CBIC recently issued Notification No. 39/2018 – Central Tax, Circular No. 59/33/2018-GST and Circular No. 60/34/2018-GST all dated 04/09/2018 by which it amended and clarified on GST Refund related issues. Summary of which is as follows:-
Increase in refund amount due to exclusion of IGST paid zero rated supplies from Adjusted Turnover
Formula for calculation of maximum refund under Rule 89(4) is as follows:
Refund Amount = (Turnover of zero-rated supply of goods + Turnover of zero-rated supply of services) x Net ITC ÷Adjusted Total Turnover
(E) “Adjusted Total turnover” means the turnover in a State or a Union territory, as defined under clause (112) of section 2, excluding –
(a) the value of exempt supplies other than zero-rated supplies and
(b) the turnover of supplies in respect of which refund is claimed under sub rules (4A) or (4B) or both, if any, during the relevant period
However the definition of adjusted turnover in clause (E) has been modified by Notification 39/2018-CTR dated 04-09-2018 as under :
‘(E) “Adjusted Total Turnover” means the sum total of the value of-
(a) the turnover in a State or a Union territory, as defined under clause (112) of section 2, excluding the turnover of services; and
(b) the turnover of zero-rated supply of services determined in terms of clause (D) above and non-zero-rated supply of services,
excluding-
(i) the value of exempt supplies other than zero-rated supplies; and
(ii) the turnover of supplies in respect of which refund is claimed under sub-rule (4A) or sub-rule (4B) or both, if any, during the relevant period.’
Comments:
Turnover of zero-rated supply of services determined in terms of clause (D) as per Rule 89(4) means The value of zero-rated supply of services made without payment of tax under bond or letter of undertaking, calculated in the following manner, namely:-
Zero-rated supply of services is the aggregate of the payments received during the relevant period for zero-rated supply of services and zero-rated supply of services where supply has been completed for which payment had been received in advance in any period prior to the relevant period reduced by advances received for zero-rated supply of services for which the supply of services has not been completed during the relevant period.
Turnover of the value of supplies can there fore be bifurcated as follows:
1. Turnover of non zero rated supply of services
2. Turnover of zero rates supply of service on which tax has been paid
3. Turnover of zero rated supply of service on which tax has not been paid
Since the definition of adjusted turnover has been modified to include only:
1. Turnover of zero rated supply of service on which tax has not been paid
2. Turnover of non zero rated supply of services
Hence the Turnover of zero rated supply of service on which tax has been paid stands excluded from the adjusted turnover which is denominator in the formula for calculation of refund.
The nominator already includes only the Turnover of zero rated supply of service on which tax has not been paid by virtue of definition of turnover of zero rated supply of service. Hence it already excludes Turnover of zero rated supply of service on which tax has been paid.
This shall result in increase in quantum of refund amount in case of service providers who are making both tax paid as well as not tax paid zero rated supplies
Domestic Supplier of Exporter claiming benefit of advance authorization/ EPCG license etc. shall not debar exporter from claiming IGST refund on exports
As per existing provisions of Rule 96(10), The persons claiming refund of integrated tax paid on exports of goods or services should not have received supplies on which the supplier has availed the benefit of:
a) 48/2017 dated 18-10-2017 [i.e. Deemed Exports (Supply of goods by a registered person against Advance Authorization/EPCG/to EOU/EHTP/STP/BTP, supply of gold by bank/PSU against advance authorization)
b) 40/2017-CTR or 41/2017-IGST(Rate) dated 23-10-2017 [0.05/0.10% of tax]
c) 78/2017 or 79/2017-Customs dated 13-10-2017
However the provision of Rule 96(10) have been modified by Notification 39/2018- CTR dated 4-9-2018, w.e.f. 23-10-2017,retrospectively, to deny to the person claiming refund of IGST paid on exports if he has :
a) Received supplies on which benefit of 48/2017-CTR or 40/2017-CTR or 41/2017-IGST(rate) has been availed or
b) Availed the benefit of 78/2017 or 79/2017-Customs
Clarification
Further, As per Para 5 of Circular 59/2018 dated 04-09-2018. It has been clarified that :
5.1 Rule 96(10) of the CGST Rules, as amended retrospectively by notification No. 39/2018-Central Tax, dated 04.09.2018 provides that registered persons, including importers, who are directly purchasing/importing supplies on which the benefit of reduced tax incidence or no tax incidence under certain specified notifications has been availed, shall not be eligible for refund of integrated tax paid on export of goods or services.
For example, an importer (X) who is importing goods under the benefit of Advance Authorization/EPCG, is directly purchasing/importing supplies on which the benefit of reduced/Nil incidence of tax under the specified notifications has been availed. In this case, the restriction under rule 96(10) of the CGST Rules is applicable to X.
However, if X supplies the said goods, after importation, to a domestic buyer (Y), on payment of full tax, then Y can rightfully export these goods under payment of integrated tax and claim refund of the integrated tax so paid. However, in the said example if Y purchases these goods from X after availing the benefit of specified notifications, then Y also will not be eligible to claim refund of integrated tax paid on export of goods or services.
5.2 Overall, 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.
Submission of Invoices for claim of refunds limited to invoices missing in GSTR-2A
It was stated in earlier circular no. 37/11/2018 that :
| For Refund claim of IGST on Exports | Invoices of Inputs, Input services and Capital goods to be submitted |
| For Refund claim of unutilized ITC on Exports | Invoices of Inputs and Input services to be submitted |
However as per Circular No. 59/2018 dated 4-09-2018, it has been clarified that :
a) refund claim shall be accompanied by a print-out of FORM GSTR-2A of the claimant for the relevant period for which the refund is claimed
b) The proper officer shall rely upon FORM GSTR-2A as an evidence of the accounting of the supply by the corresponding supplier in relation to which the input tax credit has been availed by the claimant. It is emphasized that 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.
c) Hard copies of invoices shall be filed where claim of ITC does not appear in GSTR-2A
d) Details of Invoices on the basis of which refund of ITC is claimed shall be submitted in manually along with RFD-01A and ARN
Calculation of Refund as per system validation [Circular No. 59/2018 dated 4-09-2018]
The refundable amount as per system validation is , lowest of :
a) Amount calculated as per Rule 89(4) or 89(5) [Calculation to be applied on consolidated amount of IGST/CGST and SGST] or
b) Balance in electronic credit ledger at the end of period for which refund is claimed
c) Balance in electronic credit ledger at the time of claim of refund
| For example if during relevant period for which refund is applied,
IGST on Inward Supplies = 0 but old IGST carry forward = 5000/- and subsequent IGST Balance at the time of application is Rs. 15000/- CGST on Inward Supplies=10,000, SGST on Inward Supplies = 10,000 Balance available on date of application for refund Then refund calculation shall be made cumulatively on Rs. 20,000( 0+10000+10000) and not stand alone figures of IGST, SGST and CGST |
Manner of Debiting Calculated Refund Amount [Circular No. 59/2018 dated 4-09-2018]
The amount shall be debited in the following order:
a) Integrated Tax , to the extent possible
b) Central tax and State tax/Union Territory tax, equally to the extent of balance available.
c) In the event of a shortfall in the balance available in a particular electronic credit ledger (say, Central tax), the differential amount is to be debited from the other electronic credit ledger (i.e., State tax/Union Territory tax, in this case)
Status of validation for Availability of Debiting the amount in the portal [Circular No. 59/2018 dated 4-09-2018]
a) The above method of debiting the amount is not presently available in the portal.
b) Till the time such facility is made available on the common portal, the taxpayers are advised to follow the order as explained above for all refund applications filed after the date of issue of this Circular
c) For applications already filed and pending with the tax authorities, where this order is not adhered to by the claimant, no adverse view may be taken by the tax authorities.
d) The above system validations are being clarified so that there is no ambiguity in relation to the process through which an application in FORM GST RFD-01A is generated.
e) Refund application can be filed only after the electronic credit ledger has been debited in the manner specified above and ARN is generated on the portal
Re credit of Electronic Credit Ledger in case of Rejection of Refund claim [Circular No. 59/2018 dated 4-09-2018]
a) Order for rejection to be passed in RFD-01B for the purpose of re credit.
b) Before re credit an undertaking from the claimant to the effect that he shall not file an appeal against the said rejection, be obtained. If claimant files appeal, re credit to be done only after the appeal is finally decided against the claimant.
c) For ineligible credits the amount can be paid voluntarily with interest with DRC-03. Acknowledgement in DRC-04 to be issued by proper officer. In case of fraud, willful-misstatement or suppression of facts, penalty @ 15% also to be paid. (The amount should be paid before re credit in RFD-01B)
d) For ineligible credits demand notice to be simultaneously issued u/s 73/74 along with RFD-01B
e) For ineligible credits, Claimant can pay the amount voluntarily u/s 73(5)/74(5) along with interest in DRC-03 with in 30 days from show cause notice. In case of 74(5), if amount and interest along with penalty @ 25% is paid with in 30 days from issue of SCN, the proceedings shall be dropped.
f) Demand Confirmed u/s 73(9)/74(9) to be posted to Electronic liability ledger through DRC-07
Counterpart disbursing tax authority not to withhold refund except against outstanding demand [Circular No. 59/2018 dated 4-09-2018]
If any discrepancy is noticed by the disbursing authority, the same should be brought to the notice of the counterpart refund sanctioning authority, the concerned counterpart reviewing authority and the nodal officer, but the disbursal of the refund should not be withheld. 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. It is further clarified that any adjustment of the amount sanctioned as refund against any outstanding demand against the claimant can be carried out by the refund disbursing authority if not already done by the refund sanctioning authority.
Deficiency Memo [Circular No. 59/2018 dated 4-09-2018]
a) Deficiency to be communicated in RFD-03
b) Amount claimed to be re credited in RFD-01B
c) Fresh Refund application to be filed
d) No Show cause notice to be issued
Monetary Limit for non issue of Refunds [Circular No. 59/2018 dated 4-09-2018]
a) Monetary limit of Rs. 1000/- for non issue of refund to be applied for CGST/SGST/IGST head wise and not cumulatively
b) The refunds rejected on account of being less than Rs. 1000/- to be re credited
c) The limit would not apply in cases of refund of excess balance in the electronic cash ledger.
Refund applications filed by Canteen Stores Department (CSD) [Circular No. 60/2018 dated 4-9-18]
Application
a) CSD to be granted invoice based instant refunds against inward supplies of goods and not accumulated unutilized input tax credit
b) CSD to apply refunds on quarterly basis.
c) Refund Application to be filed in form RFD-10A manually to jurisdictional tax office
d) CSD will apply for refund with the jurisdictional Central tax/State tax authority to whom the CSD has been assigned
Documents to be submitted along application
a) Refund application to accompany An undertaking stating that the goods on which refund is being claimed have been received by the CSD.
b) Refund application to accompany A declaration stating that no refund has been claimed earlier against the invoices on which the refund is being claimed
c) Copies of the valid return filed in FORM GSTR-3B by the CSD for the period covered in the refund claim to be filed with refund application
d) Copies of FORM GSTR-2A of the CSD for the period covered in the refund claim along with the attested hard copies of the invoices on which refund is claimed but which are not reflected in FORM GSTR-2A to be filed with refund application.
e) Details of the bank account in which the refund amount is to be credited to be provided
Acknowledgment/Deficiency Memo with in 15 days
Upon receipt of application acknowledgment to be issued in RFD-02 manually with in 15 days from date of receipt of application. Deficiency memo to be issued in RFD-03 manually within 15 days of the receipt of the refund application. Only one deficiency memo should be issued which should be complete in all respects.
Scrutiny by proper officer
a) The proper officer shall validate the GSTIN details on the common portal to ascertain whether the return in FORM GSTR- 3B has been filed by the CSD
b) The proper officer may scrutinize the details contained in FORM RFD-10A, FORM GSTR-3B and FORM GSTR-2A.
c) The proper officer may rely upon FORM GSTR-2A as an evidence of the accountal of the supply made by the corresponding suppliers to the CSD in relation to which the refund has been claimed by the CSD
d) The proper officer should ensure that the amount of refund sanctioned is 50 % of the Central tax, State tax, Union territory tax and integrated tax paid on the supplies received by CSD
Sanction of Refund
- a) The proper officer shall issue the refund sanction/rejection order manually in FORM GST RFD-06 manually . Payment advice manually in FORM GST RFD-05 for each tax head separately
- b) The amount of sanctioned refund in respect of central tax/integrated tax along with the bank account details of the CSD shall be manually submitted in the PFMS system by the jurisdictional Division’s DDO and a signed copy of the sanction order shall be sent to the PAO for release of the said amount
Disbursement
a) Payment of the sanctioned refund amount in relation to central tax / integrated tax shall be made by the Central tax authority while payment of the sanctioned refund amount in relation to State Tax / Union Territory Tax shall be made by the State tax/Union Territory tax authority.
b) Refund order issued by the proper officer of any tax authority to be duly communicated to the concerned counter-part tax authority within seven days for the purpose of payment of the remaining sanctioned refund amount.
c) Communication to counter part tax authority to be made through nominated nodal officer through dedicated e mail id.
d) The jurisdictional proper officer of Central or State Tax, as the case may be, shall issue FORM GST RFD-05 and send it to the DDO for onward transmission for release of payment.
e) After release of payment by the respective PAO to the applicant’s bank account, the nodal officer of Central tax and State tax authority shall inform each other.
Author Bio
Dear sir,
We are exporting goods to USA without payment of IGST after GST implementation.
Our forwarder claimed Drawback & ROSL in shipping bills, when shipment going. Drawback & ROSL amount automatically credited to our bank account.
The point is we claimed GST refund claim and its also received in our bank.
Please clarify whether we can claim GST if we already claimed Drawback & ROSL. Is there any section?
Please clarify.
Thanks