CBIC vide Circular No. 59/33/2018-GST dated 04.09.2018 has issued clarifications on various issues and errors faced in the GST  refund procedure. This article tries to explain point wise clarifications issued   in brief with its practical applicability and status till date.

1. Submission of GSTR-2A in place of Invoices

This clarification has come up with a big relief to both exporters and Department from managing huge bundle of Invoices. The Applicant can submit GSTR-2A for claiming refund of Input tax credit and the proper officer shall rely upon FORM GSTR-2A as an evidence of the accountal of the supply by the corresponding supplier in relation to which the input tax credit has been availed by the claimant. The proper officer shall not insist on the submission of an invoice (either original or duplicate) the details of which are present in FORM GSTR-2A of the relevant period submitted by the claimant.

There may be situations where Form GSTR-2A does not account for all the Invoices of which refund has been claimed. In such cases, the proper officer may call for the hard copies of such invoices if he deems it necessary for the examination of the claim for refund.

The claimant is also required to provide a statement in Annexure-A of the list of Invoices of which refund is claimed. The additional requirement in this annexure is that we have to specify the eligibility of ITC also. Moreover, it is same as statements submitted earlier.

However, till date, the Proper Officer are accepting Invoices also. It is in our hand, we can either submit copy of Invoices or copy of GSTR-2A, either of them are accepted by the Department for the purpose of claiming refund of ITC.

How to claim refund under GST Online

How to claim refund under GST Online

2. Calculation of GST Refund Amount

In case of refund of unutilized amount of ITC, the refund amount shall be calculated as least of the following:

a) The maximum refund amount as per the formula in rule 89(4) or rule 89(5) of the CGST Rules, 2017 Total amount of ITC * Value of Zero rated Turnover/ Value of Aggregate turnover

b) The balance in the electronic credit ledger of the claimant at the end of the tax period for which the refund claim is being filed after the return for the said period has been filed; and

c) The balance in the electronic credit ledger of the claimant at the time of filing the refund application.

After calculating the least of the above three amount, the claimed amount should be debited from the Electronic credit ledger of the claimant and ARN should be generated for the same.

Currently, the formula stated in 2(a) is applied on cumulative figure of CGST, SGST and IGST. Hence, we have to manually apply this formula separately to CGST, SGST and IGST and thereafter, find out the least amount out of three categories for CGST, SGST and IGST.

3. Re-credit in case of rejection of GST refund claim:

a. GST Refund Rejection due to Ineligible ITC:

In cases where refund of ITC has been rejected due to ineligibility of ITC under sub-section (1), (2) or (5) of Section 17, the rejected amount shall be recredited to the Electronic credit ledger using Form GST RFD-01B. Thereafter, for recovery of such ineligible ITC a demand notice under Section 73 or 74 of the Act shall be issued. In case the demand is confirmed by an order issued under section 73(9), or section 74(9) of the CGST Act,  the said amount shall be added to the electronic liability register of the claimant through FORM GST DRC07. Alternatively, the claimant can voluntarily pay this amount, along with interest and penalty, if applicable, before service of the demand notice, and intimate the same to the proper officer in FORM GST DRC-03 .

This will create more blockage of working capital. The CBIC has taken a longer route of re-crediting the ineligible ITC and then compelling the claimant to pay the same with Interest.

Instead the same should not be recredited and settled there only.

b. GST Refund Rejection due to other reasons

The rejected amount shall be re-credited to the electronic credit ledger of the claimant using FORM GST RFD-01B only after the receipt of an undertaking from the claimant to the effect that he shall not file an appeal against the said rejection or in case he files an appeal, the same is finally decided against the claimant, as has been laid down in rule 93 of the CGST Rules.

 Hence, if Department has issued any FORM PMT-03 earlier for rejection of refund claim, for reasons other than ineligible ITC, then it will not auto re-credit to our Electronic credit ledger, until we give a written undertaking for not filing an appeal against said rejection.

4. Scope of Rule 96(10) of CGST Rules, 2017

It is clarified that the restriction under rule 96(10) of the CGST Rules, as amended retrospectively by notification No. 39/2018-Central Tax, dated 04.09.2018, applies only to those purchasers/importers who are directly purchasing/importing supplies on which the benefit of certain notifications, as specified in the said sub-rule, has been availed.

5. Status after Deficiency Memo

In case of any deficiencies, the Proper Officer may issue Deficiency Memo in Form GST RFD-03, requiring him to file a fresh refund application after rectification of such deficiencies. It further requires re-credit of amount debited in Electronic Credit Ledger at the time of original application. The intent of the law is that in case a deficiency memo in FORM GST RFD-03 has been issued, the refund claim will have to be filed afresh.

Currently, the portal is not allowing the facility to re-credit the amount debited under Rule 89(3). Hence, at present, only the deficient documents and rectification, if any, shall be submitted with the Proper Officer after issuance of Deficiency Memo and the refund are processed in the original application only and the fresh application for the same period may not be filed on portal, as of now.

6. Disbursal of refund amount after sanctioning

A few cases have come to notice where a tax authority, after receiving a sanction order from the counterpart tax authority (Centre or State), has refused to disburse the relevant sanctioned amount calling into question the validity of the sanction order on certain grounds. It is clarified that the remedy for correction of an incorrect or erroneous sanction order lies in filing an appeal against such order and not in withholding of the disbursement of the sanctioned amount.

Hence, neither the State nor the Central tax authorities shall refuse to disburse the amount sanctioned by the counterpart tax authority on any grounds whatsoever, except under sub-section (11) of section 54 of the CGST Act.

7. Treatment of GST refund applications where amount claimed is less than rupees one thousand:

It is clarified that the limit of rupees one thousand shall be applied for each tax head separately and not cumulatively. The limit would not apply in cases of refund of excess balance in the electronic cash ledger.

The refund procedure has been simplified and more and more automation in the above procedure is awaited, facilitating faster and easier way for claimant to claim refund.

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Qualification: CA in Practice
Company: Rajvanshi & Associates
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