1. Sections 54 to 58 of GST Act’ 2017 deals with refund provisions. For the purposes of this section ‘refund’ includes refund of tax on goods and/or services exported out of India or on inputs or input services used in the goods and/or services which are exported out of India, or refund of tax on the supply of goods regarded as deemed exports, or refund of unutilized input tax credit.
2. Relevant Date : As per . Explanation2 to section 54 of CGST Act, Relevant Date means in the case of goods exported out of India where a refund of tax paid is available in respect of the goods themselves or, the inputs or input services used in such goods:-
(i) if the goods are exported by sea or air, the date on which the ship or the aircraft in which such goods are loaded, leaves India, or
(ii) if the goods are exported by land, the date on which such goods pass the frontier, or
(iii) if the goods are exported by post, the date of dispatch of goods by Post Office concerned to a place outside India.
Exporters can claim a refund on zero-rated supplies under two options. Either the exporter can export without payment of Tax under Bond/ LUT and claim a refund of accumulated Input Tax Credit or he may export on payment of integrated tax and claim refund.
3. Refund in case of Export of Goods with payment of Tax ; In case of refund of IGST paid on export of goods or goods supplied to SEZ unit or SEZ Developer, separate refund application is not required, as shipping bill or Bill of Export itself will be treated as application for refund.
4. Refund Process in case of Export of Goods :- GSTR-1: GST refund process for exports continues on the GST portal in form GSTR-1. These details are declared in GSTR-1 under Table ‘6A – Exports Invoices’. The details required in this table are as follows:
i. Invoice date
ii. Port code
iii. Shipping bill no./bill of export no.
iv. Shipping bill date/bill of export date
v. Total invoice value and taxable value
vi. GST payment (‘With Payment of Tax’ needs to be selected)
vii. Whether the supply is eligible for tax at a differential percentage, as notified by the government
viii. The tax amount which is auto-populated but can be edited
Care must be taken to ensure that all the details declared in this table match with the corresponding details declared in the shipping bill as filed with ICEGATE. The details entered in Form GSTR-1 will be matched with the details mentioned in the shipping bill. The ICEGATE will then process the refund and credit the same to the bank account as mentioned by the taxpayer on its portal
4.1 GSTR-3B: Further, GST refund process for exports will involve declaration in GSTR 3B too. The relevant amounts need to be filled up in Table 3.1(b)- ‘Outward taxable supplies (zero-rated)’. The IGST amount entered here should be either equal to or greater than the total IGST filled in Table 6A of the corresponding GSTR-1.
4.2 Refund Application to Custom :- The shipping bill and other export-related documents should be filed on the Indian Customs Electronic Commerce Gateway (ICEGATE).A Statement containing the number and date of shipping bills or bills of export and the number and date of relevant export invoices need to be filed along with refund claim . Thus, once the shipping bill and the EGM is filed and a valid return is filed, the application for refund shall be considered to have been filed and refund shall be processed
5. Mechanism of Refund Claim Process : The IGST refund module has been designed to have an in-built mechanism to automatically process and grant refund after validating the shipping bill data available in ICES against the GST return data transmitted by GSTN. The details as filed in the GST returns would be transmitted electronically by the GST common portal to the system designated by the Customs, and this would generate a confirmation that the goods covered by the said invoices have been exported out of India.
Manual intervention would be limited to only exceptional cases where automatic validation becomes impossible due to some technical errors.
The IGST refund would not be processed if it fails any validation at the level of either GSTN or Customs system. Validation errors occur due to various deficiencies.
6. Reasons for non-transmission of data from GSTIN to Custom It could be on account of various errors in the validation carried out by the GSTN. Reasons for validation errors are :
(i) Both GSTR 1/Table 6A and GSTR 3B have not been filed for export supply or there are missing invoices in GSTR 1.
(ii) Invoices provided in Table 6A of GSTR 1 are incomplete, e.g., details of shipping bill and port number/code are not mentioned.
(iii) IGST paid under Table 3.1(b) of GSTR 3B being less than total IGST claimed in Table 6A of GSTR 1 of the same period. The claim cannot be more than that of the amount of IGST paid.
6.1 Track of Refund Application : The exporters has the option to check the GST validation status for his shipping bills in his ICEGATE website login for all records transmitted by GSTN. GSTN is also reportedly working on a feedback/message system so as to inform the exporters about any failed validations.
6.2. Rectification of Errors :- Rectification of errors need to be done in the GST returns. Table 9A has been provided to carry out those corrections. If the exporter finds that even after the correct filing of return, their shipping bills do not reflect in Customs system (reflected in ICEGATE login of exporter), they may write to GSTN helpdesk
7. Validation of GST Returns : Correct information in GST Returns filed by the exporter gets successfully validated by GSTN and transmitted electronically to the Customs ,wherein matching of details in Return with that in Shipping bill takes place. On successful matching, the system designated by the Customs shall process the claim for refund and an amount equal to the integrated tax paid in respect of each shipping bill/bill of export shall be electronically credited to the registered bank account of the applicant. wherever the matching fails on account of some error, the refund do not get sanctioned.
8. Errors & Mismatches: The matching between the two data sources is done at invoice level and any mismatch of the laid down parameters results in one or more of the following errors or responses.
8.1 Incorrect Shipping Bill details(Error code SB001) :. The possible reason for such mismatch could be a clerical error made by the exporter at the time of filling of GSTR 1/Table 6A. This can be rectified by making amendments in GSTR 1 by using Form 9A.
8.2 EGM not filed ( Error Code SB002) :- Exporter has to approach their shipping line/airline/carrier to file the EGM immediately.
8.3 GSTIN mismatch ( Error Code SB 003) : This error occurs when GSTIN declared in the SB does not match with the GSTIN mentioned in the corresponding GST return. The exporter has to make necessary changes in GSTR I by use of amendment Form 9A. Exporters should note that there is no provision of amendment in the shipping bill once the EGM is filed.
8.4 Duplicate/repeat transmission of shipping bill (Error Code SB004) : This error occurs due to duplicate/repeat transmission of shipping bill – invoice record from GSTN. The previous transmission would have already been validated for IGST refund by ICES.
8.5 Mismatch of invoice number (Error code SB005) : This is the most common error committed by the exporters, which occurs due to mismatch in invoice declared in shipping bill and GSTR 1 for the same supply .This can happen due to:
(i) Typographical mistake while entering data in GSTR 1 or the SB.
(ii) The exporter uses two sets of invoices, one invoice for GST and another invoice for exports resulting in mismatch of invoice numbers.
If SB005 is due to a data entry mistake in GSTR 1, it can be amended in Form 9A. But any mistake in the SB cannot be amended once EGM is filed. Also, if the exporter has used a separate invoice in the SB, he cannot include that in his GSTR 1 in lieu of his GST invoice.
Thus, SB005 error, as of now, cannot be corrected by any amendment either in GSTR 1 or in the shipping bill.
8.6 Discontinuance of transference copy of shipping bill ( Error SB 006) – Error SB006 occurs due to discontinuance of transference copy of shipping bill. An alternate mechanism to treat final Bill of Lading as valid document for integrated with EGM should be followed – CBI&C circular No. 08/2018-Customs dated 23-3-2018.
8.7 Mistake in descrption of shipping bill about payment of IGST – In some cases, exporter pays IGST but by mistake mentions ‘NA’ in shipping Bill instead of ‘P’. In such case, refund should be granted after verifying payment of IGST based on GST returns – CBI&C circular No. 08/2018-Customs dated 23-3-2018.
8.8 Other Reasons ( Code SB000) : SB000 (Successfully Validated) is the response code which comes when all the decided parameters like GST1N,SB number, invoice number etc. match between GSTN and Customs databases. This code implies that the SB is ready for inclusion in the IGST refund scroll. However, it might happen that even with SB000. the SB does not appear in the refund scroll. This could be due to :
(i) The exports might have been made under bond or LUT, hence not eligible for refund.
(ii) If a shipping bill covers multiple invoices, few of the invoices might have been successfully validated with code SB000 whereas other invoices might be containing other types of error/s.
(iii) Composite rate of drawback has been claimed for that SB during the transitional period between 01.07.2017 to 30.09.2017, thus making the SB ineligible for IGST refund.
(iv) Where the IGST claimed amount is less than Rs. 1000/-.
In all the above cases, the scroll amount shall automatically become zero and the SBs shall not be included in the refund scroll.
8.9 There are two more reasons where the SBs will figure in the temporary IGST scroll but not in the final scroll. This could happen if there is an alert/suspension on the IEC in ICES or if the account of the IEC is not validated by PFMS.In case of multiple errors in the refund claim ,each such error would be required to be corrected individually in order to get refund.
9. Steps to be followed in case of errors in processing of refunds:
(i) When the records have not been transmitted by GSTN to Customs, exporters may contact GSTN helpdesk.
ii) Wherever the error is SB002/SB006, exporter may approach their shipping line/airline/carrier to file the EGM immediately.
iii) In cases where the temporary scroll is generated but it’s not included in the final scroll, the exporters are advised to furnish correct bank account details to the proper officer (Customs field formation) in order to update the same in ICES.
iv) As the status of refund claims is available in ICEGATE login, in cases where the corrective action has been already taken by the exporter, he may write to ICEGATE/gateway port Customs for redressal.
v) In general, any grievance related to the IGST refund claim may be brought to the notice of the Pr. Commissioner or Commissioner of the Customs of the gateway port for necessary action.
10. Refund Processing Authorities : Refund of IGST in respect goods exported /supplied to SEZ Unit or SEZ Developer, will be processed by customs department.
All other refund claims (like refund of Input Tax Credit in case of export of goods or services, refund of IGST paid on export of services, refund due to inverted duty structure, refund of tax paid by mistake, refund for any other reason) will be processed by Central or State Government authorities as per their jurisdiction over the taxable person.
11. Recovery of refund of unutilised input tax credit or integrated tax paid on export of goods where export proceeds not realised. (96B)
CBIC vide notification No. 16/2020 dated 23.03.2020 notified recovery of refund of unutilised input tax credit or integrated tax paid on export of goods where refund has been paid to an applicant but the sale proceeds in respect of such export goods have not been realised, in full or in part, in India within the period allowed (nine months from the date of export) under the Foreign Exchange Management Act, 1999.
In view of the outbreak of the COVID-19 pandemic, various governmental authorities have granted several relaxations from regulatory compliances. Accordingly, on April 1, 2020, RBI issued A. P. (DIR Series) Circular No. 27 pursuant to which the time period for realisation and repatriation of the export proceeds to India for the goods/ software/ services exported was increased from 9 (nine) months to 15 (fifteen) months from the date of export, for the exports made up to or on July 31, 2020.
Author can be approached at [email protected]