Refund of Input / Input Services – Export without payment of GST

1. GST refund process for exports of Goods and /or services without payment of Tax involves a different document. The option to export goods without payment of tax can either be used under the cover of a Letter of Undertaking (LUT) or a Bond. In such case, any ITC accumulated on inputs/input services unutilised will be available for refund.

2. Form GST RFD-11: The LUT can be filed in Form GST RFD-11 on the common portal by accessing Services > User Services > Furnish Letter of Undertaking (LUT). The necessary details are filled and uploaded along with the digital signature as per the LUT filing procedure. GST refund process for exports will not be complete without filing this details.

3. Extension of Date for submission of LUT : Notification No. 37/2017-Central Tax, dated 04.10.2017, requires LUT to be furnished for a financial year. However , In view of the outbreak of the COVID-19 pandemic , the requirement under the GST Law for furnishing of any report, document, return, statement or such other record falls during between the period from 20.03.2020 to 29.06.2020, has been extended till 30.06.2020 vide notification No. 35/2020 Central Tax dated 03.04.2020

Therefore, in terms of Notification No. 35/2020-Central Tax, time limit for filing of LUT for the year 2020-21 shall stand extended to 30.06.2020 and the taxpayer can continue to make the supply without payment of tax under LUT provided that the FORM GST RFD-11 for 2020-21 is furnished on or before 30.06.2020. Taxpayers may quote the reference no of the LUT for the year 2019-20 in the relevant documents.

4. Application for Refund : A person claiming refund of any tax, interest, penalty, fees or any other amount paid by him, may file an application in form GST RFD-01/ RFD 11 electronically – Rule 89(1) of CGST and SGST Rules, 2017.

5. Time limit for filing Refund Claim : Any person claiming refund of any tax and interest, if any, paid on such tax or any other amount paid by him, may make an application in this regard to the proper officer of IGST/CGST/SGST/UTGST before the expiry of two years from the relevant date in prescribe form and manner – section 54(1) of CGST Act.

5.1. 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.

(iv) in the case of services exported out of India where a refund of tax paid is available in respect of services themselves or, as the case may be, the inputs or input services used in such services, the date of – (i) receipt of payment in convertible foreign exchange or in Indian rupees wherever permitted by RBI, where the supply of service had been completed prior to the receipt of such payment or (ii) issue of invoice, where payment for the service had been received in advance prior to the date of issue of the invoice.

(v) in the case of refund of unutilised input tax credit, the due date for furnishing of return under section 39 for the period in which such claim for refund arises [substituted vide CGST (Amendment) Act, 2018 w.e.f. 1-2-2019. The earlier words were – in the case of refund of unutilized input tax credit under section 54(3) of CGST Act, the end of the financial year in which such claim for refund arises].

(vi) in any other case, the date of payment of tax.

5.2 No time limit for Refund from Cash Balance in Electronic Cash Register : Refund from balance in electronic cash register can be made (presumably without time limit) – proviso to section 54(1) of CGST Act. Money in electronic Cash Register is only deposit. Hence, principle of unjust enrichment does not arise.

6. Refund of ITC in case of goods supplied to canteen Stores Department of Defence :In case of goods supplied to canteen Stores Department (CSD) under Ministry of Defence, the supplies are exempt from GST – Notification Nos. 7/2017-CT (Rate) and 7/2017-IT (Rate) dated 28-6-2017. Out of Input Tax paid on inward supplies, 50% will be refunded to CSD – – Notification Nos. 6/2017-CT (Rate) and 6/2017-IT (Rate) both dated 28-6-2017.

Procedure for processing of applications filed by Canteen Stores Department has been specified in CBI&C circular No. 60/34/2018-GST dated 4-9-2018.

7. Documents to be filed with refund claim : A statement containing the number and date of invoices and the relevant Bank Realization Certificates or Foreign Inward Remittance Certificates, as the case may be, in a case where the refund is on account of export of services.

The 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.

Refund of accumulated ITC shall be restricted to the ITC as per those invoices, the details of which are uploaded by the supplier in FORM GSTR-1 and are reflected in the FORM GSTR-2A of the applicant.

CBEC vide Para 5 of circular No. 135/05/202 dated 31.03.2020 has decided that the refund of accumulated ITC shall be restricted to the ITC as per those invoices, the details of which are uploaded by the supplier in FORM GSTR-1 and are reflected in the FORM GSTR-2A of the applicant.

8. Procedure to file Claim : Refund of IGST paid on services exported shall be filed in form GST RFD-01 and shall be dealt with in accordance with provisions of rule 89 of CGST Rules – Rule 96(9) of CGST and SGST Rules, 2017 amended with retrospective effect from 23-10-2017.

The application for refund shall be submitted online .The proper officer who shall, within fifteen days of filing of the said application, scrutinize the application for its completeness and where the application is found to be complete in terms of sub-rules (2), (3) and (4) of rule 89, an acknowledgement in form GST RFD-02 shall be made available to the applicant through the Common Portal electronically, clearly indicating the date of filing of the claim for refund.

Time specified in section 54(7) of CGST Act shall be calculated from this date of filing – Rule 90(2) of CGST and SGST Rules, 2017.

9. Deficiency in Refund Application : If any deficiencies are noticed, the proper officer shall communicate the deficiencies to the applicant in form GST RFD-03 through the Common Portal electronically, requiring him to file a refund application after rectification of such deficiencies – Rule 90(3) of CGST and SGST Rules, 2017.

10. Procedure to be followed after deficiency memo : Rule 90(3) of the CGST Rules provides that where any deficiencies in the application for refund are noticed, the proper officer shall communicate the deficiencies to the claimant in FORM GST RFD-03, requiring him to file a fresh refund application after rectification of such deficiencies

Further, rule 93(1) of the CGST Rules provides that where any deficiencies have been communicated under rule 90(3), the amount debited under rule 89(3) shall be re-credited to the electronic credit ledger.

The refund claim will have to be filed afresh in case a deficiency memo in FORM GST RFD-03 has been issued,. (Para 7 of CBI&C Circular No. 59/33/2018-GST dated 4-9-2018)

It is clarified that show-cause-notices are not required to be issued where deficiency memos have been issued. A refund application which is resubmitted after the issuance of a deficiency memo shall have to be treated as a fresh application. No order in form GST RFD-04/06 can be issued in respect of an application against which a deficiency memo has been issued and which has not been resubmitted subsequently.

However, these instructions have been modified vide CBI&C circular No. 70/44/ 2018-GST dated 26-10-2018. It is clarified that the claim after removing deficiencies shall be submitted under earlier ARN (Application Reference Number) only. It will be treated as fresh application. It is not necessary to re-credit the amount to electronic credit ledger. Revised refund claim should be submitted manually. Other processes of refund will be carried out manually – para 2(f) of CBI&C circular No. 79/53/2018-GST dated 31-12-2018.

If such re-credit was already carried out, the claimant shall file refund application manually in form GST RFD-01A using same ARN. If claim is accepted, he shall request the taxpayer to debit the said amount in his electronic credit ledger in form GST DRC-03. After that, the proper officer shall issue refund order in form GST RFD-06 and payment advise in form GST RFD-05 – CBI&C circular No. 94/13/2019-GST dated 28-3-2019.

11. Calculation of refund of ITC in zero rated supplies :As per 89(4) of CGST Rules , in case of zero rated supply of goods or services or both without payment of tax under bond or letter of undertaking in accordance with the provisions of section 16(3) of the IGST Act, refund of input tax credit shall be granted as per following formula :-

Refund Amount = (Turnover of zero-rated supply of goods + Turnover of zero-rated supply of services) × Net ITC ÷ Adjusted Total Turnover. Let us try to understand the calculation with the help of a illustration ;-

11.1. Illustration :- Mr A , registered in Maharashtra , engaged in Intra State / Inter State supply of taxable and exempted goods /services . He exports goods and services without payment of tax under bond or letter of undertaking.

11.2. Details of supplies made by Mr A during the relevant period is as follows :-

Sl.	Description	Amount ( Rs. In Lakhs)	Amount ( Rs. In Lakhs)
a.	Taxable Supply of Goods in Maharashtra		225
b.	Taxable Supply of Services in Maharashtra		75
c.	Inter State Supply of Goods		100
d.	Inter State Supply of Services		25
e.	Total Exempted Supply		25
f.	Zero rated Supply of Goods		150
g.	Zero rated Supply of Service		90
g(i)	Payment received in prior period as an advance ( zero rated supply of services completed in the relevant period)	10
g(ii)	Aggregate payment received during the relevant period for zero rated supply of services )	100
g(iii)	Payment received in advance for which zero rated supply has not completed in relevant period	20
h.	Turnover of supplies under Rule 89(4A) & (4B)		15
i.	Input Tax on amount under Rule 89(4A) & (4B)		3
j	Input Tax Credit on input and input services		15

11.3. Turnover in State : turnover in State” means the aggregate value of all taxable supplies and exempt supplies made within a State , exports of goods and /or services and inter-State supplies of goods and/or services made from the State but excludes central tax, State tax, Union territory tax, integrated tax and cess;

Heading	Description	Amount(Rs. In Lakhs)	Amount(Rs. In Lakhs)
Turnover in State (k)	aggregate value of all taxable supplies + exempt supplies + exports of Goods and Services + interstate supply ( a to h ) above	225+ 75 + 100 + 25+25 + 150+90 + 15	705

11.4. Adjusted Total Turnover :- “Adjusted Total Turnover” means the sum total of the value of-

(a) the turnover in a State (excluding the turnover of services) and

(b) the turnover of zero-rated supply of services and non-zero-rated supply of services.

Excluding-

the value of exempt supplies (other than zero-rated supplies) and the turnover of supplies under rule 89(4A) and /or rule 89(4B)

Heading	Description	Amount(Rs. In Lakhs)	Amount(Rs. In Lakhs)
Adjusted Total Turnover	sum total of the value of (a) State turnover excluding the turnover of services. ( k)-(b+d+g) (b) the turnover of zero-rated supply of services & non zero rated supply of services (g+d+g) Excluding – (i) value of exempt supplies other than zero-rated supplies (e) (ii) Turnover of supplies under Rule 89(4A) & (4B)(h) g-(e+h)	705-(75+25+90)     90+25+75-(25+15)               Total	515     150               665

11.5. Net ITC :- Net ITC” means input tax credit availed on inputs and input services during the relevant period other than the input tax credit availed for which refund is claimed under sub-rule 89 (4A) or (4B) or both

Sl	Description	Amount(Rs. In Lakhs)	Amount(Rs. In Lakhs)
Net ITC	ITC on Inputs & services Other than ITC rule 89 (4A) & (4B) (j-i)	15-3	12

11.6. Turnover of zero-rated supply of goods : Turnover of zero-rated supply of goods” means the value of zero-rated supply of goods made during the relevant period without payment of tax under bond or letter of undertaking, other than the turnover of supplies in respect of which refund is claimed under sub-rule (4A) or (4B) or both.

Sl	Description	Amount(Rs. In Lakhs)	Amount(Rs. In Lakhs)
Turnover of zero Rated Goods	value of zero-rated supply of goods other than turnover under sub-rule (4A) or (4B) or both( f-h) 1.5 times of value of like goods domestically supplied is to be taken if that is less than actual turnover of zero rated ,	150-15	135

Amendment in meaning of Turnover of zero-rated supply of goods :CBI&C vide notification No. 16/2020 dated 23.03.2020 has amended the meaning of Turnover of zero-rated supply of goods.

Accordingly – the following clause shall be substituted in the said rules, in rule 89, in sub-rule (4), for clause (C) :-

“Turnover of zero-rated supply of goods” means the value of zero-rated supply of goods made during the relevant period without payment of tax under bond or letter of undertaking or the value which is 1.5 times the value of like goods domestically supplied by the same or, similarly placed, supplier, as declared by the supplier, whichever is less, other than the turnover of supplies in respect of which refund is claimed under sub-rules (4A) or (4B) or both;‟

11.7. Turnover of zero-rated supply of services Turnover of zero-rated supply of services” 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:- Payment received for services during the year +services completed during the year but advance received in previous year minus advance received against which services will be completed next year

Sl	Description	Amount(Rs. In Lakhs)	Amount(Rs. In Lakhs)
Turnover of Zero Rated Supply of services	Payment received during the relevant period Plus Received in prior period Less Advance received for which supply not completed	g(i)+g(ii)-(giii)	90

11.8. Calculation of Refund : Refund Amount = (Turnover of zero-rated supply of goods + Turnover of zero-rated supply of services) × Net ITC ÷ Adjusted Total Turnover.

Refund Amount = (135+90)*12/665 = Rs. 4.06 Lakh .

11.9 Stores, spares, packing material, stationery are all ‘inputs’ and its ITC is permissible However, refund of ITC on capital goods is not allowable – CBI&C circular No. 79/53/2018-GST dated 31-12-2018.

12. Grant of provisional refund in case of exports : Provisions for granting provisional refund upto 90% of total amount claimed has been made in section 54(6) of CGST Act in respect of zero rated supply.The provisional refund under section 54(6) of CGST Act shall be granted subject to the condition that the person claiming refund has, during any period of five years immediately preceding the tax period to which the claim for refund relates, not been prosecuted for any offence under the Act or under an existing law where the amount of tax evaded exceeds two hundred and fifty lakh rupees – Rule 91(1) of CGST and SGST Rules, 2017.

13. Show Cause Notice if whole or part of refund is not admissible :If the proper officer is satisfied, for reasons to be recorded in writing, that the whole or any part of the amount claimed as refund is not admissible or is not payable to the applicant, he shall issue a notice in form GST RFD-08 to the applicant, requiring him to furnish a reply in form GST RFD-09 within fifteen days of the receipt of such notice and after considering the reply, make an order in form GST RFD-06, sanctioning the amount of refund in whole or part, or rejecting the said refund claim and the said order shall be made available to the applicant electronically and the provision of rule 92(1) shall, mutatis mutandis, apply to the extent refund is allowed – Rule 92(3) of CGST and SGST Rules, 2017.No application for refund shall be rejected without giving the applicant a reasonable opportunity of being heard.

14. Interest on delayed refunds : Where any interest is due and payable to the applicant under section 56 of CGST Act, the proper officer shall make an order along with a payment advice (to be termed as payment order from date to be notified) in form GST RFD-05, specifying therein the amount of refund which is delayed, the period of delay for which interest is payable and the amount of interest payable, and such amount of interest shall be electronically credited to any of the bank accounts of the applicant mentioned in his registration particulars and as specified in the application for refund – Rule 94 of CGST and SGST Rules, 2017 amended on 28-6-2019.

15. Minimum limit for Refund Claim : – No refund shall be paid to an applicant if the amount is less than rupees one thousand – section 54(14) of CGST Act.

If refund amount is less than Rs. 1,000 (for each tax separately), the refund claim will not be admitted in GST portal. Acknowledgement Reference Number will not be generated. The limit does not apply to refund of balance in electronic cash ledger – CBI&C Instruction F. No. 349/54/2017-GST dated 8-5-2018 as amended by CBI&C Instruction F. No. 349/54/2017-GST dated 1-6-2018.

This is also confirmed in Para 8 of CBI&C Circular No. 59/33/2018-GST dated 4-9-2018.

16. No refund in case payment of tax is under protest :There is no provision for payment of tax under protest – FAQ on GST Chapter 14 Q No. 55 issued by CBI&C on 15-12-2018. Thus, the time limit for filing refund claim is mandatory and does not get extended by paying GST under protest.

17. 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.

18. Procedure in case of Incorrect Mapping of refund – Tax payers have been assigned either to Central Tax Authority or State Tax Authority to ensure single Interface under GST. The application submitted electronically under GST RFD 01A is assigned either to Central Tax Authority or State Tax Authority. In some cases, there may be wrong mapping and the application may go to wrong authority i.e. instead of State Tax Authority to Central Tax Authority or vice versa. Presently, there is no provision on portal to re-assign application to correct the mistake. In such cases, the authority to whom the form GST RFD-01 is assigned should process the application even if he is not the administrative authority. After such processing, should inform the common portal about incorrect mapping of refund claim, for correct assignment of future refund claims – CBI&C circular No. 104/23/2019-GST dated 28-6-2019.

19. Refund Claims can be clubbed in a same financial year but can not be spread over different financial years : – It is possible that input tax credit may be received in a month while exports may be made in subsequent month. In some months, there will be exports but no input tax credit available. In such cases, the refund claim can be filed during ‘relevant period’ which is different from ‘tax period’. Hence, exporter may file refund claim per month or per quarter or by clubbing successive calendar months/quarters. However, such refund claim cannot spread over different financial years — CBI&C circular No. 37/11/2018-GST dated 15-3-2018. This principle should apply for refund of tax due to inverted duty structure also.

20. Refund of ITC of GST Compensation Cess is available where Compensation Cess not leviable on output supply of goods exported – In some cases (like Aluminum products), GST Compensation Cess is payable on inputs (like coal), but Compensation Cess is not leviable on output supply of goods which are exported. In such cases, refund of ITC of GST Compensation Cess is available. However, the Compensation Cess cannot be used to pay IGST on final product exported – CBI&C circular No. 45/19/2018-GST dated 30-5-2018.