1. CBEC vide circular No. 135/05/2020- GST dated 31.03.2020 clarified following issues related to Refunds :-

(a) Refund of accumulated Input Tax Credit (ITC ) on account of reduction in GST Rate

(b) Guideline for Refund of Input Tax Credit under Sec 54(3)

(c) New Requirement to mention HSN/SAC in Annexure ‘B’

(d) Change in manner of refund of tax paid on supplies other than zero rated supplies

(e) Bunching of Refund claims across Financial Years

Clarification on GST Refund Related Issues

2. Refund of accumulated Input Tax Credit on account of reduction in GST Rate : Refund of accumulated ITC in terms clause (ii) of sub-section (3) of section 54 of the CGST Act is available where the credit has accumulated on account of rate of tax on inputs being higher than the rate of tax on output supplies.

2.2. It has been observed  that some of the applicants are seeking refund of unutilized ITC on account of inverted duty structure where the inversion is due to change in the GST rate on the same goods.

2.3. For Example ,  An applicant trading in goods has purchased, say goods “X” attracting 18% GST. However, subsequently, the rate of GST on “X” has been reduced to, say 12%. It is being claimed that accumulation of ITC in such a case is also covered as accumulation on account of inverted duty structure and such applicants have sought refund of accumulated ITC under clause (ii) of sub-section (3) of section 54 of the CGST Act

2.4 It is noteworthy that, the input and output being the same in such cases, though attracting different tax rates at different points in time, do not get covered under the provisions of clause (ii) of sub-section (3) of section 54 of the CGST Act. It is clarified vide Para 3 of circular 135/05/2020- GST dated 31.03.2020 that refund of accumulated ITC under clause (ii) of sub-section (3) of section 54 of the CGST Act would not be applicable in cases where the input and the output supplies are the same.

3. Guideline for Refund of Input Tax Credit under Sec 54(3): Refund of accumulated ITC shall be restricted to  invoices reflected in Form GSTR 2A

3.1. In terms of Para 36 of circular No. 125/44/2019-GST dated 18.11.2019, the refund of ITC availed in respect of invoices not reflected in FORM GSTR-2A was also admissible and copies of such invoices were required to be uploaded. However, in wake of insertion of sub-rule (4) to rule 36 of the CGST Rules, 2017 vide notification No. 49/2019-GST dated 09.10.2019, various references have been received from the field formations regarding admissibility of refund of the ITC availed on the invoices which are not reflecting in the FORM GSTR-2A of the applicant.

3.2.  The matter has been examined and it has been decided that the refund of accumulated ITC shall be restricted to the ITC as per those invoices, the details of which are uploaded by the supplier in FORM GSTR-1 and are reflected in the FORM GSTR-2A of the applicant. Accordingly, Para 36 of the circular No. 125/44/2019-GST, dated 18.11.2019 stands modified to that extent.

4. New Requirement to mention HSN/SAC in Annexure ‘B’ : HSN/SAC is required to be mention in Annexure B of refund Application

4.1 References have also been received from the field formations that HSN wise details of goods and services are not available in FORM GSTR-2A and therefore it becomes very difficult to distinguish ITC on capital goods and/or input services out of total ITC for a relevant tax period.

4.2 It has been recommended that a column relating to HSN/SAC Code should be added in the statement of invoices relating to inward supply as provided in Annexure–B of the circular No. 125/44/2019-GST dated 18.11.2019 so as to easily identify between the supplies of goods and services.

4.3. The issue has been examined and considering that such a distinction is important in view of the provisions relating to refund where refund of credit on Capital goods and/or services is not permissible in certain cases, it has been decided to amend the said statement. Accordingly, Annexure-B of the circular No. 125/44/2019-GST, dated 18.11.2019 stands modified to that extent.

4.4. A suitably modified statement format is prescribed  for applicants to upload the details of invoices reflecting in their FORM GSTR-2A. The applicant is, in addition to details already prescribed, now required to mention HSN/SAC code which is mentioned on the inward invoices. In cases where supplier is not mandated to mention HSN/SAC code on invoice, the applicant need not mention HSN/SAC code in respect of such an inward supply.

5. Change in manner of refund of tax paid on supplies other than zero rated supplies : CBEC vide Para 4 of circular No. 135/05/202 dated 31.03.2020 clarified -The combined effect of the   Rule 86 (4A) and 92 (1A)  is that refund of tax paid on supplies (other than zero rated supplies ) will now be admissible proportionately in the respective original mode of payment. Details of clarification under this head has been brought out in the article –https://taxguru.in/goods-and-service-tax/refund-tax-paid-wrong-head-cgst-sgst-igst.html

6. Bunching of Refund claims across Financial Years: Clubbing of  refund claims across Financial Years is permissible .For details under this head please refer article :https://taxguru.in/goods-and-service-tax/clubbing-gst-refund-claim-financial-years-permissible.html

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