Special Rule 20-10-0  (October 2019 – March 2020)

A Big Roller Coaster Ride  – Guidelines for ITC refunds under Section 54(3)

‘ITC is always considered as a key factor since it has its own dimensions’

Recently, CBIC has released a Circular on GST Refunds wherein they have clarified that the exporter would not be eligible for refund of Input Tax Credit which is provisionally availed as per Rule 36(4) of the CGST Rules, 2017.

Earlier, CBIC vide its Notification No. 49/2019 – Central Tax dated October 9, 2019 made a significant amendment vide insertion of new sub-rule (4) to Rule 36 of CGST Rules, 2017 which placed restriction on provisional  ITC upto 20% of the value of eligible ITC which have been uploaded by the supplier in their returns.

Subsequently, the Board vide its Notification No. 75/2019 – Central Tax dated December 26, 2019 reduced the aforesaid rate to 10%

Currently, the Board vide its Circular No.-135/05/2020-GST dated March 31, 2020 clarified that refund of accumulated ITC shall be restricted to ITC as per those invoices, which are uploaded by the respective suppliers in Form GSTR-01 and which are correspondingly reflecting in Form GSTR-2A of the applicant. Which paves the way to refund of  NIL provisional ITC as per Section 36(4) of the CGST Rules, 2017 read with Section 54(3) of CGST Act, 2017

We can understand the aforesaid clarification based on the below illustration:

Let us consider that an exporter has filed refund application towards unutilised ITC for the month February 2020 amounting Rs. 1,50,000/-

However, such ITC reflecting in GSTR-2A is only Rs. 1,00,000/-

Applying the clarification provided in the erstwhile circular (Cirular.No.125/44/2019-GST dated November 18, 2019) , the exporter was eligible for the entire amount of  Rs.1,50,000/- subject to the condition that exporter’s suppliers uploads all the invoices amounting to Rs. 50,000/- which was not reflecting in Form GSTR-2A

Currently, after giving the effect of clarification provided in the current refund circular, the exporter would be eligible for refund of Rs. 1,00,000/- only since invoices amounting to Rs. 50,000/- is not reflecting in Form GSTR-2A

Considering the current clarification, the exporters to face the problem on blockage of provisional ITC which will affect indirectly on their finances. Further, we can draw few advantages as well since the said clarification will strengthen the Compliance aspects and bring in responsibility to the supplier in prompt reporting.

The information is not intended to be relied upon as the sole basis for any decision which may affect you or your business. Before making any decision or taking any action that might affect your personal finances or business, you should consult a qualified professional adviser. Copying and sharing of the material without prior permission is restricted.

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May 2021