Abhishek Sehgal

Abhishek SehgalThe report of Joint committee of Business processes for GST, gives us the glimpse of what is going to happen in the GST regime. Based on the report, following are the situations where the possibility for refund under GST arises. Below mentioned table tries to cover all related provisions recommended by committee to get the refund sanctioned without any complication.

Excess Payment of Tax, due to mistake or inadvertence

Such cases may arise due to following reasons:-

a) wrong mention of nature of tax (CGST / SGST / IGST),

b) wrong mention of GSTIN, or

c) wrong mention of tax amount.

In first two situations, tax payer needs to file the refund application and the tax administration would verify the correctness of the taxpayer’s claim. It is recommended in the report that correctness of taxpayer claim should be checked in a time bound manner to be prescribed by the GST Law.

For third situation, taxpayer would have the option either to carry forward tax for adjustment against future tax liabilities or make an application for refund (Return itself can be treated as a refund application).

The option of carry forward of tax would be allowed,only in case ofthe excess payment made against a return and not against any other liability like specific demand raised through assessment order etc.

Export of goods and services

Unlike the current scenario, option to procure duty free inputs, utilized for exporting the final product would not be available in the GST regime. Exporter can only have an option to apply for refund of GST paid on input and input services procured for exporting the goods.

It is also proposed to integrate the Custom ICEGATE(Custom Portal)with GSTN portal to cross check whether goods are actually exported or not.

Since in case of export of services, facility of custom portal to substantiate the export of services will not be available, therefore in case of export of services, copy of invoice and BRC (Bank Realization certificate) are required for getting the refund sanctioned.

The complete procedure of application and documentation for refund in case of Export will next articles.

Deemed Export i.e. supplies to SEZs/EOUs etc.

·         Suppliers to SEZs/ EOUs etc. will now need to deposit the GST on all supply without collecting the same from customer i.e. SEZs/EOU etc. units will not bear the burden of GST.

·         To get the refund of GST deposited by supplier, he needs to make an application for refund of GST paid on such supplies along with CA certificate certifying the fact GST burden is not passed on by supplier to customer, which is being claimed as refund.

·         Recipient unit can also apply for refund of IGST, if it has actually paid IGST at the time of obtaining good/services from domestic suppliers and burden of tax has passed on to him.

However, both supplier and the recipient unit cannot take refund for the same transaction.

Finalization of Provisional Assessment

·         In case taxpayer wants to pay taxon provisional basis, taxpayer needs to select provisional tax payment option from dropbox available in the return and taxpayer needs to indicate the reasons why he wants to pay tax on provisional basis.

·         If AO agrees with the reason as mentioned by tax payer, the return/assessment may be kept provisional.

·         AO needs to finalize the provisional assessment in time bound frame(proposed to be 90 days).Once the final assessment is done AO needs to issue the speaking order and also require to mention the amount taxpayer require to pay or eligible for refund.

·         The refund would be granted only if the incidence of GST paid by him has not been passed on to the consumer. The same need to be substantiated by CA certificate.

Payment of Duty/tax during Investigation

Refund arises due to payment of duty/tax during investigation but no / less liability arises at the time of finalization of investigation / adjudication.

·         Taxpayer would be eligible to claim the refund immediately on the date of order passed in the favour of the taxpayer.A simple refund application along with a CA Certificate certifying the fact of non-passing of the GST burden by him needs to be submitted.

·         It is proposed also that, minimum time period to sanction the refund would be in line with the time limit available with the department to challenge the order with the higher authority

·         Refund may be withheld only if department has obtained the stay order of refund. It is proposed to give the power to withheld the refund only to limited hands

Purchases by UN bodies, supplies to CSD canteens etc.

·         It is proposed to grant refund to UN bodies on purchases made by them.

·         A separate mechanism is proposed to online verification of UN bodies purchase.

·         UN bodies may require to file their purchase statement along with refund application.

·         Purchases ineligible for refund should specifically mark or may not be included in the purchase statement provided above.

·         The eligible invoices may be seen by jurisdictional authority and refund may be granted based on the matching and limited manual verification.

·         While making the supplies to UN bodies, the supplier require to indicate the Unique ID allocated to UN bodies on their invoices. Same will help to cross check the purchases shown by UN bodies.

The same procedure would apply in respect of supplies to CSD canteens etc. It is further recommended that the supplies to CSD canteens etc. would not be eligible for any exemption.

Tax Credit on input used for creating tax free or Non GST supplies

Following the current tax practice, under model GST Law it is proposed that the suppliers of exempted / NIL rated / non GST goods or services would not be entitled to the ITC of GST paid on inputs (including input services or capital goods) received by them and consequently no refund of GST paid would be granted to them.

In case of mixed supplies, ITC may be allowed proportionately.

Refund Of Carry Forward Input Tax Credit This situation would be arises only in following cases:

a)      Inverted Duty Structure i.e. GST on output supplies is less than the GST on the input supplies: Chances of inverted tax structure would be less due to fewer tax rates and exemptions. With the minimal possibility of occurrence of this situation it is proposed that cash refund may be granted after due audit.

b)      ITC on account of Stock accumulation or Capital goods: The GST Law may provide for appropriate provisions for not allowing refund of carry forward ITC due to stock accumulation or capital goods and such amount would be carried forward to the next tax period for adjustment against future tax liability.

c)       ITC on account of Partial Reverse charge mechanism for certain services: If GST law provides the partial reverse charge mechanism, it is proposed that refund in such cases would be granted after appropriate checks.

Refund On Account Of Year End Or Volume Based Incentives

The suppliers are usually get the year end or volume discount through credit notes. It is recommended by the Joint committee that refund would be granted for such transaction on submission of simple application along with CA certificate certifying the fact of non-passing of GST burden by the taxpayer, which is being claimed as refund.

Suitable mechanism is recommended under GST to cross check the credit note and corresponding debit note, automatic adjustment in tax liability in case of mismatch.

Refund for International Tourists

Tax Refund for International Tourist (TRT) scheme adopted across the world, which provides an opportunity to the foreign tourists to purchase goods during their stay in any country on payment of GST and obtain refund of the GST so paid, at the time of exit from the country.

In Indian version of GST, it is proposed to incorporate the similar provisions which allowthe refund of the GST paid on retail purchase by the foreign tourists during their stay in India. Refund of GST will be available at designated airports and ports only.

A part of the eligible amount of refund will be deducted as handling fee for services rendered.

Through IT, Government is trying its level best to make simple and hassle free tax environment. But apart from IT, a simple GST legislative is also required to make things simple and free from any complication. Nonetheless, If this is how the GST legislative would look like, it will definitely bring lot more opportunity for our tax processionals.

( author can be reach at Ca.sehgal019@gmail.com.)

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February 2024