NITYA’S INSIGHT | Issue 75 Refunds under GST – Latest Practice and Procedure

December 11, 2019

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TABLE OF CONTENTS PRACTICE AND PROCEDURE FOR CLAIMING REFUNDS UNDER GST……………………………………………………………………………………………...2

A. GENERAL PROVISIONS ........................................................................................................................................................................................................... 2

1. Situations under which refund can be claimed .............................................................................................................................................................. 2

2. Person who can claim for refund ................................................................................................................................................................................... 2

3. Time limit to claim refund ............................................................................................................................................................................................... 2

4. Relevant forms for seeking refund ................................................................................................................................................................................. 3

5. Process for claiming refund ............................................................................................................................................................................................ 4

6. Unjust enrichment .......................................................................................................................................................................................................... 5

B. ONLINE REFUND PROCESS ..................................................................................................................................................................................................... 5

C. RELEVANT GUIDELINES / CLARIFICATIONS VIS-À-VIS PROCEDURAL ASPECTS FOR SPECIFIC REFUNDS……….. ....................................................................... …15

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PRACTICE AND PROCEDURE FOR CLAIMING REFUNDS UNDER GST

A. General provisions 1. Situations under which refund can be claimed:

Chapter XI of the Central Goods and Services Tax Act, 2017 (‘CGST Act’) read with Chapter X of the Central Goods and Services Tax Rules, 2017 (‘Rules’) provides for the following situations of seeking refund under GST: Export of Goods or services

i. Supplies to SEZ units and developers ii. Deemed Export supplies iii. Refund of taxes on purchase made by UN or embassies etc. iv. Refund arising on account of judgment, decree, order or direction of

the Appellate Authority, Appellate Tribunal or any court v. Refund of accumulated Input Tax Credit on account of inverted duty

structure vi. Finalization of provisional assessment

vii. Refund of pre-deposit viii. Excess payment due to mistake ix. Refunds to International Tourists of GST paid on goods in India and

carried abroad at the time of their departure from India x. Refund on account of issuance of refund vouchers for taxes paid on

advances against which goods or services have not been supplied xi. Refund of CGST & SGST paid by treating the supply as Intra-State

supply which is subsequently held as Inter-State supply and vice versa.

2. Person who can claim for refund: The person seeking refund, needs to file a refund claim in accordance with Section 54 of the CGST Act.

3. Time limit to claim refund: Every refund claim needs to be filed within two years from the relevant date. The ‘relevant date’ is defined under the CGST

Act, as follows:

Particulars Relevant Date Goods exported by sea or air Date on which the ship or aircraft, leaves India Goods exported by land Date on which such goods pass the frontier Goods exported by post Date of dispatch of goods by Post Office concerned Goods regarded as deemed exports Date on which return relating to such deemed exports is filled

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Particulars Relevant Date Services exported out where supply of service completed before the receipt of payment

Date of receipt of payment

Services exported out and payment received in advance prior to date of issuance of invoice

Date of issuance of invoice

Tax refundable in consequence of judgment, decree, order or direction of Appellate Authority, Appellate Tribunal or any Court

Date of communication of such judgment, decree, order or direction

Unutilized ITC Due date for furnishing return under Section 39 of the CGST Act for the period in which such claim for refund arises

Tax paid provisionally under this Act Date of adjustment of tax after the final assessment

4. Relevant forms for seeking refund

S. No. Process Relevant Form 1 Refund Application and generation of Application Reference Number (‘ARN’) GST RFD-01 (‘RFD-01’) 2 Acknowledgement GST RFD-02 (‘RFD-02’) 3 Deficiency Memo GST RFD-03 (‘RFD-03’) 4 Provisional Refund Order GST RFD-04 (‘RFD-04’) 5 Payment Order GST RFD-05 (‘RFD-05’) 6 Final Refund Order GST RFD-06 (‘RFD-06’) 7 Withholding Order GST RFD-07 (‘RFD-07’) 8 Show Cause Notice (‘SCN’) GST RFD-08 (‘RFD-08’) 9 Reply to SCN GST RFD-09 (‘RFD-09’) 10 Order for recredit of rejected amount GST PMT-03 (‘PMT-03’) 11 Intimation of payment made voluntarily GST DRC-03 12 Summary of order issued by Proper Officer GST DRC-07

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5. Process for claiming refund: The procedure for claiming refund is represented in below picture:

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6. Unjust enrichment:

• Every claim of refund (barring specified exceptions) needs to pass the test of unjust enrichment i.e. the incidence of tax is not passed on to the final consumer. In case of failure, refund amount (if sanctioned) is transferred to the Consumer Welfare Fund.

• The test of unjust enrichment is inapplicable in the following cases: - Refund of accumulated ITC - Refund on account of exports - Refund of payment of wrong tax - Refund of tax paid on a supply which is not provided for which refund voucher is issued

• If the refund claim is less than ₹2 Lakhs, the applicant needs to file a self-declaration to the effect that it has not passed on the incidence of tax to any other person. For refund claim exceeding ₹2 Lakhs, the applicant needs to file a certificate from a Chartered Accountant / Cost Accountant.

B. Online refund process On the roll out of GST, electronic refund module was not available on the common portal. Thus, the Government devised and implemented a temporary mechanism wherein the taxpayer can manually file Refund Application in GST RFD-01A along with other requisites. As per Circular No. 125/44/2019-GST dated November 18, 2019 (‘Circular 125’) along with an Advisory issued on the Portal, the entire process has been made electronic from September 26, 2019 without any manual intervention. Circular 125 supersedes the following Circulars issued by the Government for the process of claim of refund:

Particulars Subject Matter Circular No. 17/17/2017-GST dated November 15, 2017

Manual filing and processing of refund claims for zero-rated supplies

Circular No. 24/24/2017-GST dated December 21, 2017

Manual filing and processing of refund claims on account of inverted tax structure, deemed exports and excess balance in Electronic Cash Ledger

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Circular No. 37/11/2018-GST dated March 15, 2018

Exports related refund issues

Circular No. 45/19/2018-GST dated May 30, 2018 (including corrigendum dated July 18, 2019)

Miscellaneous refund related issues like claim for refund filed by Input Service Distributor etc.

Circular No. 59/33/2018-GST dated September 4, 2018

Miscellaneous refund related issues like submission of invoices etc.

Circular No. 70/44/2018-GST dated October 26, 2018

Miscellaneous refund related issues like status of refund claim after issuance of Deficiency Memo etc.

Circular No. 79/53/2018-GST dated December 31, 2018

Miscellaneous refund related issues like physical submission of refund claims with jurisdictional Proper Officer etc.

Circular No. 94/13/2019-GST dated March 28, 2019

Refund related issues

(Important to note that the aforementioned Circulars shall continue to apply for Refund Applications filed before September 26, 2019 and the said applications will be processed manually as prior to deployment of new system).

As per Circular 125, the following Refund Applications shall be filed and processed electronically:

i. Refund of unutilized Input Tax Credit (‘ITC’) on exports without payment of tax

ii. Refund of tax paid on export of services with payment of tax iii. Refund of unutilized ITC on supplies made to SEZ Unit / SEZ

Developer with / without payment of tax iv. Refund of unutilized ITC accumulated due to inverted tax structure v. Refund to supplier of tax paid on deemed export supplies vi. Refund to recipient of tax paid on deemed export supplies

vii. Refund of excess balance in Electronic Cash Ledger viii. Refund of excess payment of tax ix. Refund of tax paid on intra-State supply subsequently held to be

Inter-State supply and vice versa x. Refund on account of assessment / provisional assessment / appeal

/ any other order xi. Refund on account of ‘any other’ ground or reason

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With effect from September 26, 2019, the following process needs to be followed to complete the process of refund electronically:

S. No. Process Procedure Important Points 1 Refund Application and

generation of Application Reference Number (‘ARN’)

• Filing of application: The taxpayer shall file RFD-01 on the common portal seeking refund under any of the aforementioned categories along with requisite documents / statements / declarations provided in Annexure A of Circular 125.

• Period of filing: A taxpayer can file a single Refund Application for a particular tax period or successive tax periods for a particular financial year only. For refund of unutilized ITC, application can be filed chronologically only.

• Generation of ARN: ARN will be generated only after

the applicant has completed the process of filing the Refund Application.

• Date of filing: The application shall be deemed to be

filed under Rule 90(2) of the CGST Rules on the date of generation of ARN. The time limit of 15 days to issue an acknowledgement or a Deficiency Memo, as the case may be, shall be counted from the said date.

(GST RFD-01A (manual Refund Application) has now been disabled on the portal. The taxpayer shall be able to file its Refund Application in RFD-01 now)

• The refund claim for a tax period, can be filed only after all the returns in GSTR-1 and GSTR-3B due to be furnished on or before the date on which the Refund Application is being filed, are filed. There is exception for a composition taxpayer, a non-resident taxable person and an Input Service Distributor for which the corresponding forms need to be filed before filing a Refund Application.

• The applicant is not required to provide any document at the stage of filing of Refund Application other than those mentioned in Annexure A of Circular 125.

• There is no requirement of submission of physical copy of supporting documents.

• For refund of ITC, provisionally accepted ITC will be

sanctioned subject to an electronic undertaking by the taxpayer for re-payment of such amount (along with interest) in case of non-fulfilment of any conditions for eligibility of credit.

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S. No. Process Procedure Important Points 2 Assignment of

application to concerned authority

• The Refund Application and supporting documents, shall be transferred automatically to the assigned jurisdictional Proper Officer.

• The Refund Application filed by an unassigned taxpayer, shall be forwarded to the jurisdictional Proper Officer from which the taxpayer has originally migrated.

• If an applicant is assigned to a new authority after generation of ARN and a Deficiency Memo is issued by the erstwhile officer, then re-submitted Refund Application shall be treated as a fresh Refund Application. This application shall be forwarded to the new jurisdictional Proper Officer.

3 Acknowledgement • The tax officer shall issue RFD-02 electronically to the taxpayer. The taxpayer shall be able to view the acknowledgement in RFD-02 on its dashboard.

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4 Deficiency Memo • The tax officer shall issue RFD-03 electronically to the taxpayer within 15 days of filing Refund Application on fulfillment of the requisite conditions.

• With the issuance of RFD-03, amount will get recredited to Electronic Credit / Cash Ledger of the taxpayer. The taxpayer shall be able to view Deficiency Memo in RFD-03 on its dashboard.

• After Deficiency Memo is issued, Refund Application

would not be further processed. A fresh application needs to be filed within 2 years of the relevant date.

• The amount debited from Electronic Credit / Cash

Ledger would be recredited automatically once Deficiency Memo is issued.

• If an acknowledgement is issued vis-à-vis a Refund Application, no Deficiency Memo can be subsequently issued for the said application.

• Deficiency Memo shall not be issued merely on the ground that the application was received electronically in the wrong jurisdiction.

• On issuance of Deficiency Memo, recredit of any

amount would take place automatically and no order in PMT-03 is required to be issued.

• If all irregularities in a Deficiency Memo are

rectified, Proper Officer cannot serve Deficiency Memo on filing of Refund Application for the same issues.

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S. No. Process Procedure Important Points 5 Provisional Refund

Order • Grant of provisional refund: As per Rule 91 of the

CGST Rules, the Proper Officer shall refund ninety percent of the refundable amount of the claim (in case of any claim for refund on account of zero-rated supplies) on a provisional basis.

• The tax officer shall issue RFD-04 electronically to the taxpayer. The taxpayer shall be able to view the provisional sanction order in RFD-04 on its dashboard.

• No adjustment or withholding of refund is allowed for refund provisionally sanctioned.

• In case of a prima facie irregularity, the Proper Officer shall grant provisional refund 90 percent of refund claim less inadmissible portion.

• In case of full scrutiny and eligibility of a refund claim, a Proper Officer can grant full refund of the amount claimed by a taxpayer.

• In case the final sanctioned amount is less than the

provisional refund amount, the Proper Officer shall issue SCN for rejection and recovery of erroneously refunded amount. In such a case the following scenarios may happen:

- If the order rejects the refund claim as

erroneous and recoverable, the recoverable amount shall be entered in Electronic Liability Register on issue of GST DRC-07.

- If the rejected amount relates to unutilized ITC,

such amount shall be recredited in Electronic Credit Ledger. This shall be subject to submission of an undertaking by the taxpayer that no appeal has been filed / appeal has been decided against taxpayer in respect to the rejected amount.

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S. No. Process Procedure Important Points 6 Scrutiny of application

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• For refund claim on account of export of goods without payment of tax, Shipping Bill details shall be checked through ICEGATE site.

• The information contained in Table 9 of GSTR-1 of the relevant tax period as well as that of the subsequent tax periods, should be taken into cognizance, wherever applicable

• In case of discrepancies between the data

furnished by the taxpayer in GSTR-3B and GSTR-1, the Proper Officer shall refer to the Circular No. 26/26/2017–GST dated December 29, 2017 and process the Refund Application accordingly.

• For claim of unutilized ITC, the Proper Officer shall

rely upon GSTR-2A as an evidence of the account of the supply by the corresponding supplier(s) in relation to which ITC is availed by the taxpayer.

• The Proper Officer shall not insist on submission of

physical copy of invoices already auto-populated in GSTR-2A.

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S. No. Process Procedure Important Points 7 Payment Order • The tax officer will issue RFD-05 electronically to the

taxpayer.

• The tax officer is not required to send copy of RFD-05 to the Central Nodal Authority and State Adjudicating Authority. The taxpayer shall be able to view the payment order in RFD-05 on its dashboard.

• The bank account details mentioned in the Refund

Application, shall be validated by Public Financial Management System (‘PFMS’) after issuance of RFD-05 by the tax-officer.

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8 Final Refund Order • The tax officer shall issue RFD-06 electronically to the taxpayer. The taxpayer shall be able to view the final sanction / rejection order in RFD-06 on its dashboard.

• The Proper Officer can partially or fully adjust sanctioned amount of refund against any outstanding demand under GST or under any existing law.

9 Withholding Order • The tax officer shall issue RFD-07B electronically to

the taxpayer. The taxpayer shall be able to view the withholding order in RFD-07B on its dashboard.

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10 SCN • The tax officer shall issue RFD-08 electronically to the taxpayer. The taxpayer shall be able to view the SCN in RFD-08 on its dashboard.

• The taxpayer is expected to reply to the SCN within 15 days of receipt of the SCN. If the taxpayer does not

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S. No. Process Procedure Important Points respond within 15 days of the issuance of SCN, the tax officer can take action on the Refund Application.

11 Reply to SCN • The taxpayer is required to reply to SCN electronically in RFD-09 which would be available on its dashboard.

• The taxpayer shall be able to reply to SCN and upload supporting documents electronically through RFD-09. The tax officer will not process the reply to the SCN if the taxpayer has not given the same electronically in RFD-09.

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12 Order for recredit of Rejected Amount

• The tax officer shall issue PMT-03 electronically. With the issuance of PMT-03, inadmissible ITC shall be recredited to Electronic Credit Ledger of the taxpayer automatically.

• The taxpayer is required to give an undertaking that it

will not file an appeal against the refund order if it desires to get a recredit of the rejected amount. This undertaking needs to be manually submitted to the tax officer. The taxpayer shall be able to view the recredit order in PMT-03 on its dashboard.

• In case of rejection of refund claim of unutilized / accumulated ITC, the Proper Officer shall issue SCN for rejection and recovery of erroneously refunded amount. In such a case, the following scenarios may happen:

- If the order rejects refund claim as erroneous

and recoverable, recoverable amount shall be entered in Electronic Liability Register on issue of GST DRC-07.

- Before service of the demand notice, the taxpayer can voluntarily pay the amount along with interest and penalty as applicable through GST DRC-03.

• The Proper Officer shall recredit the rejected

amount in Electronic Credit Ledger. This shall be

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S. No. Process Procedure Important Points subject to submission of an undertaking by the taxpayer that no appeal is filed / appeal has been decided against taxpayer for the rejected amount.

• In case of rejection of refund claim for reason other than ineligibility of credit, the Proper Officer shall follow the aforementioned process.

13 Disbursal of refunds • Single authority disbursement: As per Circular 125,

in order to facilitate refunds, if a Refund Application is assigned to a Central Tax Officer, all sanction orders and corresponding payment order for the sanctioned refund amount under all tax heads, shall be issued by Central Tax Officer only. Similarly, for Refund Applications assigned to a State Tax Officer, all sanction orders and corresponding payment order, shall be issued by State Tax Officer only.

• The sanctioned refund amount shall be disbursed through the PFMS.

• The bank account details mentioned in Refund Application, shall be validated by PFMS after filing of RFD-01 and auto-populated on common portal. The taxpayer must ensure that bank account details selected in Refund Application, are valid and correct.

• The taxpayer will need to edit bank account details

(through non-core amendment in registration in REG-14) if there is failure of bank account validation by PFMS.

• After performing this step, the taxpayer needs to

enter the updated bank account by clicking on ‘Update Bank Account’ functionality provided with the ARN of Refund Application.

• If a validation error occurs after issuance of the

payment order, the said payment order will be invalidated by the common portal and the Proper

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S. No. Process Procedure Important Points Officer will need to issue a new payment order by after following the rectification process.

• All the details shall be communicated to the

taxpayer through e-mail / SMS.

14 Claim of interest in case of delayed refund

• As per Section 54(7) of the CGST Act, a refund order needs to be sanctioned within 60 days of the receipt of complete application. Further, Section 56 of the CGST Act provides that if any tax ordered to be refunded is not refunded within 60 days of the date of receipt of application, interest at the rate of 6 / 9 percent, as the case may be (notified vide Notification No. 13/2017-Central Tax dated June 28, 2017) needs to be paid to the taxpayer.

• Interest shall be calculated starting from the date immediately after the expiry of sixty days from the date of receipt of application (ARN) till the date of refund of such tax

• Any tax shall be considered to be refunded only when the amount has been credited to the bank account of the applicant.

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C. Relevant guidelines / clarifications vis-à-vis procedural aspects for specific refunds

Refund type Guidelines / Clarifications

Refund of IGST paid on export of services and supplies made to a SEZ developer / unit

Issue: In certain cases, the taxpayer did not erroneously report export transactions separately in GSTR-3B but correctly reported them in GSTR-1. Refund is presently not processed due to system validation which does not process refund amount more than Table 3.1(b) [Outward taxable supplies (zero-rated)] of GSTR-3B. Clarification: For the period between July 1, 2017 to June 30, 2019, refund will be processed where the claim amount does not exceed the aggregate amount of IGST / Cess mentioned in Table 3.1(a) [Outward taxable supplies (other than zero-rated, nil rated and exempted)], 3.1(b) [Outward taxable supplies (zero-rated)] and 3.1(c) [Outward taxable supplies (nil rated and exempted)] of GSTR-3B of the corresponding period.

Refund of unutilized ITC Guidelines Documentation:

• Applications for refund of unutilized ITC shall be accompanied by uploading GSTR-2A for the relevant period. Self-

certified copies of invoices not auto-populated in GSTR-2A, shall also be provided.

• Such applications shall be accompanied with details of relevant invoices for availed ITC as per format prescribed in Annexure B of Circular 125. The availed ITC shall be subject to 20 percent restriction under Rule 36(4) of the CGST Rules, as amended.

Calculation of refundable amount: The refundable amount shall be least of the following: • The maximum refund amount as per prescribed formula in Rule 89(4) or Rule 89(5) of the CGST Rules

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Refund type Guidelines / Clarifications • The balance in Electronic Credit Ledger of the applicant at the end of the tax period for which refund claim is being

filed

• The balance in Electronic Credit Ledger of the applicant at the time of filing the Refund Application Order of debit: The refundable amount shall be debited in the following order: • IGST to the extent of balance available • CGST and SGST in equal amount to the extent of balance available. In case of any shortfall, remaining amount shall

be debited from other ledger (Due to unavailability of above facility particularly for ITC refund, the order of debit may be followed for all Refund Applications although the same shall not be mandatorily enforceable.) • Refund of ITC of Compensation Cess: For refunds of ITC of Compensation Cess, the above process needs to be

followed separately and shall be debited only from the head of Compensation Cess. Clarification Issue: As per Section 54(3) of the CGST Act, no refund of ITC is allowed if a supplier avails drawback in respect of Central Tax Clarification: • If a supplier avails drawback in respect of duties rebated under the Customs and Central Excise Duties Drawback

Rules, 2017 (Customs or Central Excise), it shall be eligible for refund of unutilized ITC of Central Tax / State Tax / Union Territory Tax / Integrated Tax / Compensation Cess.

• Refund of eligible credit of State Tax shall be available if the supplier has availed drawback in respect of Central

Tax.

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Refund type Guidelines / Clarifications Refund of tax paid on deemed exports

Additional documentary evidences: • In case refund is filed by supplier of deemed export supplies: The documentary evidences as per Notification

No. 49/2017-Central Tax dated October 18, 2019 needs to be furnished. • In case refund is filed by recipient of deemed export supplies: The following documentary evidences need to

be furnished:

- An undertaking stating that refund is claimed only for those invoices which have been detailed in Statement 5B for the tax period for which refund is claimed and that no ITC has been availed on such invoices.

- Declaration that the supplier has not claimed refund with respect to the said supplies.

Additional compliance:

• The procedural compliances vis-à-vis procurement of supplies of goods from DTA by Export Oriented Unit (EOU) /

Electronic Hardware Technology Park (EHTP) Unit / Software Technology Park (STP) Unit / Bio-Technology Parks (BTP) Unit under deemed export as laid down in Circular No. 14/14/2017-GST dated November 6, 2017 needs to be adhered with.

Claims of refund of compensation cess

Issue 1: Whether a registered person is eligible to claim refund of unutilized ITC of compensation cess paid on inputs where zero-rated final product is not leviable to compensation cess? Clarification: A registered person making zero rated supply of product not leviable to compensation cess [under bond or Letter of Undertaking(‘LUT’)] may claim refund of unutilized ITC including compensation cess paid on inputs. Issue 2: Can a registered person file refund of compensation cess paid on inputs used for the captive generation of electricity (an intermediate good not leviable to GST) which is further used for the manufacture of goods (which are exported under Bond / LUT without payment of duty)?

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Refund type Guidelines / Clarifications Clarification: There is no distinction between intermediate goods / services and final goods / services under GST. ‘Inputs’ have been defined to include goods other than capital goods used or intended to be used by a supplier in the course or furtherance of business. Since input is used in the production of final good (even though indirectly) directly connected with the business of the registered person, ITC in relation to the same cannot be denied.

Clarifications vis-à-vis zero-rated supplies

• Zero-rated supplies made before filing of LUT: The substantive benefits of zero rating may not be denied where it is established that exports have been made. The delay in furnishing of LUT in such cases, may be condoned and the facility for export under LUT may be allowed on ex post facto basis taking into account the facts and circumstances of each case.

• Export of goods beyond the prescribed period of 3 months from the date of export invoice: Exports are zero

rated under the law as long as goods have actually been exported even if export is made after a period of three months. In such cases, payment of IGST first and claim refund at a subsequent date should not be insisted upon. Further, the concerned officer may grant extension of time limit for export as provided in the said sub-rule on post facto basis taking into account the facts and circumstances of each case.

• Submission of declaration with refund claim that applicant has not been prosecuted: The requirement to

provide such declaration is already satisfied in case of exports under LUT and thus, there is no requirement to produce such self–declaration with every refund claim where the exports are made under LUT.

• Refund of unutilized ITC on account of export of goods is claimed and the value declared in the tax invoice

is different from the export value declared in the corresponding shipping bill: During the processing of refund claim, value of goods declared on GST invoice and the value in the corresponding shipping bill / bill of export should be examined. The lower of two values should be taken into account while calculating the eligible amount of refund.

• Proof of realization in case of export of goods: There is no requirement to provide proof of realization of export

proceeds for processing of refund claims related to export of goods as the same has not been envisaged in the law. • Refund claim in case of export of non-GST / exempted goods: In respect of refund claims on account of export

of non-GST and exempted goods without payment of IGST; LUT / bond is not required. The exporter shall be eligible

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Refund type Guidelines / Clarifications for refund of unutilized input tax credit of Central Tax, State Tax, Union Territory Tax, Integrated Tax and compensation cess in such cases.

Refund of transitional credit

• No refund of unutilized transitional credit is admissible as such credit pertains to duties and taxes paid under the erstwhile laws and the same cannot be said to have been availed during the relevant period. Thus, the same cannot be treated as part of ‘Net ITC’ as per Rule 89(4) and 89(5) of the CGST Rules. Note: The exporter can utilize such ITC for payment of IGST at output stage and claim refund of such IGST paid.

Restriction on refund claim in certain cases of exports

• Any exporter who imported any inputs / capital goods in terms of Notification No. 78/2017-Customs dated October 13, 2017 (exempting Integrated Tax / Cess on goods imported by EOUs) and Notification No. 79/2017-Customs dated October 13, 2017 (exempting Integrated Tax / cess on import of goods under Advance Authorization / EPCG. Schemes) before the issuance of Notification No. 54/2018 – Central Tax dated October 9, 2018 (amending Rule 96(10) of the CGST Rules) shall be eligible to claim refund of IGST paid on exports.

• Exporters who have imported inputs in terms of Notification No. 78/2017-Customs dated October 13, 2017, after the issuance of Notification No. 54/2018 – Central Tax dated October 9, 2018, would not be eligible to claim refund of IGST paid on exports.

• Exporters who are receiving capital goods under EPCG scheme, either import under Notification No. 79/2017-Customs dated October 13, 2017 or domestic procurement under Notification No. 48/2017-Central Tax dated October 18, 2017, shall be eligible to claim refund of IGST on exports.

Calculation of refund amount for claims of refund of accumulated ITC on account of inverted tax structure

• The refund on input services and capital goods as part of refund of input tax credit accumulated on account of inverted tax structure, is not allowed.

• Where there are multiple inputs attracting different rates of tax, the term ‘Net ITC’ as per Rule 89(5) of the CGST Rules covers ITC availed on all inputs in the relevant period irrespective of their rate of tax.

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Refund type Guidelines / Clarifications Refund of TDS / TCS deposited in excess

• Amount deducted / collected deposited in the wrong head: The excess balance in the wrong head may be claimed as refund by the tax deductor / collector as the excess balance in Electronic Cash Ledger.

Refund of IGST paid on exports

• Shipping Bill filed by an exporter, is deemed to be an application for refund in such cases.

• The same shall be deemed to be filed only when export manifest / export report is filed, and the applicant has filed the return in GSTR-3B for the relevant period duly indicating IGST paid on goods exported in Table 3.1(b) of GSTR-3B.

• The exporter also needs to furnish details of export goods in Table 6A of GSTR-1 of the relevant period.

• The relevant information regarding the refund claim shall be forwarded to customs systems only where common

portal is able to validate the consistency of the details entered by the applicant. Thereafter, the customs system processes and refund amount are electronically credited to the Applicant.

NIL refunds filed inadvertently

• A registered person who has filed NIL refund claim in GST RFD-01A / RFD-01 for a given period under a particular category, can again apply for refund for the said period only if it satisfies the following two conditions: - The registered person must have filed a NIL refund claim in GST RFD-01A / RFD-01 for a certain period under

a particular category - No refund claims in GST RFD-01A / RFD-01 must have been filed by the registered person under the same

category for any subsequent period.

• The second condition shall be only for refund claims falling under the following categories: - Refund of unutilized ITC on account of exports without payment of tax - Refund of unutilized ITC on account of supplies made to SEZ Unit / SEZ Developer without payment of tax - Refund of unutilized ITC on account of accumulation due to inverted tax structure

In all other cases, registered persons shall be allowed to re-apply even if the second condition is not satisfied

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Refund type Guidelines / Clarifications

• The registered persons satisfying the above conditions, may file the refund claim along with supporting documents under ‘Any Other’ category instead of the category under which NIL refund claim has already been filed.

(Refer Circular No. 110/29/2019-GST dated October 3, 2019)

Miscellaneous • Supply for exports at concessional rate of tax: An exporter who procures goods at the concessional rate as per Notification No. 40/2017 – Central Tax (Rate) dated October 23, 2017 and Notification No. 41/2017 – Integrated Tax (Rate) both dated Octobers 23, 2017 is eligible for refund on account of inverted tax structure. The exporter can export the goods only under LUT / bond and cannot export on payment of IGST.

• Calculation of amount for non-grant of refund: The limit of ₹1,000 for non-grant of refund shall be applied for each tax head separately and not cumulatively.

• Inclusion of ITC of invoices issued in a particular month but availed in subsequent month: Such ITC cannot

be excluded from the calculation of refund amount for the subsequent month.

• Inclusion of ITC on inputs including inward supplies of stores and spares, packing materials etc.: Such ITC (booked as revenue expense in books of accounts) shall be included in calculation of ‘Net ITC’ as long as such inputs are used for the purpose of the business and / or for effecting taxable supplies including zero-rated supplies subject to restrictions under Section 17(5) of the CGST Act.

………………… Disclaimer: This Insight has been prepared for client and firm’s personnel only. It is solely for the purpose of general information on the key tax changes and does not represent any opinion of NITYA Tax Associates. We are not responsible for the loss arising to any person for acting or refraining from acting on the basis of material contained in this insight. It is recommended that professional advice be sought based on specific facts and circumstances. © NITYA Tax Associates. All Rights Reserved.

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