Rule 89(4) of CGST Rules not Applicable on Refund of Integrated Tax Paid on Zero-Rated Supply: Delhi HC [Read Order]

A Division Bench of the Delhi High Court ruled that Rule 89(4) of the Central Goods and Services Tax (CGST) Rules, 2017 is inapplicable to cases of refund of integrated tax paid on zero rated supply.

The petitioner, Ohmi Industries Asia Private Limited, filed an application seeking refund of and amount of ₹ 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 had received the Foreign Inward Remittance against the said invoices in November, 2018.

The Adjudicating Authority issued a Deficiency Memo calling upon the petitioner to furnish the Foreign Inward Remittance Certificate. Thereafter, 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 was not reflected in the corresponding GSTR 2A of August, 2018 to October, 2018 filed by the petitioner.

The Adjudicating Authority rejected the petitioner’s claim for refund of integrated tax. The Authority, while determining the quantum of the refund applied the formula under Rule 89(4) of the CGST Rules, 2017 and had rejected the petitioner’s claim by referring to Sub-clause (D) of Rule 89(4) of the CGST Rules on the ground 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 submitted that Rule 89(4) of the CGST Rules applied only for refund in respect to exports made without payment of integrated tax. The petitioner pointed out that it was not seeking refund of accumulated ITC but integrated tax as paid and that there was no dispute that the petitioner had discharged his liability of payment of integrated tax.

A Division Bench comprising Justices Vibhu Bakhru and Amit Mahajan observed that “The opening sentence of Rule 89(4) of the CGST Rules makes it amply clear that it applies only in cases of zero-rated supply of goods or services, without payment of tax under bond or letter of undertaking. We find merit in the petitioner’s contention that Rule 89(4) of the CGST Rules is inapplicable to cases of refund of integrated tax paid on zero rated supply.”

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