Rule 89(4) Under CGST Rules Inapplicable On Refund Of Integrated Tax Paid On Zero-Rated Supply: Delhi High Court

The Delhi High Court has held that Rule 89(4) of the Central Goods and Services Tax Rules, 2017 is inapplicable to cases of refund of integrated tax paid on zero-rated supply.

The bench of Justice Vibhu Bakhru and Justice Amit Mahajan has noted that the opening sentence of Rule 89(4) makes it amply clear that it applies only in cases of zero-rated supply of goods or services without payment of tax under a bond or letter of undertaking.

Rule 89(4) of the Rules applies only to refunds with respect to exports made without payment of integrated tax. The petitioner pointed out that it was not seeking a refund of accumulated ITC but integrated tax as paid by him, and there was no dispute that the petitioner had discharged his liability for the payment of integrated tax.

The petitioner/assessee filed an application seeking a refund of an amount of Rs. 3,99,187, being the integrated tax paid on the export of services (zero-rated supply), in respect of the invoices raised in the month of October 2018. The petitioner received the Foreign Inward Remittance against the invoices in November 2018.

The adjudicating authority issued a deficiency memo calling upon the petitioner to furnish the Foreign Inward Remittance Certificate. The petitioner complied with it. The Adjudicating Authority issued a Show Cause Notice setting out certain queries with regard to the difference in the payment of tax.

The Adjudicating Authority also raised a query on the ground that the Input Tax Credit (ITC) shown in respect of four invoices was not reflected in the corresponding GSTR 2A filed by the petitioner.

The petitioner provided the necessary clarifications in a letter dated July 21, 2020. The adjudicating authority rejected the petitioner’s claim for a refund of integrated tax. The order passed by the Adjudicating Authority indicates that the Adjudicating Authority had verified that the petitioner had paid integrated tax amounting to Rs. 12,02,165 in respect of invoices raised in the month of October 2018. It was also reflected in GSTR 3B.

The Adjudicating Authority, while determining the quantum of the refund, applied the formula under Rule 89(4) of the Central Goods and Services Tax Rules, 2017, and rejected the petitioner’s claim by referring to Sub-clause (D) of Rule 89(4) of the Rules. The adjudicating authority was of the view that the turnover reflected for the month of October 2018 ought to be considered as the turnover for the month of November 2018 when the remittances were received.

The petitioner sought a refund of integrated tax in respect of zero-rated supplies made after the payment of integrated tax under the Integrated Goods and Services Tax Act, 2017.

The court noted that the appellate authority has mechanically rejected the petitioner's appeal on the ex facie erroneous assumption that the petitioner was seeking a refund of accumulated ITC.

The court set aside the order of the Adjudicating Authority rejecting the assessee's refund claim regarding zero-rated supply.

Case Title: Ohmi Industries Asia Private Limited Versus Assistant Commissioner

Citation: 2023 LiveLaw (Del) 518

Date: 29.03.2023

Counsel For Petitioner: Sparsh Bhargava

Counsel For Respondent: Anish Roy

Click Here To Read The Order