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CMA Final · Indirect Tax Laws and Practice · Zero Rated Supplies and Deemed Exports

Kaveri Textiles exported goods under LUT. During the relevant period the turnover of zero-rated supply of goods was Rs 40,00,000 (after the applicable value limits), turnover of zero-rated supply of services was nil, Net ITC was Rs 6,00,000 and Adjusted Total Turnover was Rs 1,00,00,000. What is the maximum refund of ITC under rule 89(4)?

The maximum refund is Rs 2,40,000. Using the rule 89(4) formula, zero-rated turnover of Rs 40 lakh multiplied by net ITC of Rs 6 lakh and divided by adjusted total turnover of Rs 1 crore gives 40 percent of the ITC.

  1. ARs 2,40,000Correct
  2. BRs 1,60,000
  3. CRs 6,00,000
  4. DRs 3,60,000

Explanation

Refund = (40,00,000 + 0) x 6,00,000 / 1,00,00,000 = Rs 2,40,000. Rs 1,60,000 wrongly uses the ratio of turnover not exported times ITC (60% x ... gives 3,60,000; 40% of 4,00,000 mix-up), and Rs 6,00,000 ignores the proportion entirely.

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