Refund of IGST on Export Proceeds Received via PayPal—Eligibility of—ACS. Shruti Phophaliya

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The Tax Publishers GST--IGST Refund Refund of IGST on Export Proceeds Received via PayPal--Eligibility of ACS. Shruti Phophaliya Goods and Services Tax regime has introduced the concept of zero rated supply for exports, allowing exporters to claim refunds of the GST paid on inputs used for exported goods or services. However, an ambiguity surrounded the eligibility of claiming these refunds when export revenue is received through payment gateways like PayPal or Razor Pay, instead of traditional convertible foreign currency channels. Recently, the Madras High Court has shed light on this issue in the case of Afortune Trading Research Lab LLP v. Deputy Commissioner (GST & CE) 2024 TaxPub(GST) 432 (Mad-HC), which is being discussed elaboratively in this write-up. 1. Meaning of zero rated supply The term "zero rated supply" is defined under sub-section (1) of section 16 of the Integrated Goods and Services Tax Act, 2017 (in short 'IGST Act') to mean - (i) export of goods or services or both; or (ii) supply of goods or services or both for authorised operations to a Special Economic Zone developer or a Special Economic Zone unit. Clause (6) of section 2 of the IGST Act defines the term "export of service" to mean supply of any service when - (i) the supplier of service is located in India; (ii) the recipient of service is located outside India; (iii) the place of supply of service is outside India; (iv) the payment for such service has been received by the supplier of service in convertible foreign exchange or in Indian rupees wherever permitted by the Reserve Bank of India; and (v) the supplier of service and the recipient of service are not merely establishments of a distinct person in accordance with Explanation 1 in section 8 of the IGST Act. As per sub-section (2) of section 16 of the IGST Act, a supplier effecting zero rated supply is entitled to avail Input Tax Credit (ITC), even if such supply is exempt from payment of tax. The reason behind such refund is to reduce the burden of tax on exporters and to promote exports. According to sub-section (3) of section 16, a registered person making zero rated supply is eligible to claim the refund of unutilised ITC on the supply of goods or services or both, without the payment of integrated tax, under bond or Letter of Undertaking (LUT), in accordance with the provisions of section 54 of the Central Goods and Services Tax Act, 2017 (CGST Act) or the rules made thereunder, subject to such conditions, safeguards and procedure as may be prescribed. As per sub-section (4) of section 16, the Central Government may specify on the recommendation of the GST council and subject to such safeguards and procedures, SUBSCRIBE FOR FULL CONTENT

The Tax Publishers

GST--IGST Refund

Refund of IGST on Export Proceeds Received via PayPal--Eligibility of

ACS. Shruti Phophaliya

Goods and Services Tax regime has introduced the concept of zero rated supply for exports, allowing exporters to claim refunds of the GST paid on inputs used for exported goods or services. However, an ambiguity surrounded the eligibility of claiming these refunds when export revenue is received through payment gateways like PayPal or Razor Pay, instead of traditional convertible foreign currency channels. Recently, the Madras High Court has shed light on this issue in the case of Afortune Trading Research Lab LLP v. Deputy Commissioner (GST & CE) 2024 TaxPub(GST) 432 (Mad-HC), which is being discussed elaboratively in this write-up.

1. Meaning of zero rated supply

The term "zero rated supply" is defined under sub-section (1) of section 16 of the Integrated Goods and Services Tax Act, 2017 (in short 'IGST Act') to mean -

(i) export of goods or services or both; or

(ii) supply of goods or services or both for authorised operations to a Special Economic Zone developer or a Special Economic Zone unit.

Clause (6) of section 2 of the IGST Act defines the term "export of service" to mean supply of any service when -

(i) the supplier of service is located in India;

(ii) the recipient of service is located outside India;

(iii) the place of supply of service is outside India;

(iv) the payment for such service has been received by the supplier of service in convertible foreign exchange or in Indian rupees wherever permitted by the Reserve Bank of India; and

(v) the supplier of service and the recipient of service are not merely establishments of a distinct person in accordance with Explanation 1 in section 8 of the IGST Act.

As per sub-section (2) of section 16 of the IGST Act, a supplier effecting zero rated supply is entitled to avail Input Tax Credit (ITC), even if such supply is exempt from payment of tax. The reason behind such refund is to reduce the burden of tax on exporters and to promote exports.

According to sub-section (3) of section 16, a registered person making zero rated supply is eligible to claim the refund of unutilised ITC on the supply of goods or services or both, without the payment of integrated tax, under bond or Letter of Undertaking (LUT), in accordance with the provisions of section 54 of the Central Goods and Services Tax Act, 2017 (CGST Act) or the rules made thereunder, subject to such conditions, safeguards and procedure as may be prescribed.

As per sub-section (4) of section 16, the Central Government may specify on the recommendation of the GST council and subject to such safeguards and procedures,