Drawback, GST, RoDTEP refund different levies

Availing of refund under one scheme does not take away the right to claim refund under another scheme. Exporters can contest any attempts to delay or deny such refunds

Last week, many exporters, Customs brokers, consultants and even some GST/Customs officers asked me whether there is any merit in the contention that exporters can claim Goods and Services Tax (GST) refunds on exports, while claiming part of the amount through the duty drawback route also. My answer is an emphatic ‘No’. Let me explain.

Rule 2(a) of the Customs and Central Excise Duties Drawback Rules, 2017 (introduced through M.F.(D.R.) Notification No. 88/2017-Cus. (N.T.), dated 21-9-2017), says that ‘drawback’ in relation to any goods manufactured in India and exported means the rebate of duty excluding integrated tax leviable under sub-section (7) and compensation cess leviable under sub-section (9), respectively, of Section 3 of the Customs Tariff Act, 1975 (51 of 1975), chargeable on any imported materials or excisable materials used in the manufacture of such goods.

Thus, the said Drawback Rules rebate only the customs duty on imported materials, and excise duty on excisable materials used in the manufacture of the exported goods. They do not rebate any GST. Even the Integrated GST (IGST) and compensation cess paid on the imported materials are excluded from the duty drawback scheme.

In the Central GST Act, 2017, the word ‘drawback’ is defined differently, and in the third proviso to Section 54 (3) of the said CGST Act, there is a reference to drawback of Central Tax. These references now have no relevance to the refund provisions under the GST laws and the said Drawback Rules. Indeed, they are superfluous.

Some exporters have also raised a query on whether the duty drawback scheme is for compensating ‘un-rebated taxes and duties’ such as value-added tax, mandi tax, electricity duties, etc. The answer is No.  These taxes and duties, besides many others, such as stamp duty on export documents, embedded GST on purchases from unregistered dealers, coal used for generation of electricity, excise duty on fuel used in transportation, and any other taxes, duties or levies, which are not refunded, exempted or re­imbursed under any of the prevalent mechanisms, such as Advance Authorisation, Drawback, and GST refund are given back through the scheme for Remission of Duties and Taxes on Exported Products (RoDTEP). An indicative list of taxes, duties or levies being rebated through the RoDTEP scheme is given in the M.F. (D.R.) Instruction F. No. 605/19/2021-DBK/876-947, dated 28-10-2021 issued by the finance ministry.

Through Section 16 of the IGST Act, 2017, exports are zero-rated. Section 54 of the CGST Act, 2017, provides the basic legal framework for the grant of refunds for zero-rated exports, and Rules 89 and 96 of the CGST Rules, 2017, deal with the mechanisms for grant of GST refunds on zero-rated exports.   

Thus, conceptually, legally, and procedurally, the GST refunds, duty drawback, and RoDTEP scheme operate in different spheres. They aim to refund different types of duties and taxes. While the GST laws deal with refunds of only the GST, the duty drawback rules deal with the rebate of excise and Customs duties, and the RoDTEP scheme deals with compensation for other embedded taxes, duties or levies in the manufacture and export of the goods. 

Availing of refund under one scheme does not take away the right to claim refund under another scheme. All the three refunds, rebates or remissions can be claimed on the same shipment.  Exporters can contest any attempts to delay or deny such refunds. 
 

Email : tncrajagopalan@gmail.com