Circular No. 125/44/2019 – GST dated 18-11-2019:  The circular aims at automating the entire refund process. Many a new concepts and procedures for refunds have been laid. At the same time old guidelines have been consolidated, and some of them have been modified , altered, simplified and rationalized.  This article presents a summary of important guidelines laid down in the subject circular. The summary is presented with reference  to relevant paras

Para   Important Take aways
3 All Following Old Circulars based  on manual processing of refund application have been rescinded.

a. Circular No. 17/17/2017-GST dated 15.11.2017,

b. Circular No. 24/24/2017-GST dated 21.12.2017,

c. Circular No. 37/11/2018-GST dated 15.03.2018,

d. Circular No. 45/19/2018-GST dated 30.05.2018 (including corrigendum dated 18.07.2019),

e. Circular No. 59/33/2018-GST dated 04.09.2018,

f. Circular No. 70/44/2018-GST dated 26.10.2018,

g. Circular No. 79/53/2018-GST dated 31.12.2018 and

h. Circular No. 94/13/2019-GST dated 28.03.2019

2 However applications filed before 26-09-2019 shall be dealt as per old circulars only
2 Application filed on or after 26-09-2019 shall be processed electronically only.
1,2 Now RFD-01 shall be submitted instead of RFD-01A electronically and supporting documents / undertakings / invoices also to be submitted electronically.
4.a List of Documents/ declarations/ undertakings/ certificates to be submitted along each type of refund application is provided in Annexure A
4.a 4 Annexures may be submitted with each not exceeding 5MB.
4.a No supporting shall be submitted physically
4.c,34 Time of generation of ARN is deemed time for filing refund application and period of issuing acknowledgment or deficiency memo with in 15 days or calculation of interest after 60 days from the date of receipt of refund application is computed accordingly
4.c, 4.d 5, 27 Application is automatically transmitted to jurisdictional officer. In case of assignement to wrong officer, it shall be re assigned by Commissioner or officer authorized by him to correct officer, with in 3 working days. No deficiency memo shall be issued by officer for incorrect assignemnt.

Migrated cases not assigned shall get transmitted to officer who held jurisdiction before GST. This officer shall process the refund application till issued to refund order RFD-06 or payment order RFD-05.

In case of assignment of migrated cases post ARN generation and issue of deficiency memo by officer who held jurisdiction before GST, the fresh refund application pursuant to deficiency memo shall be transmitted to newly assigned jurisdictional proper officer only and shall be processed by such jurisdictional officer only

Refund sanction Final/ Provisional (RFD-06/RFd-04) for both CGST and SGST shall be done by single jurisdictional Central/State officer. Payment order under all tax heads (RFD-05) shall be done by single Central/State officer

6 All pending returns to be filed before refund application
7,36 GST Council has decided to grant refund of provisionally accepted  ITC subject to undertaking that ITC shall be paid back along with interest if it is found subsequently that :

a. Supplier fails to pay tax charged as per section 16(2)©

b. Matching of Invoices resulting final acceptance of ITC is not done as per section 42(2) Such availment of ITC will be subject to restriction imposed under sub-rule (4) in rule 36 of the CGST rules

8 Refund applications for different tax periods (monthly /quarterly) may be clubbed to apply for consolidated refund application without spreading over different financial years
8 For claiming refund of unutilized ITC on exports, supplies to SEZ and inverted duty refund shall be applied chronologically only
9 Deficiency Memo/Acknowledgment to be issued in 15 days only.
9 No deficiency memo shall be issued after issue of acknowledgment
10 After issue of deficiency memo there shall be auto re credit to electronic credit ledger. No PMT-03 or undertaking for non filing of appeal is required at this stage
10,11 Fresh Refund application filed pursuant to deficiency memo shall have new and distinct ARN.  No fresh deficiency memo shall be issued against new application unless defect remains unrectified or new defect comes to notice
12 Fresh application persuant to deficiency memo to be filed with in 2 years from relevant period only and there shall be no extension only because original application was filed with in said 2 years.
13 Inadmissible ITC to be reduced at the stage of provisional refund against exports
14 Where officer is fully satisfied about eligibility of refund and is of the opinion that no further scrutiny is required, final refund may be granted instead of provisional refund with in 7 days from acknowledgment
15, 16,20,21,22,23,24 Where refund is granted provisionally and final refund is reduced then issue SCN in RFD-08 for

a. Rejection of ineligible ITC

b. Recovery of Erroneously refunded amount with interest and penalty After hearing according to principles of natural justice, issue

a.  RDF-06 for Final refund amount

b. PMT-03 for [re credit of debit amount-Final Refund Amount] subject to undertaking that appeal shall not be filed against refund order. If appeal is made there shall be no recredit

c. DRC-07 for recovery of provisionally granted wrong amount/Ineligible ITC plus interest plus penalty. Alternately DRC 03 may be filed before service of demand notice by taxpayer voluntarily.

Where appeal is made and refund is granted then apply for refund under category “On Account of Assessment/Provisional Assessment/ Appeal/ Any other order”

17 No adjustment of outstanding dues or withholding shall be done from provisional refund. In case of need, final refund may be granted instead of provisional refund and withholding/recovery may be done there from
17 Verification of Shipping bill details to be done from icegate portal  by keying in port name, Shipping bill number and date.
18 Mismatch between 3B and GSTR-1 may be resolved following system of adjustment provided in Circular 26/2017
25,26 For Mismatch for IGST paid on supply to SEZ between Table 3.1(b) of GSTR 3B and Table 6B GSTR-1 due to IGST paid reflected in 3.1(a) of 3B, it is clarified that for period from 01-07-2017 to 30-06-19, IGST paid on SEZ supplies reflected in Table 6B and claimed as refund shall be compared with aggregate of tax paid under 3.1(a)+3.1(b)+3.1©
28 to 33 Disbursal of refund amount shall be done through PFMS after validating bank details provided in refund application. PFMS shall create unique assessee code to facilitate payment. The taxpayers have been advised not change bank details in respective refund applications. Communication of disbursal shall be done by PFMS on the portal and by SMS to the taxpayer.

In case of invalid bank details, bank details can be updated

34 Interest on delayed disbursal @ 6% on the refund amount starting from the date immediately after the expiry of sixty days from the date of receipt of application (ARN) till the date of refund of such tax (i.e. date of credit in bank account) shall have to be paid to the applicant.

Tax authorities have been advised to issue the final sanction order in FORM GST RFD-06 and the payment order in FORM GST RFD-05 within 45 days of the date of generation of ARN, so that the disbursement is completed within 60 days.

35 Adjustment of refund amount against any outstanding demand under the existing law can be done
36,37,38 For refund of unutilized ITC (except compensation cess) :

a. 2A relating to period for which Invoice carrying ITC pertain to be uploaded

b. 2A to be treated evidence of accountal of tax on invoices being claimed by recipient. Submission of invoices accounted in 2A not to be insisted

c. List of Invoices not appearing in 2A for which refund is being claimed to be provided in Annexure B along with declaration of eligibility and subject to restrictions of ITC not exceeding 20% of invoices appearing in 2A

d. Invoices not uploaded in 2A and declared eligible in Annexure B to be self certified and to be uploaded along RFD-01

e. Formula under Rule 89(4) and 89(5) to be applied on consolidated amount of tax heads and not to be applied on each tax head separately.

f. Quantum of refund of Unutilized ITC= Minimum of [Refund as per Formula, Credit ledger Balance at the end of period after filing 3B for the period for which refund is claimed, Credit ledger Balance at the time of filing refund]

g. Order of Debit in Credit Ledger : First utilize IGST Credit to the extent possible, 2nd:  utilize CGST and SGST equally to the extent of balance available 3rd: If there is shortfall in some credit ledger, then utilize other credit ledger to the extent balance is available

h. Order of Debit facility is not available on portal and to be followed manually. However no adverse view to be taken if order of debit is not followed. Hence it is not compulsory to follow order of debit

39, 42,43, 61 Refund of Unutilized ITC on Compensation cess to be computed separately and Debit to be made from cess balance only.

Where inward supply e.g. coal is subject to cess but final product say aluminium is not subject to cess, refund for unutilized ITC of Cess for export may be claimed but at the same if IGST is paid on exports, then cess can be utilized for payment of such IGST.

As per Para 43, where ITC on Unutilized cess is claimed in subsequent months, refund amount shall be minimum of refund on the basis of ITC availed in the relevant month vs. recomputed refund if itc had been availed in the months to which to which it  pertains. . Further as per 61 refund shall be claimed only in the month in which it is availed. Hence there is contradiction between the two. However para 43 applies to compensation cess only and is in context of avail ment of ITC consequent to issue of Circular No. 45.

Though Circular is silent on inverted duty Refund of cess where final product is not leviable to cess, however such refund may not be available.

Further Cess reversed in 3B and also treated as expense can not be claimed as refund. However if subsequently reversal is restored back and accounting entry is also reversed, then refund can be claimed

40 Drawback of customs/central excise shall not disentitle refund of CGST, SGST, IGST, Cess. For drawback of CGST, there is no disentitlement for SGST
44, 45, 46 Zero rated supply before furnishing LUT may be  allowed on ex post facto basis. Exports after expiry of time limit under LUT may be allowed id goods have actually been exported after 3 months from the date of invoice. Asking for self–declaration for prosecution with every refund claim where the exports have been made under LUT is not warranted.
47 During the processing of the refund claim, the value of the goods declared in the GST invoice and the value in the corresponding shipping bill / bill of export should be examined and the lower of the two values should be taken into account while calculating the eligible amount of refund
48 FIRC/BRC not required for refund application for export of goods
49 In case of zero-rated supply of exempted or non-GST goods, the requirement for furnishing a bond or LUT cannot be insisted upon
50 Refund of Transitional Credit is not allowed
53, 62 NO refund for Inverted Duty on Input service and Capital goods. Stores and spares, for capital goods, the expenditure on which has been charged as a revenue expense in the books of account, cannot be held to be capital goods and hence refund for unutilized ITC can be claimed in respect of such stores and spares
54 Where there are multiple inputs attracting different rates of tax, in the formula provided in rule 89(5) of the CGST Rules, some of which have rate lower or equal to rate of output supplies, the term “Net ITC‟ covers the ITC availed on all inputs in the relevant period, irrespective of their rate of tax
56 Tax Deductor/collector may claim refund of tax deposited in wrong head.  After filing of GSTR-7/8, Deductee may claim refund of the TDS/TCS under the category “refund of excess balance in the electronic cash ledger
57 Where ITC lapsed on fabric for July 17 to July 18 is reversed and portal restricts refund to ITC claimed  reduced by ITC reversed for earlier periods, then ITC may be claimed as refund under “Any other”. Credit ledger to debited through DRC 03 after calculation and verification by officer.

In respect of cases of refund on fabric items for inward supplies post 31-7-18, it has been advised to debit the credit ledger through DRC 03 instead of 3B because portal restricts the refund to ITC claimed for relevant period as reduced by ITC reversed for earlier periods

Interest to be paid on amount which has been reversed belatedly on fabrics for period prior to 01-08-2018. Such interest shall be calculated starting from the due date of filing of return in FORM GSTR-3B for the month of August, 2018 till the date of reversal of said amount through FORM GSTR-3B or through FORM GST DRC03, as the case may be

57, 59 Refund on ITC @ 0.05%/0.1% on inward supplies received by merchant exporter can be claimed under Category “any other” instead of under the category “refund of unutilized ITC on account of exports without payment of tax”. if the proper officer is satisfied that the whole or any part of the amount claimed is payable as refund, he shall request the taxpayer, in writing, to debit the said amount from his electronic credit ledger through FORM GST DRC-03. However exporter can export such goods only against LUT.

The supplier who supplies goods at the concessional rate is also eligible for refund on account of inverted tax structure

60 Limit of rupees one thousand u/s 54(14) shall be applied for each tax head separately

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  1. vswami says:

    In comparison to the Article published in the CA Journal (Dec. Issue) titled- “Refund of Tax under GST Law- An Update”
    the above write-up is seen to throw up many more points ; for anyone to independently study, identify and form an opinion, – as to whether the Master Circular , as professed, may be taken to have clarified , fully and satisfactorily, all ‘major doubts’ (of ‘taxpayers’ or practicing professionals), raised/ left to be raised !?
    Own random Picks:
    1. “…….refund procedure has been made fully automatic at the portal…”
    The Board vide master circular No. 125/44/2019-GST dated 18th Nov, 2019 HAS CLARIFIED THE FOLLOWING MAJOR DOUBTS OF THE TAXPAYERS; …….


    2. “ Q 1. If a refund application is electronically transmitted to the wrong jurisdictional officer then what will happen?
    Answer. Jurisdictional officer SHALL REASSIGN IT to the correct officer electronically AS SOON AS POSSIBLE, BUT NOT LATER THAN 3 WORKING DAYS, from the date of generation of the ARN. Deficiency memos shall not be issued in such cases MERELY on the ground that the applications were received electronically in the wrong jurisdiction.”

    FONT < ‘fully automatic’ , ‘merely ?!

    OVER to GST Pundits at large …

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