IGST Refund on Postal Exports Cannot Be Denied Due to Absence of Prescribed Procedure

The Delhi High Court, in M/s IBA Crafts Private Limited and Ors. v. Union of India and Ors., W.P.(C) 3218/2024, has reinforced an important principle for exporters: a statutory refund cannot be denied merely because the department has not prescribed or operationalised a proper procedure.

Background of the Case

The petitioners were manufacturers and traders who exported goods through authorised Foreign Post Offices. For the period July 2017 to December 2017, they exported goods after payment of IGST and claimed refund under the GST law. From January 2018 onwards, they started exporting under Letter of Undertaking.

The exporters had:

• Exported goods through authorised Foreign Post Offices
• Paid IGST on eligible exports
• Received export proceeds through approved banking channels
• Furnished supporting documents and proof of IGST payment
• Made repeated representations to the authorities

However, the refund claims were not processed on the ground that there was no prescribed mechanism or procedure for processing IGST refunds for postal exports for the relevant period.

Legal Framework

Under Section 16 of the Integrated Goods and Services Tax Act, 2017, export of goods or services is treated as a zero-rated supply. Exporters are generally entitled to claim refund either of unutilised input tax credit or of IGST paid on exports, subject to the applicable provisions.

Rule 96 of the Central Goods and Services Tax Rules, 2017 deals with refund of integrated tax paid on goods or services exported out of India.

The Court also noted that Notification No. 31/2017-Customs (N.T.) dated 31 March 2017 had notified various post offices as Foreign Post Offices for the purpose of clearance of imported and exported goods. Further, Circular No. 14/2018-Customs dated 4 June 2018 prescribed the procedure for e-commerce exports through post and clarified the framework for postal exports.

Court’s Observations

The Delhi High Court observed that the petitioners had a statutory right to refund of IGST paid on eligible zero-rated exports.

The Court expressed serious concern over the inaction of the authorities and noted that administrative failure or absence of a prescribed procedure cannot defeat a taxpayer’s statutory entitlement. The Court also recorded that the authorities were aware of the issue but had failed to take effective steps for processing the refund claims.

Key Takeaways for Exporters

This ruling is important for exporters, especially small businesses and e-commerce exporters using postal channels.

Important lessons include:

• Refund claims should not be denied only due to procedural gaps.
• Exporters must maintain complete documentation, including postal receipts, invoices, GSTR-1 details, proof of IGST payment and proof of export proceeds.
• Where refund is delayed despite compliance, exporters may make detailed written representations before approaching higher authorities or courts.
• Statutory rights under GST cannot be defeated by administrative inaction.

Conclusion

The IBA Crafts ruling provides relief to exporters and highlights that genuine refund claims must be processed in accordance with law. Businesses engaged in exports through postal channels should review pending refund claims and ensure that all supporting documents are properly maintained.

For expert guidance on this topic, contact your tax professional today.