CA Umesh

What is the meaning of Refund

The expression “Refund” is defined in explanation of Sec 48. Expression of refund is inclusive in nature. It says refund includes refund of tax paid on goods and/or services exported out of India or inputs or input services used in goods and/or services which are exported out of India, or refund of tax paid on supply of goods regarded as deemed export, or refund of unutilized input tax credit as in Sec 48(3).

Refund includes refund of tax paid on :-

i. Goods or Services exported out of India

ii. Input/Input services used in goods/services exported out of India

iii. Tax Paid on supply of goods regarded as deemed export

(For e.g. Supply made to an SEZ unit or developer)

iv. Unutilised input tax  credit

Refund of Tax

♦ Any person claiming refund of any tax and interest paid by him, may make an application to proper officer within 2 years from the relevant date in such manner as may be prescribed.

♦ The term “Relevant date” is explained below.

♦ Any registered taxable person claiming refund of any balance in the electronic cash ledger, may claim such refund in monthly return u/s 34.

♦ A specialized agency of the UNO or any MFI and organization notified under united nations (Privileges and Immunities) act 1947 or Embassy or any other notified person u/s 49, may make an application to proper officer within 6 months from last day of the month in which supply was received, for claiming refund of an amount by him of inward supplies of any goods or services.

♦ It means there is no exemption for the payment of taxes on inward supplies to the category of the person as specified in u/s 49. It is clearly indicated that first pay the taxes and then claim refund.

Situation under which refund shall be arise

♦ Refund of tax on goods/services exported out of India or on inputs or input services used in goods/Services exported out of India.

♦ Refund of unutilized input tax credit

♦ Refund of tax paid on a supply which is not provided, either wholly or partially, and for which invoice has not been issued.

♦ Refund of tax in pursuance of sec 70

♦ Tax, interest or any other amount paid by applicant, if he had not passed on the incidence of such tax and interest to any other person.

♦ Tax or interest borne by the person notified by GST council

Refund of unutilized input tax credit

♦ A taxable person may claim refund of any unutilized input tax credit within 2 years from the end of the F/Y in which such claim for refund arises.

Unutilized Input Tax Credit shall be allowed in following cases:

1. Export including zero rated supplies

2. If Credit accumulated on account of rate of tax on input being higher than the rate of tax on outward supplies other than nil rated or fully exempt supplies.

♦ No refund shall be allowed if the goods exported out of India are subject to export duty. But law is silent about the services which are exported out of India, are subject to export duty.

♦ No refund of input tax credit shall be allowed if supplier of goods/services claims refund of output tax paid under IGST Act 2016.

♦ A registered taxable person, who is claiming refund of unutilized cenvat credit, defaulted in furnishing any return or required to pay any tax, interest or penalty which has not been stayed by any court/tribunal/ appellate authority by the specified date, the proper officer has 2 option

1. Withhold payment of refund due until the said person furnished the return or paid the tax, interest or penalty

2. Deduct from the refund due, any tax, interest, penalty, fee or any other amount which the said is liable to pay but remains unpaid under the act or any earlier law.

Documents required along with refund application

♦ Such documentary evidence as may be prescribed to establish that a refund is due to the applicant

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♦ The applicant may furnish such documentary or other evidence to establish that tax or interest, if any, paid on such tax or any other amount paid in relation to which such refund is claimed  was collected from, or paid by, him and the incidence of such tax and interest had not been passed on to any other person.

♦ It shall not be necessary for the applicant to furnish any documentary and other evidences, If amount claimed as refund is less than 5 lakh rupees, then he may file declaration based on the documentary or other evidences available with him, certifying that the incidence of such tax and interest had not been passed on to any other person.

Miscellaneous

♦ Notwithstanding any judgment, decree, direction of tribunal or court, or any provision of this act or in other laws, No refund shall be made except the situation mentioned above.

♦ On receipts of refund application, Proper officer may be satisfied for such refundable amount.

If officer is satisfied: He may pass an order and credited the refund amount to the fund

If officer is not satisfied: grant refund on provisional basis, 90% of the total amount claimed, excluding the ITC provisionally accepted and then pass the final order after due verification of document furnished by the applicant.

♦ If the officer is satisfied then he will pass the order within 60 days from the date of receipt of application.

♦ If an order giving rise to a refund is the subject matter of an appeal or further proceedings and the commissioner is of opinion that such refund is likely to adversely affect to the revenue in the said appeal or other proceedings, he may withhold the refund, after giving the taxable person an opportunity of being heard, till such time as he may determine {Sec 48(11)}

♦ If the refund is withheld under sec 48(11), the taxable person shall be entitled to interest u/s 50, if as a result of the appeal or further proceeding he becomes entitled to refund.

♦ Any advance tax deposited by a casual person or NR taxable person u/s 24(2) shall not be refunded unless such person furnished all the returns u/s 34 in respect of period for which certificate of registration granted to him.

♦ No refund shall be paid to the applicant if the amount is less than Rs 1000.

♦ The expression “Specified Date” shall mean

If no appeal has been filed: Last date for filling an appeal

If appeal has been filed: 30 days from the date of appeal

♦ The expression “Relevant date” shall mean

In case of export of goods:

-If exported by sea or air: date on which ship or aircraft leaves India

-If exported by land: Date on which goods pass the frontier

-If exported by post: Date of dispatched of goods by post office to a place outside India

In case of deemed exports: date on which the return relating to such deemed exports is filed

In case tax become refundable as a consequence of any judgement or order: date of communication of such judgement or order

√ In case of refund of unutilized ITC: end of F/Y in which such claim for refund arises

√ In case tax is paid provisionally under this act or rules made there under: date of adjustment of tax after the final assessment thereof.

√ In case of export of services, where refund of tax paid is available of services themselves or, as the case may be, the inputs or input services used in such services, the date of-

-Receipts of payment in convertible foreign exchange, where supply had been completed prior to receipt of payment

-Issue of invoice, where payment for the service had been received in advance prior to the date of issue of the invoice.

√ In case of a person, other than the supplier, the date of receipt of goods or services by such person

√ In any other case, the date of payment of tax.

♦ If any tax ordered to be refunded to any applicant is not refunded within 60 days from the date of receipt of application, then interest (rate as notified by council) shall be payable to such taxable person from the date immediately after the expiry of 60 days from the date of receipts of application till the actual date of refund of such tax.

♦ The taxable person shall be entitled to interest on refund if such refund of tax arise as a consequences of any order made by an appellate authority, tribunal or any court.

♦ There shall be establishment of centre or state govt fund (Consumer welfare fund) and amount referred to in sec 48(5) & (6) and investment income of such fund shall be credited to this fund.

♦ The government shall utilize such fund for the welfare of consumer and also specify authority to maintain proper records in consultation with CAG.

Transitional Provisions

Sec 179: Pending refund claims to be disposed of under earlier law

Appointed day-: Case-1

♦ Any person filed claim for refund amount before or after the appointed day, for refund of Cenvat credit, duty, tax or interest paid before the appointed day, shall be disposed under earlier law.

♦ If refund of cenvat credit fully or partially rejected, the so rejected shall be lapse.

♦ No refund of balance amount of cenvat credit shall be allowed which are carried forward under this act as on appointed day.

♦ Any amount eventually accruing to him shall be paid in cash.

♦ This provision is overruling the all provisions of earlier law other than Sec 11B(2) of central excise act 1944.

Sec 180: Refund claims filed after the appointed day for goods cleared or service provided before the appointed day and exported before or after the appointed day to be disposed of under earlier law

Appointed Day: Case-2

♦ Any person filed claim for refund amount after the appointed day, for refund of any duty or tax paid for goods or service exported before or after  the appointed day, shall be disposed under earlier law.

♦ If refund of cenvat credit fully or partially rejected, the so rejected shall be lapse.

♦ No refund of balance amount of cenvat credit shall be allowed which are carried forward under this act as on appointed day.

Sec 181: Refund claims filed after the appointed day for payment received and tax deposited before the appointed day in respect of services not provided

Appointed Day: Case-3

♦ Any person filed claim for refund amount after the appointed day, for the refund of such tax amount which is deposited to the government in respect of services not provided, shall be disposed under earlier law.

♦ Any amount eventually accruing to him shall be paid in cash

♦ This provision is overruling the all provisions of earlier law other than Sec 11B(2) of central excise act 1944.

(Author can be reached umeshkumar.kumar14@gmail.com)

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