Customs Circulars

Implementation of Section 16(4) of IGST Act on Export Restrictions

The Central Board of Indirect Taxes & Customs (CBIC), under the Ministry of Finance, Government of India, has issued Circular No. 24/2023-Customs, dated September 30, 2023, which outlines the implementation of Section 16(4) of the Integrated Goods and Services Tax (IGST) Act and related export restrictions. This circular brings significant changes to the export procedures and tax refund mechanisms.

Background and Legal Reference

The circular refers to Section 16(4) of the IGST Act 2017, which deals with the restriction on the export of certain goods upon payment of IGST (Integrated Goods and Services Tax). It also mentions Notification No. 01/2023-Integrated Tax, dated August 31, 2023, which provides detailed guidelines regarding these export restrictions.

Effective Date

As per Notification No. 27/2023-Central Tax dated July 31, 2023, Section 16(4) of the IGST Act, 2017, will be effective from October 1, 2023. This means that the new regulations regarding the export of specified goods and services will come into force on this date.

Export Restrictions and Refund Mechanism

The circular clarifies that, in accordance with the aforementioned provision and Notification No. 01/2023-Integrated Tax, all goods or services (except those specified in column (3) of the TABLE in the notification) may be exported upon payment of integrated tax. However, suppliers of such goods or services may claim a refund of the tax paid. In essence, goods mentioned in the Table annexed to the notification may only be exported under Letter of Undertaking (LUT) and not by paying IGST.

Implementation through DG Systems CBIC

To enforce these export restrictions and facilitate the refund mechanism, the Directorate General of Systems CBIC has developed a backend functionality. This functionality introduces changes to the filing of shipping bills and amendments, particularly for commodities listed in the notification. Given that IGST refunds are processed at the shipping bill level, the checks have been enabled accordingly.

Key Point to Note

It’s important to emphasize that if a shipping bill contains single or multiple invoices for which IGST has been paid and even one invoice contains an item restricted for export on payment of IGST under Section 16(4) of the IGST Act, the entire shipping bill containing such items will not be allowed to be filed.

Sensitization and Trade Notices

The circular requests that officers under the jurisdiction of Customs be sensitized to these changes, especially for manual shipping bills in Non-EDI (Electronic Data Interchange) ports or even at EDI ports. This sensitivity is also important for exports through posts/courier services. The aim is to ensure that no undue benefits are taken by exporting goods that fall under the purview of Section 16(4) of the IGST Act 2017.

Additionally, the circular suggests issuing suitable trade notices and public notices to inform and educate the trade community about these new regulations.

Seeking Clarifications

Stakeholders and officers encountering difficulties or having doubts in the implementation of this circular are encouraged to bring them to the attention of the Board via email at dircus@nic.in.

This circular marks a significant step in aligning the export procedures and tax refund mechanisms with the provisions of the IGST Act 2017. It seeks to maintain transparency and compliance while ensuring that the export of certain goods and services follows the prescribed guidelines.

For comprehensive details and precise information, please refer to the official Circular No. 24/2023-Customs dated September 30, 2023.

Stay tuned for further updates as this development unfolds.

Customs-Circular-No-24-2023