CST Refund For a 100% EOU - A Blog post by Jay Dedhia

What is EOU?

Ø  The EOU scheme was introduced in the year 1980 vide Ministry of Commerce resolution dated 31st December 1980 . The purpose of the scheme was basically to boost exports by creating additional production capacity. The EOU scheme is complementary to the EPZ scheme, except that it is widely dispersed in location, unlike EPZs, which are set up at specific locations.

Salient Features of EOU-

Benefits

Ø  The Export Oriented Units (EOUs) and units in Export Processing Zones (EPZs), Electronic Hardware Technology Park (EHTP), Software Technology Park (STP) and Special Economic Zones (SEZ) will be entitled to full reimbursement of Central Sales Tax (CST) paid by them on purchases made from the Domestic Tariff Area (DTA), for production of goods and services as per Exim Policy.

Applicable Laws

Ø  Foreign Trade Policy.

Ø  Central Sales Tax Act, 1956

Ø  The Central Sales Tax (Registration And Turnover) Rules, 1957

Pre requirements for claiming refund

Ø  CST Registeration (Sec. 7 of CST Act)

Ø  Purchase from DTA

Ø  Purchase are essential for export

Ø  Purchase used for export production

Ø  CST is paid by bank account maintained by EOU/EPZ/EHTP/STP/SEZ unit

Procedure for claiming refund

Ø  Application as per Annexure I

Ø  Apply to Development Commissioner of the EPZ/SEZ concerned or the designated officer of the EHTP/STP

Ø  Eligible CA firm’s certificate as per Annexure II

Ø  3 way check (original invoice of the supplier and proof of payment and its reconciliation with ‘C’ Form)

Ø  Copy of material inward register (quantity, the source of purchase and the C Form)

Ø  Copy of Form C + counter foil (The reimbursement will be limited to the payment of CST against C Form)

Ø  Only one consolidated claim for the quarter

Ø  Application to be within six months from the end of quarter

Ø  In case of procurement of goods against payment in  instalments, the CST reimbursement claim may be made in the quarter in which the full payment has been effected against the invoice/bill.

Ø  The claim for CST reimbursement for the amount below Rs. 100/- on any single invoice shall not be entertained.

Deliverables for claiming Refund

Ø  Annexure I - Application

Ø  Annexure II – CA Certificate

Ø  Copy of CST registeration certificate

Ø  Copy of C Forms + counter foils

Ø  3 Copy of Specimen signatures of authorized persons

Points to be noted post claiming refund

Ø  Material inward register is subject to periodical check by authorized officer

Ø  All the claims are subject to post audit

Ø  Preserve all records for 3 years (Original invoices, Bank receipts, C Forms etc)

Practical difficulties

Ø  Maintain 3 way check for each invoice is tiresome process even after using ERP

Ø  Maintain material inward register for audit by authorized officer – onus of proof is on us

Ø  Proper documentation is to be preserved for post claim audit.

Ø  Preserve all records for 3 years (Original invoices, Bank receipts, C Forms etc)

Ø  Only one consolidated claim per quarter.

Penalties

Ø  In case some glaring error or irregularity is detected against any unit in claiming CST reimbursement, action to recover the amount paid and levy penalty would be taken under FTDR Act against such unit

Ø   Any dues of the Government viz. arrears of Lease rent, amount on account of a Court’s decree or Income tax recovery note, etc. will also be deductible from the claim amount or it can be set off from the subsequent payment.