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Circulars clarifying issues related to SEZ and refund of unutilized ITC for job workers

Circular No.ES/94/ 2018-19                                                                                    15th June, 2018

To: Members of the Council

Sub: Circulars clarifying issues related to SEZ and refund of unutilized ITC for job workers

Dear Member,

CBIC has issued Circular No. 48/22/2018-GST  dated 14th June, 2018 clarifying matters related to SEZ and refund of unutilized ITC for job workers.

CBIC has clarified a long pending issue faced by Fabric Processors regarding refund of unutilized ITC on account of inverted duty structure.

Vide this Circular CBIC has clarified that the fabric processors shall be eligible for refund of unutilized ITC on account of inverted duty structure under section 54(3) of the CGST Act even if the goods (fabrics) supplied to them are covered under Notification No. 5/2017-Central Tax (Rate) dated 28.06.2017. Our Chairman, Vice-Chairman, the Committee Members of the Council thank the Hon’ble Union Minister of Textiles, Smt. Smriti Zubin Irani for her whole-hearted support for pursuing the matter with CBIC. Our special thanks to the Drawback Committee for hearing the plea of our Fabric Processors who were reeling under the stress.

Relevant extract of the Notification is given here- below:-

Issue

Whether independent fabric processors (job workers) in the textile sector supplying job work services are eligible for refund of unutilized input tax credit on account of inverted duty structure under section 54(3) of the CGST Act, 2017, even if the goods (fabrics) supplied are covered under notification No. 5/2017-Central Tax (Rate) dated 28.06.2017?

Clarification issued vide Notification No. 5/2017-Central Tax (Rate) dated 28.06.2017

  • Notification No. 5/2017-Central Tax (Rate) dated 28.06.2017 specifies the goods in respect of which refund of unutilized input tax credit (ITC) on account of inverted duty structure under section 54(3) of the CGST Act shall not be allowed where the credit has accumulated on account of rate of tax on inputs being higher than the rate of tax on output supplies of such goods. However, in case of fabric processors, the output supply is the supply of job work services and not of goods (fabrics).

Clarification issued vide Circular No. 48/22/2018-GST  dated 14th June, 2018

  • Circular No. 48/22/2018-GST  dated 14th June, 2018 clarifies that the fabric processors shall be eligible for refund of unutilized ITC on account of inverted duty structure under section 54(3) of the CGST Act even if the goods (fabrics) supplied to them are covered under notification No. 5/2017-Central Tax (Rate) dated 28.06.2017.

Members may kindly refer Circular No. 48/22/2018-GST  dated 14th June, 2018  for more details.

Thanking you,

Yours faithfully,

S.BALARAJU
EXECUTIVE DIRECTOR

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