Government of India

Ministry of Finance

Department of Revenue

Central Board of Excise & Customs

GST Policy Wing

*****

Room 220-A,

North Block, New Delhi

To,

Sh. Arun Goyal, Special Secretary

GST Council Secretariat

5th Floor, Tower II, Jeevan Bharti Building

Janpath Road, Connaught Place

New Delhi-110 001

Sir,

Sub: Non-inclusion of transitional credit in "Net ITC" for sanction of refund under rule 89 of CGST Rules, 2017- reg.

I am directed to refer to the above mentioned subject and to state that the method for calculation of refund amount in case of zero-rated supply of goods or services or both without payment of tax under bond or letter of undertaking is provided under sub-rule (4) of rule 89 of the CGST Rules, 2017. Similarly, the method for calculation of refund on account of inverted duty structure has been provided under sub-rule (5) of rule 89 of the said rules. In both these cases expression "Net ITC" has been defined as meaning input tax credit availed on inputs and input services during the relevant period other than the input tax credit availed for which refund is claimed under sub-rules (4A) or (4B) or both.

2. Certain doubts have been expressed regarding inclusion of the credit flowing into electronic credit ledger through TRAN 1 in "Net ITC". In this regard, it is clarified that input tax credit which flows on account of transitional provisions is credit availed under the existing law and therefore, cannot be included in the amount of "Net ITC" during the relevant period. You may kindly circulate this clarification amongst the State Governments.

3. This has the approval of the Finance Secretary.

Yours faithfully,

(Upender Gupta)