Question52: As per Rule 89(4) of CGST Rules, 2017, for refund of ITC on zero rated supply against LUT, `Turnover of zero-rated supply of services` has been defined as follows :-

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.

Please clarify this definition with the suitable example.

Answer For Example. XY ltd in Gujarat has total receipt of Rs 30 lakh for export of architect designing service in the month of October. In this month company has also completed one architect service for which consideration of Rs.4 lakh is already received in July. In the same month company received an advance payment of Rs 10 lakh for future export of architect service.

In accordance of Rule 89(4)

Zero rated supply of service = total payment received for zero rated supply of service + value of services completed for which advance received in earlier period - advance for which supply of service is not completed

Thus zero rated supply of service for the relevant period of Oct for calculation of Refund Amount.

= 30 lakh+4 lakh -10 lakh

= 24 lakh.

We take this opportunity to inform you that this formula is not correct in practical The Rule provide refund of net ITC the net ITC is the total credit availed which may in practical be wrong

For example you have taken credit of 10 lakh because of bulk purchase in month of may and have clearance of rs 1 lakh in domestic and 1 lakh in export according to the formula refund claim due will rs five lakh against export of rs 1 lakh

We think there is need to do correction and the refund should be as per consumption of material like draw back. (REPLY dt. 2/2/2018)