| Aug-02-2021

ITC ON PURCHASE OF EXPORT GOODS

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  • CA VenkataramaniP. GANESAN
    Participant

    I am doing export and import business. I have purchased a machinery from Bombay with IGST and exported to outside India (Thailand) without IGST (without any bond and declaration). I had imported goods from outside India (from Thailand) and sold to other state (kerala) with IGST. Can i take the IGST on purchase of goods as ITC and adjust the tax against outward IGST?

    CA VenkataramaniCA Venkataramani
    Compliance Expert

    Comment:
    There are two transactions in the given scenario:

    First transaction – Inter-State inward supply of Machinery from Mumbai, on payment of IGST, wherein the said Machinery is subsequently exported to Thailand (without any Bond or declaration). In respect of this transaction the IGST paid on inward supply would be available as Input Tax Credit.

    Second Transaction – Import of Machinery from Thailand wherein the said Machinery is subject to payment of IGST, and subsequently the said Machinery is dispatched as an Inter-State Outward Supply to Kerala against payment of IGST. In respect of this transaction the IGST paid on import of Machinery as inward supply would be available as Input Tax Credit.

    You are entitled to claim input tax credit of IGST on inward supply of Machinery from Bombay and utilise such input tax credit against the outward supply of machinery to Kerala (within India). This view is based on the Section 16 read with Section 17(2) of the CGST / SGST Act, 2017 wherein it is specified that the input tax credit may be claimed as is attributable to the taxable supplies including zero-rated supplies. In other words, the registered person is entitled to claim the input tax credit of IGST paid on inward supply of goods which are subsequently exported “with payment of tax or without payment of tax”. In addition to this, in the instant case, IGST paid on import of Machinery is also eligible for input tax credit. Accordingly, the output tax on supply of Machinery subsequent to import may be paid by way of utilising the input tax credit pertaining to Machinery exported and input tax credit of IGST paid on import of Machinery.

    Note: In terms of Section 16(3) of the IGST Act, 2017, the export of goods without payment of taxes may be effected only under bond or letter of undertaking. In the instant case, since the letter of undertaking is not filed, the export of goods without payment of taxes will not be in accordance with Section 16(3) of the IGST Act, 2017. Therefore, it is recommended to file the letter of undertaking at the earliest.

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