Article explains Refund in GST, Type of Refund in the GST, Time limit for GST refund claim, Details of the circular issued by Department in relation to the GST refund, Scope of GST refund, Process for the GST refund as per CGST Act,2017, Provisional GST Refund, Interest in the GST refund and Other issue and their clarification of refund.
There is no ambiguity that for every taxpayer provision related to refunds are always most favorites under any Act and GST Act is no different. In fact, every organization designs their business process in such a manner so as to make optimum utilization of the refund provisions. CGST Act having Section 54 which deal in the refund, CGST Rules 2017 having provison relating to the refund in the Chpater X Rule 89 to 97A, 22 circular issued by department in regarding to refund with 8 circular rescind with master circular 125/19 in the refund, so in this detail article, we will discuss the refund provision in the GST as far as possible, further refund was discussed in the GST 6th council meeting in the details and we can refer the discussion of the council for the better clarity.
there are three type of refund in the GST regime, first is refund of tax paid, second is Input tax credit and third are others.
Refund of Tax paid – it include zero rated supply with payment of tax either goods or services and sez supply for the goods and services both, deemed export and wrong payment of tax and excess payment of tax
Refund of acculamated Input tax credit (hereafter referred as ITC) – zero rated supply without payment of tax for the export of goods or services, for SEz supply for goods or services, inverted duty structure, deemed export.
Others :- excess payment in cash ledger, on account of appeal or assessment and any other revision.
For the all type of refund, only export of goods with payment of tax, the shiping bill itself is considered as a refund application, for the rest, registered person has to apply to the department.
These applications for the following types of refunds shall be filed in FORM GST RFD 01 on the common portal and the same shall be processed electronically:
1. Refund of unutilized input tax credit (ITC) on account of exports without payment of tax;
2. Refund of tax paid on export of services with payment of tax;
3. Refund of unutilized ITC on account of supplies made to SEZ Unit/SEZ Developer without payment of tax;
4. Refund of tax paid on supplies made to SEZ Unit/SEZ Developer with payment of tax;
5. Refund of unutilized ITC on account of accumulation due to inverted tax structure;
6. Refund to supplier of tax paid on deemed export supplies;
7. Refund to recipient of tax paid on deemed export supplies;
8. Refund of excess balance in the electronic cash ledger;
9. Refund of excess payment of tax;
10. Refund of tax paid on intra-State supply which is subsequently held to be inter-State supply and vice versa;
11. Refund on account of assessment/provisional assessment/appeal/any other order;
12. Refund on account of “any other” ground or reason.
GST refund application shall be filled within 2 Year of relevant date. it was 2 year in the initial draft GST law, the reason for the giving 2 year time limit that Registered Person (hereinafter referred as RP) shall file his annual return after 18 month i.e. Sept in the next year as per law (ignoring the extension given by the department) and RP need 6 month at least time for the forget to claim refund, if same was pointed out by CA in the annual return in any case, so same was given 2 year from the relevant date.
|S. No.||GST Circular No||Particulars||Status as on date|
|1||17/2017||Process for the filling of refund claim by manual way in the case of Zero rated supply||Rescinded vide Circular No. 125/44/2019 – GST|
|2||18/2017||Refund of unutilized input tax credit of GST paid on inputs in respect of exporters of fabrics.||Valid as on date|
|3||24/2017||Manual filing and processing of refund claims on account of inverted duty structure, deemed exports and excess balance in electronic cash ledger.||Rescinded vide Circular No. 125/44/2019|
|4||36/2018||Processing of refund application for UIN entities||Valid as on date|
|5||37/2018||clarifications on exports related refund issues||Rescinded vide Circular No. 125/44/2019|
|6||43/2018||Clarifying the issues arising in refund to UIN.||Valid as on date|
|7||45/2018||Clarification on refund related issues.||Rescinded vide Circular No. 125/44/2019 – GST dated 18.11.2019.|
|8||48/2018||refund of unutilized ITC for job workers||Valid as on date|
|9||56/2018||Clarification on removal of restriction on refund of accumulated Input Tax Credit on fabrics||Valid as on date|
|10||59/2018||Clarification on refund related issues||Rescinded vide Circular No. 125/44/2019|
|11||60/2018||Processing of refund applications filed by Canteen Stores Department (CSD||Valid as on date|
|12||63/2018||Clarification regarding processing of refund claims filed by UIN entitles||Valid as on date|
|13||70/2018||Clarification on certain issues related to refund.||Rescinded vide Circular No. 125/44/2019 –|
|14||79/2018||Clarification on refund related issues||Rescinded vide Circular No. 125/44/2019|
|15||94/2019||Seeks to clarify certain refund related issues under GST||Rescinded vide Circular No. 125/44/2019|
|Processing of refund applications in FORM GST RFD-01A submitted by taxpayers wrongly mapped on the common portal||Valid as on date|
|17||106/2019||Refund of taxes paid on inward supply of indigenous goods by retail outlets established at departure area of the international airport beyond immigration counters when supplied to outgoing international tourist against foreign exchange||Valid as on date|
|18||110/2019||Seeks to clarify the eligibility to file a refund application in FORM GST RFD-01 for a period and category.||Valid as on date|
|19||111/2019||Seeks to clarify procedure to claim refund in FORM GST RFD-01 subsequent to favourable order in appeal or any other forum||Valid as on date|
|20||125/2019||Master circular for the refund – Seeks to clarify the fully electronic refund process through FORM GST RFD-01 and single disbursement.||Valid as on date|
|21||135/2020||Circular on Clarification on refund related issue arise from the Circular No 125/2019||Valid as on date|
|22||139/2020||Clarification on Refund Related Issues.||Valid as on date|
|S. No.||Group||Nature of refund||Scope of refund/how much refund will be done|
|Export of goods or service with payment of tax||Actual Amount paid as tax|
|2||SEZ supply with payment of tax|
|3||Tax paid on deemed export to supplier|
|4||Wrong payment of tax|
|5||Excess payment of tax|
|6||Input Tax Credit||Export of goods or services without payment of duty||ITC on account of input and input services only|
|7||SEZ supply without payment of tax|
|8||Inverted duty structure||ITC on account of input only|
|9||Tax paid on deemed export to recipient||Actual amount paid as tax|
|10||Others||Excess amount in cash ledger||Actual amount|
|11||On account of appeal/assessment etc|
Note – there is a gap in the law, if exporter does export with payment of IGST by using ITC ledger for payment of tax, then he came in the S. No. 1 and he can take refund of capital goods also as in this case, refund is allowed as actual amount paid as tax and tax on capital goods can be considered as actual amount as paid as tax.
However ITC on capital goods can be utilised when exporter is claiming for GST Refund as per Section 16(3)(b) of IGST Act 2017 i.e. after payment of IGST taxes read with section 54 of CGST act,2017
A. Application for the refund to be done in the RFD-01 :-
B. Acknowledgement (RFD-02) or Deficiency Memo (RFD-03) :-
C. Deficiency Memos RFD – 03
D. Further process by the PO and RP :-
E. Payment of refund by the department :-
F. If department is not satisfied with refund application then :-
G. Working done by Department at time of analysis/assessment of refund application :-
Maximum refund = Turnover of inverted duty structure * Net ITC/Adjusted total turnover – tax payable on such inverted rate of supply
Section 54(3)(ii) – where the credit has accumulated on account of rate of tax on inputs being higher than the rate of tax on output supplies (other than nil rated or fully exempt supplies), except supplies of goods or services or both as may be notified by the Government on the recommendations of the Council
Section 2 (59)- inputs as any goods other than capital goods used or intended to be used by a supplier in the course or furtherance of business
Thus, inputs do not include services or capital goods
Para 53 – Therefore, the intent of the law is not to allow refund of tax paid on input services or capital goods as part of refund of unutilized input tax credit. It is clarified that both the law and the related rules clearly prevent the refund of tax paid on input services and capital goods as part of refund of input tax credit accumulated on account of inverted tax structure.
Cases whereas the output is service and RP has taken input of Goods or services or both, then RP is entitled for the refund in that case.
There is nowhere mentioned to provide the calculation of the stock details in the case of refund.
List of documents required to be submitted as per Annexure A – Circular No 125/2019
|Type of refund||Declaration/Statement/Undertaking/ Certificates to be filled online||Supporting documents to be additionally uploaded|
|Refund of ITC unutilized on account of accumulation due to inverted tax
|Declaration under second and third
proviso to section 54(3)
|Copy of GSTR-2A of the relevant period|
|Declaration under section 54(3)(ii)||Statement of invoices (Annexure-B)|
|Undertaking in relation to sections
16(2)(c) and section 42(2)
|Self-certified copies of invoices entered in Annexure-B whose details are not found in GSTR-2A of the relevant period|
|Statement 1 under rule 89(5)|
|Statement 1A under rule 89(2)(h)|
|Self-declaration under rule 89(2)(l) if
amount claimed does not exceed two lakh rupees, certification under rule 89(2)(m)otherwise
Rule 86(4A) Where a registered person has claimed refund of any amount paid as tax wrongly paid or paid in excess for which debit has been made from the electronic credit ledger, the said amount, if found admissible, shall be re-credited to the electronic credit ledger by the proper officer by an order made in FORM GST PMT-03.
92(1A)- Where, upon examination of the application of refund of any amount paid as tax other than the refund of tax paid on zero-rated supplies or deemed export, the proper officer is satisfied that a refund under sub-section (5) of section 54 of the Act is due and payable to the applicant, he shall make an order in FORM RFD-06 sanctioning the amount of refund to be paid, in cash, proportionate to the amount debited in cash against the total amount paid for discharging tax liability for the relevant period, mentioning therein the amount adjusted against any outstanding demand under the Act or under any existing law and the balance amount refundable and for the remaining amount which has been debited from the electronic credit ledger for making payment of such tax, the proper officer shall issue FORM GST PMT-03 re-crediting the said amount as Input Tax Credit in electronic credit ledger.]
Refund can be claimed only upto the closing balance of the relevant tax period not more than, the reason for the same is RP need to debit the credit ledger at the time of application for the refund and a person cannot debit the amount more than available balance in general terms also.
Any refund claim for a tax period may be filed only after furnishing all the returns in FORM GSTR-1 and FORM GSTR-3B which were due to be furnished on or before the date on which the refund application is being filed. (Para 6)
Whereas Section 54(10) states that refund to be withhold if return is not filled and adjust the tax or interest or penalty due to the person, withhold means department has to process the refund claim, approve the same but not disbursed due to non filling of return, hence in this case also, circular is against the law.
In the case of goods export out of india with IGST Paid, Rule 96(1)(b) states that application in the shiping bill for the refund deemed to have been filled when RP has furnished return in GSTR3 or GSTR 3B as the case may be, whereas Para 6 ask that GSTR 1 is also mandatory, it is agisnt the law.
Section 54(3) a registered person may claim refund of any unutilised input tax credit at the end of any tax period:
(59) “input” means any goods other than capital goods used or intended to be used by a supplier in the course or furtherance of business;
Section 2 (62) “input tax” in relation to a registered person, means the central tax, State tax, integrated tax or Union territory tax charged on any supply of goods or services or both made to him and includes—
(a) the integrated goods and services tax charged on import of goods;
(b) the tax payable under the provisions of sub-sections (3) and (4) of section 9;
but does not include the tax paid under the composition levy
Section 2(63) “input tax credit” means the credit of input tax;
Section 2(52) “goods” means every kind of movable property other than money and securities but includes actionable claim, growing crops, grass and things attached to or forming part of the land which are agreed to be severed before supply or under a contract of supply;
In my opinion :-
As per my knowledge or opinion, “input” word used in the Section 54(2)(ii) meaning whereas input rate is higher in the case of output supply, there is not restriction placed by the act with intention to block the refund of Capital goods but now used or interpreated by the department.
Bombay well Print P Ltd Vs CBIC 2019 – in progress Bombay HC
Zuari Agrochemical P Ltd Vs UOI 2020 – in progress Bombay HC
Shree Rama Newsprint Ltd Vs UOI 2018 – in Process Gujarat HC
Quarry Owners Association vs. Union of India [TS-588-HC-2019 Gujarat HC
AFCONS-SIBMOST Joint Venture vs. Union of India and Other- In process in Patna High Court
M/s Raymond UCO Denim Private Limited – In Progress in Bombay High Court.
Export of goods or services can be made without payment of Integrated tax under the provisions of rule 96A of the CGST Rules. Under the said provisions, an exporter is required to furnish a bond or Letter of Undertaking (LUT) to the jurisdictional Commissioner before effecting zero rated supplies.
procedure for filing of LUT has been specified vide Circular No. 8/8/2017 –GST dated 4.10.2017.
Para 44 – if exporter do export before the making LUT, LUT filled after export and claim refund for the GST paid, then if exporter able to established that exports in terms of the relevant provisions 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.
Rule 96A (1) of the CGST Rules provides that any registered person may export goods or services without payment of Integrated tax after furnishing a LUT / bond and that he would be liable to pay the tax due along with the interest as applicable within a period of fifteen days after the expiry of three months and The time period in case of services is fifteen days after the expiry of one year or or such further period as may be allowed by the Commissioner from the date of issue of the invoice for export, if the goods or services are not exported out of India, if exporter cannt able to export the goods within above timeline, then department is not allowed to insisit taxpayers for the payment of IGST – Refer Para 45
requirement of self declaration for the prosecuted is already satisfied in case of exports under LUT as if a person gives this declaration, then only he can export with LUT otherwise required to export under bond, so asking for self–declaration with every refund claim where the exports have been made under LUT is not required – Refer 46
Refund is allowed with head to head only in the case of other than Zero Rated supply Rule 86(4A) – Para 4 Notification NO 135/2020
1. Refund of excess payment of tax;
2. Refund of tax paid on intra-State supply which is subsequently held to be interState supply and vice versa;
3. Refund on account of assessment/provisional assessment/appeal/any other order;
4. Refund on account of “any other” ground or reason.
In the above 4 cases, earlier refund was paid in the cash mode even paid by the RP with ITC mode, but government restrict the same, now same is allowed with payment vide only i.e. if a persn made payment of excess tax from the accumulated ITC, then refund will be made to him by credit in the ITC not in cash, for the control of encashment of credit balances,
HSN Code is mandatory required in the case of refund :- Para 6 – 135/2020 – New Requirement to mention HSN/SAC in Annexure ‘B’ in the statement of invoices for the differentiates the capital goods/input/input services
Why work contractor not comes in the preview of refund in inverdreted duty structure :- in the council 6th council meeting, there was objection for the taking work contract by the CBEC with specific objected in the work contractor case, the hon’ble finance minister of uttar Pradesh, Karnataka and west bangal was also agreed on that prospaol and later on council has accepted this propsaol for the excluding them for the inverdted duty.
Refund in the case of invoices / documents relating to imports, ISD invoices and the inward supplies liable to Reverse Charge (RCM supplies) :- these are not relflacitng in the GSTR 2A of the assessee, in the circular No 135, same was restrict and allowed only to the extent of GSTR 2A (Para 5.2), after the issuing of this circular, department started rejected of the refund in the above cases which was not reflacted in the GSTR2A due to process of the GST Law, so department has clarified for the allowance of the refund in the above cases, extract are below.
The aforesaid circular does not in any way impact the refund of ITC availed on the invoices / documents relating to imports, ISD invoices and the inward supplies liable to Reverse Charge (RCM supplies) etc.. It is hereby clarified that the treatment of refund of such ITC relating to imports, ISD invoices and the inward supplies liable to Reverse Charge (RCM supplies) will continue to be same as it was before the issuance of Circular No. 135/05/2020- GST dated 31st March, 2020.