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CMA Final · Indirect Tax Laws and Practice · GST Refunds - Inverted Duty Structure and Zero Rated Supplies

Shree Textiles Ltd exported goods without payment of tax under a Letter of Undertaking. The FOB value in the shipping bill is Rs 60 lakh and the value in the tax invoice is Rs 58 lakh. Like goods supplied domestically by it were valued at Rs 36 lakh. Net ITC for the relevant period is Rs 20 lakh and Adjusted Total Turnover is Rs 200 lakh. What is the maximum refund under Rule 89(4)?

The maximum refund is Rs 5,40,000. Turnover of zero-rated goods is capped at the lower of Rs 58 lakh and 1.5 times the domestic value of like goods, which is Rs 54 lakh. Refund equals 54 x 20 / 200.

  1. ARs 6,00,000
  2. BRs 5,80,000
  3. CRs 3,60,000
  4. DRs 5,40,000Correct

Explanation

The value of goods exported is the lesser of the FOB value (Rs 60 lakh) and the invoice value (Rs 58 lakh), which is Rs 58 lakh. Turnover of zero-rated goods is the lesser of this and 1.5 times the domestic value of like goods (1.5 x 36 = Rs 54 lakh), so Rs 54 lakh. Refund = 54 x 20 / 200 = Rs 5.4 lakh. Using Rs 58 lakh ignores the 1.5 times cap.

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