The Central Board of Indirect Taxes & Customs (CBIC) has introduced few amendments vide Notification No. 15/2021 – Central Tax dated 18.05.2021 in the CGST Rules relating to refunds which have been discussed below:
♦ Exclusion of the period between the date of filing of refund application to the date of issuance of deficiency memo from the limitation period of 2 years
As per Section 54 (1) of the CGST Act, 2017, an assessee is required to file a refund application within 2 years from the relevant date and Rule 90(3) of the CGST Rules, 2017 provides that where the proper officer finds any deficiency in the said application, he/she may issue a deficiency memo vide Form GST RFD 03to communicate such deficiencies. The aseessee is then required to file a fresh refund application after rectification of such deficiencies. Para 12 of the Circular No. 125/44/2019 – GST dated 18.11.2019 clarified that the filing of the fresh application must also be done within the limitation period of 2 years from the relevant date irrespective of the date of filing of the old refund application.
Such provision had given rise to number of refund application being rendered time barred due to issuance of deficiency memos and filing of fresh applications after removal of deficiency and thereby resulting in rejection of the refund claim.
To overcome this hassle, a proviso has been added to Rule 90(3) which provides that the time period from the date of filing of the refund application till the date of issuance of deficiency memo shall be excluded in computing the limitation period of 2 years.
In the case of Insitel Services Pvt Ltd v. Union Of India & Ors, 2020-TIOL-1579-HC-DEL-GST, the legality of Rule 90(3) has been challenged for being ultra vires the Article 14 and Article 19(1)(g) of the Constitution of India since issuance of a deficiency memo under Rule 90(3) effectively results in rejection of the refund application without giving any opportunity of hearing to the applicant and the petitioner has also prayed that the Rule 90(3) may be read down to the effect that the rectification of deficiencies shall not be treated as submission of fresh application of refund for the purpose of computing limitation for refund applications and grant of interest on delayed refund. Thus, the Hon’ble High Court of Delhi has been pleased to issue an order in the petition.
This amendment is a welcome step in favor of the assessee and it would help in curbing any frivolous deficiency memo issued solely with the intention to harass the assessee and deny the refund. The move come to the aid of the assessee in these difficult times, when the businesses are facing severe capital crunch due to the repeated lockdowns and general slowdown due to the pandemic.
Now what needs to be ascertained is whether the said amendment will have a retrospective effect. It is a settled position of law that where a legislation confers a procedural benefit, then it is presumed that such legislation will have a retrospective effect. In reliance of the same, the present amendment can be said to have a retrospective effect.
♦ Facility of withdrawal of the refund application
New sub-rule (5) & (6) have been inserted in Rule 90 which allows the assessee to withdraw their refund application. The application can be withdrawn at any time before the issuance of provisional sanction order in Form GST RFD 04, refund sanction order in Form GST RFD 06, payment order in Form GST RFD 05, refund withhold order in Form GST RFD 07 or notice in Form GST RFD 08.
The withdrawal of the refund application is required to be made vide Form GST RFD 01W. Once the application for withdrawal is submitted, the amount which was debited from the electronic credit or cash ledger of the assessee, at the time of filing of refund application, shall be credit back to the respective ledger.
Such a facility will allow the assessee to withdraw the refund application if filed erroneously and allow automatic credit of the debited amount without being at the mercy of the department for recredit of cash or credit.
♦ Withholding of refund
Rule 92 and 96 have been amended to omit Part A of Form GST RFD 07, which provided for the details of the refunds completely adjusted against any outstanding demand. Now Part B of Form GST RFD 07 which includes the details of the amount of refund withheld, shall become Part A.
Further, a proviso has been added Rule 92 (2) which provides that where the refund is no longer liable to be withheld, the proper officer may pass release the withheld refund by passing an order in Part B of Form GST RFD 07.
The present notification has introduced the above said procedural amendments which have come as a relief to the assesses and businesses and will hopefully ease their burden to a certain extent as far as GST refund is concerned.