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Refund of unutilized ITC due to zero rated supply of goods/services under bond/LUT – amendments in online format sought

Through this article I try to bring the difficulties faced in claiming the “Refund of unutilized ITC” due to zero rated supply of goods/services under bond/LUT because of restricting the claim period for a tax period in the online application of the GSTN portal.
S.Maheswaran B.Sc., B.L.,
 Superintendent of Central Tax and Central Excise

Refund of unutilized ITC due to zero rated supply of goods/services under bond/LUT – amendments in online format sought

Through this article I try to bring the difficulties faced in claiming the “Refund of unutilized ITC” due to zero rated supply of goods/services under bond/LUT because of restricting the claim period for a tax period in the online application of the GSTN portal.

As per the Sec 54(3) subject to the provisions of sub-section (10) a registered person may claim refund of any unutilised input tax credit at the end of any tax period.

As per the Sec 2(106) of CGST Act, 2017 tax period is defined as “period for which the return is required to be furnished”

As per Sec 39. (1) Every registered person, other than an Input Service Distributor or a non-resident taxable person or a person paying tax under the provisions of section 10 or section 51 or section 52 shall, for every calendar month or part thereof, furnish, in such form and manner as may be prescribed, a return, electronically, of inward and outward supplies of goods or services or both, input tax credit availed, tax payable, tax paid and such other particulars as may be prescribed, on or before the twentieth day of the month succeeding such calendar month or part thereof.

As per rule 89(4) of CGST Rules, 2017, the formula for arriving refund in case of accumulated ITC due to zero rated supply of goods/services to export/SEZ is as under:

Maximum Refund Amount =

(Turnover of zero rated supply of goods + Turnover of zero rated supply of services) x Net ITC /Adjusted Total Turnover (Refer Statement 3A)

As per rule 89(4)(F) “Relevant period” means the period for which the claim has been filed”

A combined reading of Sec 54(3) CGST Act, 2017 with 89(4)(f) of CGST rules 2017 it is observed that the claim can be filed at the end of any tax period for any number of months before the relevant date. For example a claim for refund of unutilized ITC can be filed for the month of July 2017 or from July 2017 to January 2018 cumulatively. But before the end of the tax period no such claim can be filed. In other words the assessee can not file more than one claim for a tax period.

However, it appears that the online RFD-01A application allows filing of application month wise only. The table reflected in online RFD-01A application after entering the figures as per formula is reproduced below:

Amount eligible for refund (Table as reflected in RFD -01A filed online)

Values as per Statement 3A Balance in Electronic Credit Ledger Tax credit Availed during the period Eligible amount

(Lowest of all)

IGST
CGST
SGST/UT
CESS

The “Refund ARN Receipt” generated on filing application through online also contains the period details as “Year” and “Month/quarter”

If the refund is restricted to be filed month wise the exporters who procure goods/raw material for processing during previous month and availed ITC on the same month but exported the goods in the subsequent months can not claim the said refund on accumulated ITC as they do not have exports during the said month of availment of ITC. The hard hit are those who are exporting almost 100% of their products. Otherwise a prudent exporter will postpone his availment of ITC to the month of export as ITC can be availed within one year from the date of input invoice.

From the above discussion, it appears that though the Sec 54(3) of the CGST Act 2017 and rule 89 (4) of the CGST Rules, 2017 provides for cumulative claim of refund of unutilised ITC at the end of any tax period, the online refund application allows filing of the application month wise only. Hence the online application format in the portal may be modified so as to be in consistence with the said legal provisions, which will facilitate the filing of refund of unutilised ITC at the end of any tax period provided the same is filed within the relevant date. Will the CBEC respond?

View Comments (9)

  • Very True..this has been unattended or you can say GST Councils lack of understanding of the basic act itself. Due to this quarterly return filers are not able to file correct RFD-01 A.

  • The issue is very well written. This problem is faced by many exporters. This should reach GST council & relevant authorities. Need to be cleared soon.

  • we are also facing the same issue and cannot claim the unutilised input tax credit for the month in which n o export sale was affected.

  • We have to apply for April 2018 month Refund (ITC on export of goods and services without payment of tax) but We have by mistake made Nil refund application of April 2018 month and this particular month has been blocked so we unable to make GST refund application again for April 2018 month and when we contacted GST office they told us that they don’t have information regarding this so request you to please let us know how we can make refund application for the month of April 2018.

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