22.06.2023: Value of exempted supply computed for applying Rule 42 of the CGST Rules, shall not include ‘Duty credit scrips’ : Telangana AAR

The Telangana Authority of Advance Ruling (AAR) in the case of M/s. Kaveri Exports vide Order No. A.R.Com/20/2022 TSAAR Order No. 12/2023 dated 24.05.2023, has ruled that “duty credit scrips” shall be excluded from the value of exempt supply.

In the present case, the applicant deals in the export of cotton lint-fully pressed cotton bales. They have submitted that they are in receipt of duty credit e-scrips under the scheme for the remission of duties and taxes on exported products (RoDTEP) from the Department of Foreign Trade. The e-scrips are used for clearing imports and are also freely transferable if the exporter does not have any corresponding imports.

The applicant sought an advance ruling on the issue of whether the sale of duty credit e-Scrips is only other income and not part of turnover for applying Rules 42, 89(4), and 89(4B) of the CGST Rules, 2017.

The ‘Duty Scrips’ given as an incentive to exporters are covered under tariff item no. 4907 at Serial No. 128 of Schedule II of Notification No. 01/2017. However, Notification No. 35/2017 dated October 13, 2017, and the original Notification No. 02/2017 dated June 28, 2017, for exempting goods from GST were amended to improve at Serial No. 122A with a new entry of ‘Duty Credit Scrips’ under the HSN ‘4907’. Thus, the duty credit scrips are exempt from tax.

The AAR has observed that the relevancy of the turnover pertaining to the sale of “duty credit scrips” does not arise in the computation of the refund of an input tax credit, availed in respect of inputs received.

The AAR held that after the insertion of clause (d) in Explanation 1 to Rule 43 of the CGST Rules, vide Notification No. 14/2022 dated July 5, 2022, the value of “duty credit scrips’ shall be excluded from the value of exempt supply for the purpose of applying Rule 42 of the CGST Rules.


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