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TMI BlogFully electronic refund process through FORM GST RFD-01 and single disbursementX X X X Extracts X X X X X X X X Extracts X X X X ..... undersigned 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 processing shall be undertaken electronically, have been deployed on the common portal with effect from 26.09.2019. Accordingly, the Circulars issued earlier laying down the guidelines for manual submission and processing of refund claims need to be suitably modified and a fresh set of guidelines needs to be issued for electronic submission and processing of refund claims. With this objective and in order to ensure uniformity in the implementation of the provisions of law across field formations, in exercise of its powers conferred by section 168 of the Rajasthan Goods and Services Tax Act, 2017 (hereinafter referred to as "RGST Act"), hereby lays down the procedure for electronic submission and processing of refund applications in supersession of earlier Circulars issued by the undersigned viz. GS ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 uploaded along with the refund application. Neither the refund application in FORM GST RFD-01 nor any of the supporting documents shall be required to be physically submitted to the office of the jurisdictional proper officer. b. The Application Reference Number (ARN) will be generated only after the applicant has completed the process of filing the refund application in FORM GST RFD-01, and has completed uploading of all the supporting documents/ undertaking/ statements/invoices and, where required, the amount has been debited from the electronic credit/cash ledger. c. As soon as the ARN is generated, the refund application along with all the supporting documents shall be transferred electronically to the jurisdictional proper officer who shall be able to view it on the system. The application shall be deemed to have been filed under sub-rule (2) of rule 90 of the RGST Rules on the date of generation of the said ARN and the time limit of 15 days to issue an acknowledgement or a deficiency memo, as the case may be, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eficiency memo. 6. Any refund claim for a tax period may be filed only after furnishing all the returns in FORM GSTR-1 and FORM GSTR-3B which were due to be furnished on or before the date on which the refund application is being filed. However, in case of a claim for refund filed by a composition taxpayer, a non-resident taxable person, or an Input Service Distributor (ISD) furnishing of returns in FORM GSTR-1 and FORM GSTR-3B is not required. Instead, the applicant should have furnished returns in FORM GSTR-4 (along with FORM GST CMP-08), FORM GSTR-5 or FORM GSTR-6, as the case may be, which were due to be furnished on or before the date on which the refund application is being filed. 7. Since the functionality of furnishing of FORM GSTR-2 and FORM GSTR-3 remains unimplemented, it has been decided by the GST Council to sanction refund of provisionally accepted input tax credit. However, the applicants applying for refund must give an undertaking to the effect that the amount of refund sanctioned would be paid back to the Government with interest in case it is found subsequently that the requirements of clause (c) of sub-section (2) of section 16 read with sub-section (2) of sec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the re-credit would take place automatically and no order in FORM GST PMT-03 is required to be issued. The applicant is required to rectify the deficiencies highlighted in deficiency memo and file fresh refund application electronically in FORM GST RFD-01 again for the same period and this application would have a new and distinct ARN. 11. It is further clarified that once an application has been submitted afresh, pursuant to a deficiency memo, the proper officer will not serve another deficiency memo with respect to the application for the same period, unless the deficiencies pointed out in the original deficiency memo remain un-rectified, either wholly or partly, or any other substantive deficiency is noticed subsequently. 12. It is also clarified that since a refund application filed after correction of deficiency is treated as a fresh refund application, such a rectified refund application, submitted after correction of deficiencies, shall also have to be submitted within 2 years of the relevant date, as defined in the explanation after sub-section (14) of section 54 of the RGST Act. Provisional Refund 13. Doubts get raised as to whether provisional refund would be given ev ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eously refunded should not be recovered under section 73 or section 74 of the RGST Act, as the case may be, along with interest and penalty, if any. 16. The proper officer for adjudicating the above case shall be the same as the proper officer for sanctioning refund under section 54 of the RGST Act. The above notice shall be adjudicated following the principles of natural justice and an order shall be issued, in FORM GST RFD-06, under section 54 of the RGST Act, read with section 73 or section 74 of the RGST Act, as the case may be. If the adjudicating authority decides against the applicant in respect of both points (a) and (b) above, then an amount of ₹ 70/- will have to be sanctioned in FORM GST RFD- 06, and an amount of ₹ 20/-, along with interest and penalty, if any, shall be entered by the officer in the electronic liability register of the applicant through issuance of FORM GST DRC- 07. Further, if the application pertains to refund of unutilized/accumulated ITC, then ₹ 30/-, i.e. the amount rejected, shall have to be re-credited to the electronic credit ledger of the applicant through FORM GST PMT-03. However, this re-credit shall be done only after the r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sions of the RGST Act and rules made thereunder, the proper officer shall have to issue a show cause notice in FORM GST RFD-08, under section 54 of the RGST Act, read with section 73 or 74 of the RGST Act, requiring the applicant to show cause as to why: (a) the refund amount corresponding to the ineligible ITC should not be rejected as per the relevant provisions of the law; and (b) the amount of ineligible ITC should not be recovered as wrongly availed ITC under section 73 or section 74 of the RGST Act, as the case may be, along with interest and penalty, if any. 21. The above notice shall be adjudicated following the principles of natural justice and an order shall be issued, in FORM GST RFD-06, under section 54 of the RGST Act, read with section 73 or section 74 of the RGST Act, as the case may be. If the adjudicating authority decides against the applicant in respect of both points (a) and (b) above, then FORM GST RFD- 06 shall have to be issued accordingly, and the amount of ineligible ITC, along with interest and penalty, if any, shall be entered by the officer in the electronic liability register of the applicant through issuance of FORM GST DRC-07. Alternatively, the ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y decides wholly in the applicant?s favour. It is hereby clarified in such a case the petitioner would file a fresh refund claim for the said amount of ₹ 20/- under the option of claiming refund "On Account of Assessment/Provisional Assessment/Appeal/Any other order". Application for refund of integrated tax paid on export of services and supplies made to a Special Economic Zone developer or a Special Economic Zone unit 25. It has been represented that while filing the return in FORM GSTR-3B for a given tax period, certain registered persons committed errors in declaring the export of services on payment of integrated tax or zero-rated supplies made to a Special Economic Zone developer or a Special Economic Zone unit on payment of integrated tax. They have shown such supplies in the Table under column 3.1(a) instead of showing them in column 3.1(b) of FORM GSTR-3B whilst they have shown the correct details in Table 6A or 6B of FORM GSTR-1 for the relevant tax period and duly discharged their tax liabilities. Such registered persons were earlier unable to file the refund application in FORM GST RFD-01A for refund of integrated tax paid on the export of services or on supplie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... PFMS will create a unique assessee code (combination of GSTIN + validated bank account number) for the applicant. This unique assessee code will be used by PFMS for all refund payments made to the applicant in the said bank account. Therefore, in order to avoid repeat validations and generation of multiple unique assessee codes for the same GSTIN, it shall be advisable for the applicants to enter the same bank account details in successive refund applications submitted in FORM GST RFD-01. In cases where an applicant wishes to avail the refund in a different bank account, which has not yet been validated, a new unique assessee code (comprising of GSTIN + new bank account) will be generated by PFMS after validation of the said bank account. 29. If the bank account details mentioned by an applicant in the refund application submitted in FORM GST RFD-01 are invalidated, an error message shall be transmitted by PFMS to the common portal electronically and the common portal shall make the error message available to the applicant and the refund officers on their dashboards. On receiving such an error message, an applicant can: (a) rectify the invalidated bank account details by filing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unded is not refunded within 60 days of the date of receipt of application, interest at the rate of 6 per cent (notified vide notification No. F.12(56)FD/Tax/2017-Pt-I-39 dated 29.06.2017) on the refund amount starting from the date immediately after the expiry of sixty days from the date of receipt of application (ARN) till the date of refund of such tax shall have to be paid to the applicant. It may be noted that any tax shall be considered to have been refunded only when the amount has been credited to the bank account of the applicant. Therefore, interest will be calculated starting from the date immediately after the expiry of sixty days from the date of receipt of the application till the date on which the amount is credited to the bank account of the applicant. Accordingly, all tax authorities are advised to issue the final sanction order in FORM GST RFD-06 and the payment order in FORM GST RFD-05 within 45 days of the date of generation of ARN, so that the disbursement is completed within 60 days. 35. The provisions relating to refund provide for partial as well as complete adjustment of refund against any outstanding demand under GST or under any existing law. It is hereb ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the relevant period uploaded by the applicant. 37. In case of refunds pertaining to items listed at (a), (c) and (e) in para 3 above, the common portal calculates the refundable amount as the least of the following amounts: (a) The maximum refund amount as per the formula in rule 89(4) or rule 89(5) of the RGST Rules [formula is applied on the consolidated amount of ITC, i.e. Central tax + State tax +Integrated tax]; (b) The balance in the electronic credit ledger of the applicant at the end of the tax period for which the refund claim is being filed after the return in FORM GSTR-3B for the said period has been filed; and (c) The balance in the electronic credit ledger of the applicant at the time of filing the refund application. After calculating the least of the three amounts, as detailed above, the equivalent amount is to be debited from the electronic credit ledger of the applicant in the following order: (a) Integrated tax, to the extent of balance available; (b) Central tax and State tax, equally to the extent of balance available and in the event of a shortfall in the balance available in a particular electronic credit ledger (say, Central tax), the differential amo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... efund in respect of such supplies and shall not avail any input tax credit on such supplies. Similarly, in case the refund is filed by the recipient of deemed export supplies, an undertaking shall have to be furnished by him stating that refund has been claimed only for those invoices which have been detailed in statement 5B for the tax period for which refund is being claimed and that he has not availed input tax credit on such invoices. The recipient shall also be required to declare that the supplier has not claimed refund with respect to the said supplies. The procedure regarding procurement of supplies of goods from DTA by Export Oriented Unit (EOU) / Electronic Hardware Technology Park (EHTP) Unit / Software Technology Park (STP) Unit / Bio- Technology Parks (BTP) Unit under deemed export as laid down in Circular No. 14/14/2017- GST dated 06.11.2017 issued by the Centre needs to be complied with. Guidelines for claims of refund of Compensation Cess 42. Doubts have been raised whether a registered person is eligible to claim refund of unutilized input tax credit of compensation cess paid on inputs, where the zero-rated final product is not leviable to compensation cess. For ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... available even if the exported product is not subject to levy of cess. After the issuance of this Circular, the registered person decides to start exporting under bond/LUT without payment of tax. He also decides to avail (through the return in FORM GSTR-3B) the ITC of compensation cess, paid on the inputs used in the months of July, 2017 to May, 2018, in the month of July, 2018. The registered person then goes on to file a refund claim for ITC accumulated on account of exports for the month of July, 2018 and includes the said accumulated ITC for the month of July, 2018. How should the amount of compensation cess to be refunded be calculated? Clarification: In the instant case, refund on account of compensation cess is to be recomputed as if the same was available in the respective months in which the refund of unutilized credit of Central tax/State tax/Union Territory tax/Integrated tax was claimed on account of exports made under LUT/Bond. If the aggregate of these recomputed amounts of refund of compensation cess is less than or equal to the eligible refund of compensation cess calculated in respect of the month in which the same has actually been claimed, then the aggregate of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er is half of total turnover). Since both the balance in the electronic credit ledger at the end of the tax period for which the claim of refund is being filed and the balance in the electronic credit ledger at the time of filing the refund claim is ₹ 50/- (assuming that no other debits/credits have happened), the common portal will proceed to debit ₹ 50/- from the ledger as the claimed refund amount. The question is whether the proper officer should sanction ₹ 50/- as the refund amount or ₹ 25/- (i.e. half of the ITC availed after adjusting for reversals)? Clarification: ITC which is reversed cannot be held to have been 'availed' in the relevant period. Therefore, the same cannot be part of refund of unutilized ITC on account of zero-rated supplies. Moreover, the reversed ITC has been accounted as a cost which would have reduced the income tax liability of the applicant. Therefore, the same amount cannot, at the same time, be refunded to him/her in the ratio of export turnover to total turnover. However, if the said reversed amount is again availed in a later tax period, subject to the restriction under section 16(4) of the RGST Act, it can be refu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... irst and claiming refund at a subsequent date should not be insisted upon. In such cases, the jurisdictional Commissioner may consider granting extension of time limit for export as provided in the said sub-rule on post facto basis keeping in view the facts and circumstances of each case. The same principle should be followed in case of export of services. 46. It is learnt that some field formations are asking for a self-declaration with every refund claim to the effect that the applicant has not been prosecuted. The facility of export under LUT is available to all exporters in terms of notification No. 37/2017- Central Tax dated 04.10.2017, except to those who have been prosecuted for any offence under the RGST Act or the IGST Act or any of the existing laws in force in a case where the amount of tax evaded exceeds two hundred and fifty lakh rupees. Para 2(d) of the Circular No. 8/8/2017-GST dated 04.10.2017 issued by the Centre, mentions that a person intending to export under LUT is required to give a self-declaration at the time of submission of LUT that he has not been prosecuted. Persons who are not eligible to export under LUT are required to export under bond. It is clarif ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... making zero rated supplies, notwithstanding that such supply is an exempt supply. In terms of section 2 (47) of the RGST Act, exempt supply includes non-taxable supply. Further, as per section 16(3) of the IGST Act, a registered person making zero rated supply shall be eligible to claim refund when he either makes supply of goods or services or both under bond or letter of undertaking (LUT) or makes such supply on payment of Integrated tax. However, in case of zero-rated supply of exempted or non-GST goods, the requirement for furnishing a bond or LUT cannot be insisted upon. It is thus, clarified that in respect of refund claims on account of export of non-GST and exempted goods without payment of Integrated tax; LUT/bond is not required. Such registered persons exporting non-GST goods shall comply with the requirements prescribed under the existing law (i.e. Central Excise Act, 1944 or the VAT law of the respective State) or under the Customs Act, 1962, if any. Further, the exporter would be 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. Ref ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of notification Nos. 78/2017-Customs and 79/2017-Customs both dated 13.10.2017, before the issuance of the notification No. F.12(46)FD/Tax/2017-Pt.-V-123 dated 16.10.2018, shall be eligible to claim refund of the Integrated tax paid on exports. Further, exporters who have imported inputs in terms of notification Nos. 78/2017-Customs dated 13.10.2017, after the issuance of notification F.12(46)FD/Tax/2017-Pt.-V-123 dated 16.10.2018, would not be eligible to claim refund of Integrated tax paid on exports. However, exporters who are receiving capital goods under the EPCG scheme, either through import in terms of notification No. 79/2017-Customs dated 13.10. 2017 or through domestic procurement in terms of notification No. F.12(46)FD/Tax/2017-Pt-II-122, dated 18.10.2017, shall continue to be eligible to claim refund of Integrated tax paid on exports and would not be hit by the restrictions provided in sub-rule (10) of rule 96 of the RGST 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 RGST Act provides that refund of any unutilized ITC may be claimed where the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le in such situations. iii. Further assume that the applicant supplies the output Y having value of ₹ 3,000/- during the relevant period for which the refund is being claimed. Therefore, the turnover of inverted rated supply of goods and services will be ₹ 3,000/-. Since the applicant has no other outward supplies, his adjusted total turnover will also be ₹ 3,000/-. iv. If we assume that Input A, having value of ₹ 500/- and Input B, having value of ₹ 2,000/-, have been purchased in the relevant period for the manufacture of Y, then Net ITC shall be equal to ₹ 385/- (₹ 25/- and ₹ 360/- on Input A and Input B respectively). v. Therefore, multiplying Net 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 RGST Rules which is ₹ 25/-. Refund of TDS/TCS deposited in excess 55. Tax deducted in accordance with the provisions of section 51 of the RGST Act or tax c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion check on the common portal which prevents the value of input tax credit in Statement 1A of FORM GST RFD-01Afrom being higher than the amount of ITC availed in FORM GSTR-3B of the relevant period minus the value of ITC reversed in the same period. This results in registered persons being unable to claim the full amount of refund of accumulated ITC on account of inverted tax structure to which they might be otherwise eligible. What is the solution to this problem? (a) As a one-time 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... shall be calculated starting from the due date of filing of return in FORM GSTR-3B for the month of August, 2018 till the date of reversal of said amount through FORM GSTR-3B or through FORM GST DRC-03, as the case may be. (b) The registered person who has reversed the amount of credit to be lapsed in the 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 notification No. F.12(46)FD/Tax/2017-Pt-II 124, dated the 23rd October, 2017, or notification No. 41/2017-Integrated Tax (Rate), dated the 23rd October, 2017 (hereinafter referred to as the "said notifications")? (a) Rule 8 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he bank account of the applicant. Clarifications on other issues 59. Notification No. F.12(46)FD/Tax/2017-Pt-II-124 and notification No. 41/2017 - Integrated Tax (Rate) both 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 RGST 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 Integrated tax. 60. Sub-section (14) of section 54 of the RGST Act provides that no refund under subsection ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 RGST Act. Further, capital goods have been clearly defined in section 2(19) of the RGST 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 revenue expense in the books of account, cannot be held to be capital goods. Annexure-A List of all statements/declarations/undertaki ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ration under second and third proviso to section 54(3) Endorsement(s) from the specified officer of the SEZ regarding receipt of goods/services for authorized operations under second proviso to rule 89(1) Declaration under rule 89(2)(f) Self-certified copies of invoices entered in Annexure-A whose details are not found in GSTR-2A of the relevant period Statement 4 under rule 89(2)(d) and rule 89(2)(e) Self-declaration regarding nonprosecution under sub-rule (1) of rule 91 of the CGST Rules for availing provisional refund Undertaking in relation to sections 16(2)(c) and section 42(2) Self-declaration under rule 89(2)(l) if amount claimed does not exceed two lakh rupees, certification under rule 89(2)(m) otherwise 5 Refund of ITC unutilized on account of Accumulate on due to inverted tax structure Declaration under second and third proviso to section 54(3) Copy of GSTR-2A of the relevant period Declaration under section 54(3)(ii) Statement of invoices (Annexure-B) Undertaking in relation to sections 16(2)(c) and section 42(2) Self-certified copies of invoices entered in Annexure-B whose details are not found in GSTR-2A of the relevant period Statement 1 under ..... 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