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TMI BlogFully electronic refund process through FORM GST RFD-01 and single disbursement– regardingX X X X Extracts X X X X X X X X Extracts X X X X ..... t regarding After roll out of GST w.e.f. 01.07.2017, on account of the unavailability of electronic refund module on the common portal, a temporary mechanism had to be devised and implemented wherein applicants were required to file the refund application in FORM GST RFD-01A on the common portal, take a print out of the same and submit it physically to the jurisdictional tax office along with all supporting documents. Further, processing of these refund applications, i.e. issuance of acknowledgement of the refund application, issuance of deficiency memo, passing of provisional/final order, payment advice etc. was also being done manually. In order to make the process of submission of the refund application electronic, Circular No. 79/53/2018-GST dated 2 nd Aug., 2019 was issued wherein it was specified that the refund application in FORM GST RFD-01A , along with all supporting documents, shall be submitted electronically. However, various post submission stages of processing of the refund application continued to be manual. 2. The necessary capabilities for making the refund procedure fully electronic, in which all steps of submission and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... j. Refund of tax paid on intra-State supply which is subsequently held to be inter-State supply and vice versa; k. Refund on account of assessment/provisional assessment/appeal/any other order; l. Refund on account of any other ground or reason. 4. The following modalities shall be followed for all refund applications filed in FORM GST RFD-01 on the common portal with effect from 26.09.2019: a. FORM GST RFD-01 shall be filled on the common portal by an applicant seeking refund under any of the categories mentioned above. This shall entail filing of statements/declarations/undertakings which are part of FORM GST RFD-01 itself, and also uploading of other documents/invoices which shall be required to be provided by the applicant for processing of the refund claim. A comprehensive list of such documents is provided at Annexure-A and it is clarified that no other document needs to be provided by the applicant at the stage of filing of the refund application. The facility of uploading these other documents/invoices shall be available on the common portal where four documents, each of maximum 5MB, may be upl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ime, there might be some migrated taxpayers, who have remained unassigned so far. The refund application in FORM GST RFD-01 filed by such unassigned taxpayers shall be forwarded, for processing, by the common portal to the jurisdictional proper officer of the tax authority from which the taxpayer has originally migrated. Such officers will continue to process these applications up to the stage of issuance of final order in FORM GST RFD-06 and the related payment order in FORM GST RFD-05 even if the applicant is assigned to the counterpart tax authority while the refund claim is under processing. However, if such an applicant gets assigned to one of the tax authorities after generation of the ARN and a deficiency memo gets issued for the refund application submitted by him, then the re-submitted refund application, after correction of deficiencies, shall be treated as a fresh refund application and shall be forwarded to the jurisdictional proper officer of the tax authority to which the taxpayer has now been assigned, irrespective of which authority handled the initial refund claim and issued the deficiency memo. 6. Any refund claim for a tax period may be file ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 9. It may be noted that if the application for refund is complete in terms of sub-rule (2), (3) and (4) of rule 89 of the HPGST Rules, an acknowledgement in FORM GST RFD-02 should be issued within 15 days of the filing of the refund application. The date of generation of ARN for FORM GST RFD-01 is to be considered as the date of filing of the refund application. Sub-rule (3) of rule 90 of the HPGST Rules provides for communication of deficiencies in FORM GST RFD-03 where deficiencies are noticed within the aforesaid period of 15 days. It is clarified that either an acknowledgement or a deficiency memo should be issued within the aforesaid period of 15 days starting from the date of generation of ARN. Once an acknowledgement has been issued in relation to a refund application, no deficiency memo, on any grounds, may be subsequently issued for the said application. 10. After a deficiency memo has been issued, the refund application would not be further processed and a fresh application would have to be filed. Any amount of input tax credit/cash debited from electronic credit/ cash ledger would be re-credited automatically once the deficiency mem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at no further scrutiny is required, the proper officer may issue final order in FORM GST RFD-06 within 7 days of the issuance of acknowledgement. In such cases, the issuance of a provisional refund order in FORM GST RFD-04 will not be necessary. 15. Further, there are doubts on the procedure to be followed in situations where the final refund amount to be sanctioned in FORM GST RFD-06 is less than the amount of refund sanctioned provisionally through FORM GST RFD-04 . For example, consider a situation where an applicant files a refund claim of ₹ 100/- on account of zero-rated supplies. The proper officer, after prima-facie examination of the application, sanctions ₹ 90 as provisional refund through FORM GST RFD-04 and the same is electronically credited to his bank account. However, on detailed examination, it appears to the proper officer that only an amount of ₹ 70 is admissible as refund to the applicant. In such cases, the proper officer shall have to issue a show cause notice to the applicant, in FORM GST RFD-08 , under section 54 of the HPGST Act, read with section 73 or 74 of the HPGST Act, requiring the applicant to show cause as to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ioned. Scrutiny of Application 18. In case of refund claim on account of export of goods without payment of tax, the Shipping bill details shall be checked by the proper officer through ICEGATE SITE (www.icegate.gov.in) wherein the officer would be able to check details of EGM and shipping bill by keying in port name, Shipping bill number and date. It is advised that while processing refund claims, information contained in Table 9 of FORM GSTR-1 of the relevant tax period as well as that of the subsequent tax periods should also be taken into cognizance, wherever applicable. In this regard, Circular No. 26/26/2017 GST dated 29.12.2017 issued by the Central Government may be referred, wherein the procedure for rectification of errors made while filing the returns in FORM GSTR-3B has been provided. Therefore, in case of discrepancies between the data furnished by the taxpayer in FORM GSTR-3B and FORM GSTR-1 , the proper officer shall refer to the said Circular and process the refund application accordingly. 19. Detailed guidelines laid down in subsequent paragraphs of this Circular covering various types of refund claim ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed against the applicant. 22. In case of rejection of a claim for refund, on account of any reason other than the ineligibility of credit, the process described in para 20 and 21 above shall be followed with the only difference that there shall be no proceedings for recovery of ineligible ITC under section 73 or section 74, as the case may be. 23. Consider an example where against a refund claim of unutilized/accumulated ITC of ₹ 100/-, only ₹ 80/- is sanctioned (₹ 15/- is rejected on account of ineligible ITC and ₹ 5/- is rejected on account of any other reason). As stated above, a show cause notice, in FORM GST RFD-08 shall have to be issued to the applicant, requiring him to show cause as to why the refund claim amounting to ₹ 20/-should not be rejected under the relevant provisions of the law and why the ineligible ITC of ₹ 15/- should not be recovered under section 73 or section 74, as the case may be, with interest and penalty, if any. If the said notice is decided against the applicant, ₹ 15/-, along with interest and penalty, if any, shall be entered by the officer in the electronic liability regi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f integrated tax/cess mentioned in the Table under columns 3.1(a), 3.1(b) and 3.1(c) of FORM GSTR-3B filed for the corresponding tax period. Disbursal of refunds 27. Separate disbursement of refund amounts under different tax heads by different tax authorities, i.e. disbursement of Central tax, Integrated tax and Compensation Cess by Central tax officers and disbursement of State tax by State tax officers, was causing undue hardship to the refund applicants. In order to facilitate refund applicants on this account, it has now been decided that for a refund application assigned to a Central tax officer, both the sanction order (FORM GST RFD-04/06) and the corresponding payment order (FORM GST RFD-05) for the sanctioned refund amount, under all tax heads, shall be issued by the Central tax officer only. Similarly, for refund applications assigned to a State/UT tax officer, both the sanction order (FORM GST RFD-04/06) and the corresponding payment order (FORM GST RFD-05) for the sanctioned refund amount, under all tax heads, shall be issued by the State/UT tax officer only. 28. The sanctioned refund amounts, as entered in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sue the payment order in FORM GST RFD-05 only after the selected bank account has been validated. 31. By following the above process, validation errors, if any, will generally be corrected before the issuance of payment order in FORM GST RFD-05 . Therefore, there should generally not be any validation errors after issuance of a payment order in FORM GST RFD-05 . However, in certain exceptional cases, it is possible that a validation error occurs after issuance of the payment order. In such cases, the said payment order will be invalidated by the common portal and a new payment order will have to be issued by the proper officer after following the rectification process described in paras 29 and 30 above. The re-issued payment order will have a new reference number and shall contain the newly selected bank account details. However, there will be no change in either the original ARN or the sanction order number or the amount for which the payment order was originally issued. 32. It may be noted that the applicant, at the time of filing of refund application in FORM GST RFD-01 , can select a bank account only from the list of bank accounts provide ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ecoverable under the existing law as an arrear of tax under GST unless such amount is recovered under the existing law. It is hereby clarified that adjustment of refund amount against any outstanding demand under the existing law can be done. Guidelines for refunds of unutilized Input Tax Credit 36. Applicants of refunds of unutilized ITC, i.e. refunds pertaining to items listed at (a), (c) and (e) in para 3 above, shall have to upload a copy of FORM GSTR-2A for the relevant period (or any prior or subsequent period(s) in which the relevant invoices have been auto-populated) for which the refund is claimed. The proper officer shall rely upon FORM GSTR-2A as an evidence of the account of the supply by the corresponding supplier(s) in relation to which the input tax credit has been availed by the applicant. Such applicants shall also upload the details of all the invoices on the basis of which input tax credit has been availed during the relevant period for which the refund is being claimed, in the format enclosed as Annexure-B along with the application for refund claim. Such availment of ITC will be subject to restriction imposed under sub- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... common portal, the taxpayers are advised to follow the order as explained above for all refund applications. However, for applications where this order is not adhered to by the applicant, no adverse view may be taken by the tax authorities. The above system validations are being clarified so that there is no ambiguity in relation to the process through which an application in FORM GST RFD-01 is generated. 39. For all refund applications where refund of unutilized ITC of compensation cess is being claimed, the calculation of the refundable amount of compensation cess shall be done separately and the amount so calculated will be entirely debited from the balance of compensation cess available in the electronic credit ledger. 40. The third proviso to sub-section (3) of section 54 of the CGST Act states that no refund of input tax credit shall be allowed in cases where the supplier of goods or services or both avails of drawback in respect of central tax. It is clarified that if a supplier avails of drawback in respect of duties rebated under the Customs and Central Excise Duties Drawback Rules, 2017, he shall be eligible for refund of unutilized input ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 16(2) of the Integrated Goods and Services Tax Act, 2017 (hereafter referred to as the IGST Act ) which states that, subject to the provisions of section 17(5) of the HPGST Act, credit of input tax may be availed for making zero rated supplies. Further, section 16 of the IGST Act has been mutatis mutandis made applicable to inter-State supplies under the Cess Act vide section 11 (2) of the Cess Act. Thus, it implies that input tax credit of Compensation Cess may be availed for making zero-rated supplies. Further, by virtue of section 54(3) of the HPGST Act, the refund of such unutilized ITC shall be available. Accordingly, it is clarified that a registered person making zero rated supply of aluminium products under bond or LUT may claim refund of unutilized credit including that of compensation cess paid on coal. Such registered persons may also make zero-rated supply of aluminium products on payment of Integrated tax but they cannot utilize the credit of the compensation cess paid on coal for payment of Integrated tax in view of the proviso to section 11(2) of the Cess Act, which allows the utilization of the input tax credit of cess, only for the payment of cess on the outwar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd (of compensation cess) in respect of past periods, as aforesaid, would not be admissible in respect of consignments exported on payment of Integrated tax. This process would be applicable for application(s) for refund of compensation cess (not claimed earlier) in respect of the past period. b) Issue: A registered person uses coal for the captive generation of electricity which is further used for the manufacture of goods (say aluminium) which are exported under Bond/Letter of Undertaking without payment of duty. Refund claim is filed for accumulated Input Tax Credit of compensation cess paid on coal. Can the said refund claim be rejected on the ground that coal is used for the generation of electricity which is an intermediate product and not the final product which is exported and since electricity is exempt from GST, the ITC of the tax paid on coal for generation of electricity is not available? Clarification: There is no distinction between intermediate goods or services and final goods or services under GST. Inputs have been clearly defined to include any goods other than capital goods used or intended to be used by a supplier in the c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat tax period in the same manner as detailed in para 37 above. This is subject to the restriction that the accounting entry showing the said ITC as cost is also reversed. Clarifications on issues related to making zero-rated supplies 44. Export of goods or services can be made without payment of Integrated tax under the provisions of rule 96A of the HPGST Rules. Under the said provisions, an exporter is required to furnish a bond or Letter of Undertaking (LUT) to the jurisdictional Commissioner before effecting zero rated supplies. A detailed procedure for filing of LUT has been specified vide Circular No. 8/8/2017 GST dated 4.10.2017 issued by the Central Government. It has been brought to the notice of the Board that in some cases, such zero-rated supplies were made before filing the LUT and refund claims for unutilized input tax credit got filed. In this regard, it is emphasized that the substantive benefits of zero rating may not be denied where it has been established that exports in terms of the relevant provisions have been made. The delay in furnishing of LUT in such cases may be condoned and the facility for export under LUT may be all ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... are not eligible to export under LUT are required to export under bond. It is clarified that this requirement is already satisfied in case of exports under LUT and asking for self declaration with every refund claim where the exports have been made under LUT is not warranted. 47. It has also been brought to the notice of the Board that in certain cases, where the refund of unutilized input tax credit on account of export of goods is claimed and the value declared in the tax invoice is different from the export value declared in the corresponding shipping bill under the Customs Act, refund claims are not being processed. The matter has been examined and it is clarified that the zero-rated supply of goods is effected under the provisions of the GST laws. An exporter, at the time of supply of goods declares that the goods are meant for export and the same is done under an invoice issued under rule 46 of the HPGST Rules. The value recorded in the GST invoice should normally be the transaction value as determined under section 15 of the HPGST Act read with the rules made thereunder. The same transaction value should normally be recorded in the corresponding shipping bil ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eligible for refund of unutilized input tax credit of Central tax, State tax, Union Territory tax, Integrated tax and compensation cess in such cases. Refund of transitional credit 50. Refund of unutilized input tax credit is allowed in two scenarios mentioned in sub-section (3) of section 54 of the HPGST Act. These two scenarios are zero rated supplies made without payment of tax and inverted tax structure. In sub-rule (4) and (5) of rule 89 of the HPGST Rules, the amount of refund under these scenarios is to be calculated using the formulae given in the said sub-rules. The formulae use the phrase Net ITC and defines the same as 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-rules (4A) or (4B) or both . It is clarified that as the transitional credit pertains to duties and taxes paid under the existing laws viz., under Central Excise Act, 1944 and Chapter V of the Finance Act, 1994, the same cannot be said to have been availed during the relevant period and thus, cannot be treated as part of Net ITC and thus no refund of such unuti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be hit by the restrictions provided in sub-rule (10) of rule 96 of the HPGST Rules. Clarification on calculation of refund amount for claims of refund of accumulated ITC on account of inverted tax structure 53. Sub-section (3) of section 54 of the HPGST Act provides that refund of any unutilized ITC may be claimed where the credit has accumulated on account of rate of tax on inputs being higher than the rate of tax on output supplies (other than nil rated or fully exempt supplies). Further, sub-section (59) of section 2 of the HPGST Act defines inputs as any goods other than capital goods used or intended to be used by a supplier in the course or furtherance of business. Thus, inputs do not include services or capital goods. Therefore, clearly, the intent of the law is not to allow refund of tax paid on input services or capital goods as part of refund of unutilized input tax credit. It is clarified that both the law and the related rules clearly prevent the refund of tax paid on input services and capital goods as part of refund of input tax credit accumulated on account of inverted tax structure. 54. There have been instances whe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ITC by the ratio of turnover of inverted rated supply of goods and services to the adjusted total turnover will give the figure of ₹ 385/-. vi. From this, if we deduct the tax payable on such inverted rated supply of goods or services, which is ₹ 360/-, we get the maximum refund amount, as per rule 89(5) of the HPGST Rules which is ₹ 25/-. Refund of TDS/TCS deposited in excess 55. Tax deducted in accordance with the provisions of section 51 of the HPGST Act or tax collected in accordance with the provisions of section 52 of the HPGST Act is required to be paid while discharging the liability in FORM GSTR 7 or FORM GSTR 8 , as the case may be, by the deductor or the collector, as the case may be. 56. It has been reported that, there are instances where taxes so deducted or collected is deposited under the wrong head (e.g. an amount deducted as Central tax is deposited as Integrated tax/State tax), thereby creating excess balance in the cash ledger of the deductor or the collector as the case may be. Doubts have been raised on the fate of this excess balance of TDS/TCS in the cash ledger of the ded ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ime measure to resolve this issue, refund of accumulated ITC on account of inverted tax structure, for the period(s) in which there is reversal of the ITC required to be lapsed in terms of the said notification, is to be claimed under the category any other instead of under the category refund of unutilized ITC on account of accumulation due to inverted tax structure in FORM GST RFD-01A. It is emphasized that this application for refund should relate to the same tax period in which such reversal has been made. b) The application shall be accompanied by all statements, declarations, undertakings and other documents which are statutorily required to be submitted with a refund claim of unutilized ITC on account of accumulation due to inverted tax structure . On receiving the said application, the proper officer shall himself calculate the refund amount admissible as per rule 89(5) of State Goods and Services Tax Rules, 2017 (hereinafter referred to as HPGST Rules ), in the manner detailed in para 37 above. After calculating the admissible refund amount, as described above, and scrutinizing the application for completeness and eligibility, if the proper officer is s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... return in FORM GSTR-3B for any month subsequent to August, 2018 or through FORM GST DRC-03 subsequent to the due date of filing of the return in FORM GSTR-3B for the month of August, 2018 would remain eligible to claim refund of unutilized ITC on account of accumulation due to inverted tax structure w.e.f. 01.08.2018. However, such refund shall be granted only after the reversal of the amount of credit to be lapsed, either through FORM GSTR-3B or FORM GST DRC-03, along with payment of interest, as applicable. 4 How should a merchant exporter claim refund of input tax credit availed on supplies received on which the supplier has availed the benefit of the Government of India, Ministry of Finance, notification No. 40/2017-State Tax (Rate), dated the 20.11.2017, published in the Gazette of Himachal Pradesh vide number EXN-F(10)-40/2017 21st November, 2017 or notification No. 41/2017-Integrated Tax (Rate), dated the 23rd October, 2017, published in the Gazette of India, Extraordinary, Part II, Section 3, Sub-section (i), vide number G.S.R 1321(E), dated the 23rd October, 2017 (hereinafter referred to as the said notifications )? ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntegrated tax paid in respect of such export is electronically credited to the bank account of the applicant. Clarifications on other issues 59. Notification No. 40/2017 State Tax (Rate) dated 20.11.2017 and notification No. 41/2017 Integrated Tax (Rate) dated 23.10.2017 provide for supplies for exports at a concessional rate of 0.05% and 0.1% respectively, subject to certain conditions specified in the said notifications. It is clarified that the benefit of supplies at concessional rate is subject to certain conditions and the said benefit is optional. The option may or may not be availed by the supplier and / or the recipient and the goods may be procured at the normal applicable tax rate. It is also clarified that the exporter will be eligible to take credit of the tax @ 0.05% / 0.1% paid by him. The supplier who supplies goods at the concessional rate is also eligible for refund on account of inverted tax structure as per the provisions of clause (ii) of the first proviso to sub-section (3) of section 54 of the HPGST Act. It may also be noted that the exporter of such goods can export the goods only under LUT / bond and cannot export on payment of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stores and spares, packing materials, materials purchased for machinery repairs, printing and stationery items, as part of Net ITC on the grounds that these are not directly consumed in the manufacturing process and therefore, do not qualify as input. There are also instances where stores and spares charged to revenue are considered as capital goods and therefore the ITC availed on them is not included in Net ITC, even though the value of these goods has not been capitalized in his books of account by the applicant. It is clarified that the ITC of the GST paid on inputs, including inward supplies of stores and spares, packing materials etc., shall be available as ITC as long as these inputs are used for the purpose of the business and/or for effecting taxable supplies, including zero-rated supplies, and the ITC for such inputs is not restricted under section 17(5) of the HPGST Act. Further, capital goods have been clearly defined in section 2(19) of the HPGST Act as goods whose value has been capitalized in the books of account and which are used or intended to be used in the course or furtherance of business. Stores and spares, the expenditure on which has been charged as a reven ..... X X X X Extracts X X X X X X X X Extracts X X X X
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