Challenges in Refund of accumulated ITC of inputs used for export of goods & services

Due to non-availability of the refund module on the GST portal, Central Board of Excise Customs has issued circular No. 17/17/2017 – GST dated 15th November, 2017 which prescribes the procedures of manual refunds until refund module is made available on the online portal of GST.

The GST rules framed initially prescribe that refund in GST is to be made online without facing the tax officials by taxpayers. But due to incapability of GST portal to handle refund cases, the government has initiated steps to give short term relief to exporters who were facing the blockage of working capital by way of manual refunds.

The basic condition to claim refund of accumulated ITC is that taxpayer must have export turnover in that particular month or quarter as the case may be. This has denied refund to those exporters who have purchased goods in one month or quarter and claimed ITC in GST returns in that month or quarter and exported the goods in the next month or quarter.

As per the circular, the procedure for claiming refund of accumulated ITC of inputs used for making exports of goods and services are:

  1. Online application for refund in Form GST RFD-01A has to be filed on the common portal claiming the refund monthly or quarterly basis according to frequency of returns to be furnished by the taxpayer;
  2. Refund application has to be submitted to jurisdictional proper officer with the printout of the Form GST RFD-01A filed online accompanying with the documentary evidences.

The jurisdictional proper officer after receiving afore mentioned refund application performs scrutiny of the same and has to issue acknowledgement in Form GST RFD-02 within 15 days from the date of receipt of refund application if all documents are found complete in all aspects. And the provisional refund has to be credited to the taxpayer’s bank account within 7 days from the date of acknowledgement.

There is another provision contained in the circular for issuance of deficiency memo in the Form GST RFD-03 within 15 days from the date of receipt of refund application. So it can said that once refund application is submitted to the jurisdictional proper officer, the taxpayer can expect acknowledgement in Form GST RFD-01A or deficiency memo in Form GST RFD-03 within 15 days of submission of such application. After rectifying the deficiencies mentioned in the deficiency memo, the taxpayer has to file application within 30 days from the date of receipt of deficiency memo which then will be treated as fresh application. This again entitles additional 15 days time limit to the officers to issue acknowledgement in Form GST RFD-02 if found satisfactory or reject the refund. Practically 9 out of 10 times, only deficiency memos are raised by the officers demanding additional documents and clarifications from the taxpayers which is giving rise to delay in refunds to the taxpayers. The reason of this happening may be due to sufficient cause or some other way around.

The circular has given inclusive list of documentary evidences as details in Statement 3 or 5 of Annexure to Form GST RFD-01A to be produced before jurisdictional proper officer along with the print out of Form GST RFD-01A filed on the common portal. Due to which different tax officers are asking for different additional documents. Hence there is no uniformity in the list of documents to be submitted as evidences for processing of refunds across all the departments. Moreover, there is no comprehensive knowledge about the functionality of GST portal among the tax officers which has resulted in issuance of deficiency memo rather than acknowledgment.

The circular should have mentioned the detail of each and every documents required to be submitted to the jurisdictional proper officer so that the officers do not have privilege to question the correctness and completeness of the documents if taxpayers genuinely submit all the requisite documents.

In the end, I have to say that the taxpayers really have to be on their toes to respond to the deficiency memos asking additional documents and clarifications and getting refund on time.

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