the refund of accumulated opening ITC they bring into GST via transition. In a recent clarification it is made clear that refund of that opening ITC will not be available.

(C) “Turnover of zero-rated supply of goods” means the value of zero-rated supply of goods made during the relevant period without payment of tax under bond or letter of undertaking, other than the turnover of supplies in respect of which refund is claimed under sub-rules (4A) or (4B) or both

(D) “Turnover of zero-rated supply of services” means the value of zero-rated supply of services made without payment of tax under bond or letter of undertaking, calculated in the following manner, namely:- Zero-rated supply of services is the aggregate of the payments received during the relevant period for zero-rated supply of services and zero-rated supply of services where supply has been completed for which payment had been received in advance in any period prior to the relevant period reduced by advances received for zero-rated supply of services for which the supply of services has not been completed during the relevant period;

(E) “Adjusted Total turnover” means the turnover in a State or a Union territory, as defined under clause (112) of section 2, excluding –

(a) the value of exempt supplies other than zero-rated supplies and

(b) the turnover of supplies in respect of which refund is claimed under subrules (4A) or (4B) or both, if any, during the relevant period;

(F) “Relevant period” means the period for which the claim has been filed