Payment Towards Output Tax Can Be Made By Utilisation Of Amount Available In Electronic Credit Ledger Of A Registered Person: CBIC

The CBIC has notified that the refund in respect of deemed export supplies is the refund of tax paid on the supplies. However, the recipients of deemed export supplies were facing difficulties on the portal in claiming a refund of tax paid due to the requirement of the portal to debit the amount so claimed from their electronic credit ledger.

"Considering the difficulty, the tax paid on supplies has been made available as ITC to the recipients vide Circular No. 147/03/2021-GST dated 12.03.2021 only to enable them to claim such refunds on the portal. The ITC of tax paid on deemed export supplies, allowed to the recipients to claim a refund of such tax paid, is not an ITC in terms of the provisions of Chapter V of the CGST Act, 2017. Therefore, the ITC so availed by the recipient of deemed export supplies would not be subjected to the provisions of Section 17 of the CGST Act, 2017," the circular read.

The ITC of tax paid on deemed export supplies, allowed to the recipients to claim a refund of tax paid, is not an ITC in terms of the provisions of Chapter V of the CGST Act, 2017. The ITC availed by the recipient of deemed export supply for claiming refund of tax paid on supplies regarded as deemed exports is not to be included in the "Net ITC" for computation of refund of unutilised ITC on account of zero-rated supplies or on account of inverted rated structure.

The CBIC clarified that "leasing" referred to in sub-clause (i) of clause (b) of sub-section (5) of section 17 refers to the leasing of motor vehicles, vessels, and aircraft only and not to the leasing of any other items. Accordingly, availment of ITC is not barred under sub-clause (i) of clause (b) of sub-section (5) of section 17 of the CGST Act in the case of leasing, other than leasing of motor vehicles, vessels, and aircraft.

Schedule III to the CGST Act provides that "services by an employee to the employer in the course of or in relation to his employment" will not be considered a supply of goods or services. Hence, GST is not applicable on services rendered by an employee to an employer provided they are in the course of or in relation to employment.

The CBIC has clarified that any payment towards output tax, whether self-assessed in the return or payable as a consequence of any proceeding instituted under the provisions of the GST Laws, can be made by utilisation of the amount available in the electronic credit ledger of a registered person.

As per sub-section (4) of section 49, the electronic credit ledger can be used for making payment of output tax only under the CGST Act or the IGST Act. It cannot be used for the payment of any interest, penalty, fees or any other amount payable under the said acts. Similarly, an electronic credit ledger cannot be used for payment of an erroneous refund sanctioned to the taxpayer where such a refund was sanctioned in cash.

Circular No. 172/04/2022-GST

Dated: 06.07.2022

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