Exporters can now claim rebates on output side

In other words, if one received some form of tax relief on inputs, one won’t be able to get a refund on the export tax.
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NEW DELHI: The Ministry of Finance has issued a formal notification regarding the deletion of Rule 96(10) of the Central Goods and Services Tax (CGST) Rules, effective from 8 October 2024. This rule had been the focus of significant industry debate due to the confusion it created regarding the eligibility of

Indian exporters to claim refunds under the rebate option, while also availing themselves of benefits under specified notifications and schemes outlined in the Foreign Trade Policy (FTP).

According to the sub-rule (10) of Rule 96 in the CGST rules, if one has used certain tax benefits or exemptions on the materials imported or bought locally, one cannot claim a refund of the Integrated Goods and Services Tax (IGST) that was paid when exporting goods or services. In other words, if one received some form of tax relief on inputs, one won’t be able to get a refund on the export tax.

The repeal of Rule 96(10) is expected to offer substantial relief to numerous exporters whose transitional credits had been effectively blocked due to the restrictive conditions imposed by the rule. Under the previous regime, exporters who claimed certain benefits under FTP schemes were barred from claiming a rebate of taxes on exported goods, leading to operational challenges and financial strain. The rule’s deletion now enables these exporters to claim rebates on the output side without the risk of being disqualified due to simultaneous claims under FTP schemes.

Experts advise exporters affected by Rule 96(10) to review their rebate claims and transitional credits in light of this notification. They also advise them to consult tax professionals to ensure that all claims are aligned with the updated regulatory framework, which takes effect from 8 October 2024. This will ensure that exporters fully leverage the relief provided by the deletion of Rule 96(10), while maintaining compliance with the revised CGST rules.

According to Vishal Kulkarni, Director of Tax, Teva Pharmaceuticals, India, the deletion of this rule will enable ease of doing business in India, fostering a business-friendly environment in India.

‘Deletion of Rule 96(10) serves a dual purpose’

First, it provides relief to taxpayers whose transitional credits were previously blocked. Secondly, its removal strengthens the argument that the rule, in its earlier form, was ambiguous, and possibly arbitrary, said Abhishek A Rastogi, founder, Rastogi Chambers.

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