50th GST council updates were aiming to remove the vagueness on certain aspects, especially more litigation prone areas have been tackled to avoid the litigation including providing the clarity on establishment of GST tribunal.
In this article, I have enumerated updates pertaining to refunds under GST:
I. Refund of accumulated input tax credit under Section 54(3) on the basis of entry available as per FORM GSTR 2B
Presently, the refunds are sanctioned based on GSTR 2A as per para 36 of the circular No. 125/44/2019-GST, dated 18.11.2019. Further para 5 of Circular No. 135/05/2020-GST dated 31.03.2020 provides that the refund of accumulated input tax credit (ITC) is restricted to the input tax credit 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. After insertion of clause (aa) in Section 16(2) of the CGST Act, 2017 w.e.f. 1st January 2022 vide Notification No. 39/2021-C.T. dated 21.12.2021, and the amendment in rule 36(4) of CGST rules, 2017 w.e.f. 1st January 2022 vide Notification No. 40/2021- CT dated 29.12.2021, entry in GSTR 2B is mandatory to claim the input tax credit which is being aligned for refund claim.
II. Requirement of the undertaking in FORM RFD 01 inserted vide Circular No. 125/44/2019-GST, dated 18.11.2019.
Since the functionality of furnishing of FORM GSTR-2 and FORM GSTR-3 remains unimplemented, it has been decided by the GST Council to sanction refund of provisionally accepted input tax credit. However, the applicants applying for refund must give an undertaking to the effect that the amount of refund sanctioned would be paid back to the Government with interest in case it is found subsequently that the requirements of clause (c) of sub-section (2) of section 16 read with sub-section (2) of section 42 of the CGST Act have not been complied with in respect of the amount refunded. This undertaking should be submitted electronically along with the refund claim.
However, section 42 of CGST Act, 2017 has been omitted w.e.f. 1st October 2022 vide Notification No. 18/2022-CT dated 28.09.2022. In view of this reference of section 42, form GSTR-2 and Form GSTR-3 being deleted from the said circular and the standard undertaking formats. Accordingly, clarifications, were carried out vide circular number 197/09/2023 dated 17th July 2023 to give effect to the changes.
III. Clarification regarding determination of value of adjusted total turnover in the formula under Rule 89(4):
Presently ambiguity exists as to whether value of goods exported out of India must be considered as per Explanation under sub-rule (4) of rule 89 of CGST Rules for the purpose of calculation of “adjusted total turnover” in the formula under the said sub-rule? Through the present circular it is being clarified that, for the purpose of sub-rule (4) of rule 89, the value of export/ zero rated supply of goods to be included while calculating “adjusted total turnover” will be same as being determined as per the amended definition of “Turnover of zero-rated supply of goods” in the said sub-rule.
Otherwise also trade and industry was considering this by taking turnover reported at numerator also in the denominator. Wherever such practices not followed, this clarification would be a great relief as it would enhance the refund amount. For the past, wherever not considered, one can consider making application for enhanced refund amount under “any other head”.
IV. Clarification in respect of admissibility of refund where an exporter applies for refund subsequent to compliance of the provisions of sub-rule (1) of rule 96A.
There are many instances where goods could not be exported or payment for export of services could not be received within time frame as prescribed in clause (a) or (b), as the case may be, of sub-rule (1) of rule 96A, but the said compliances are made after expiry of the said timelines. In such cases, the ambiguity exists that, whatever IGST paid due to non-compliance of the law, whether refund can be sought? Now, in the present circular it has been clarified this position that, after export of the goods or realization of payment in case of export of services, as the case may be, the said exporters would be entitled to claim refund of the tax so paid earlier, in compliance of the provisions of sub – rule (1) of rule 96A of the CGST Rules. It is further proposed that the refund application in the said scenario may be made under the category “Excess payment of tax”.
This clarification is in favour to trade and industry specially to export community wherein the principle of substantial benefits cannot be denied for procedural lapse was upheld.
50th GST council has lived upto the hype which was created as many of the practical issues troubling the taxpayers have been addressed. One can hope that the council would consider other pending practical issues and set a right direction for the businessmen.