Bombay HC Permits IGST Refund with Interest Rate of 7% on Zero-rated Supplies U/S 16(3)

The Bombay High Court has ruled that the IGST (Integrated Goods and Services Tax) paid on zero-rated supplies will be refunded to the petitioner along with 7% interest.

A two-member bench consisting of Justice G.S. Kulkarni and Justice Jitendra Jain have determined that the petitioner has the right to claim a refund for the IGST paid on the exports in question. It is evident that the petitioner is not attempting to exploit both the IGST refund and a higher duty drawback.

The department rejected the petitioner’s/assessee’s claim for Rs. 21,41,451 in relation to a zero-rated supply.

The petitioner has stated that a GST return is filed in Form No. GSTR-1 for the month of August 2017 contained unintentionally inaccurate information regarding the invoice number and port code for completed export transactions. Once the petitioner discovered this mistake, they promptly filed an amended return, correcting the details related to the tax invoice and rectifying the invoice number and Port Code.

Despite making these allegations, the petitioner claims that the Respondents did not provide any response. Subsequently, the petitioner filed a complaint with the Central Public Grievance Redress and Monitoring System (CPGRAMS) regarding the IGST refund.

The petitioner’s complaint was duly acknowledged, and they received an email stating that their complaint had been resolved. It was determined that the petitioner had utilized the aforementioned export invoice and associated Shipping Bill to avail themselves of a larger tax drawback on their exports.

The petitioner argues that the justifications for the rejection are inaccurate. On October 9, 2020, the petitioner lodged a new grievance, asserting that they had not actually obtained a higher amount of drawback against the Shipping Bill.

However, once again, the petitioner received an email notification from CPGRAMS stating that the issue had been resolved.

According to Section 16 of the IGST Act, the petitioner’s exports undeniably qualify as zero-rated supplies. The petitioner claims that, based on the clear legal provisions established by Section 54 of the CGST Act and Rule 96 of the CGST Rules, they are eligible for a refund.

The court observed that the petitioner’s case falls within the definition of zero-rated supply under Section 16(3) of the IGST Act. The refund of integrated tax paid on goods or services exported outside of India is now governed by Rule 96 of the CGST Rules.

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The court has concluded that the petitioner is entitled to a refund of the IGST paid on the exports. There is no question that the petitioner is not attempting to claim both the IGST refund and a higher duty drawback in this case.