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CLARIFICATIONS ON REFUND RELATED ISSUES Circular No. 135/05/2020 – GST dated 31.03.2020 Issue No. 1: - The period for a refund claim to be filed cannot be spread over the different financial years. This restriction was bought in vide Circular 125/44/2019-GST dated 18.11.2019. Example: - A company started purchasing goods for further manufacturing of goods from November 2017 till June 2018. The manufacturing was completed in June 2018 and the final product was exported in the month of June 2018. The company was not able to file for a refund for ITC on goods purchased as the claim of the refund was extending to 2 years i.e. F.Y. 2017-18 and F.Y. 2018-19. Clarification: - Refund claim can be spread across different Financial Years. There is no such restriction mentioned in Section 54(3) of the CGST Act, 2017 and circulars cannot impose additional stricter conditions that are not postulated in the law. This situation has been held by Delhi HC in the case of Pitambra Books Pvt. Ltd. (2020). Issue No. 2: - Refund of GST input when the GST rate on such inputs has been reduced subsequently. Example: - A taxpayer is dealing in trading of goods. He purchased goods attracting a GST rate of 18%. Subsequently, the GST rate was reduced to 12%. The taxpayer requested for refund of excess ITC accumulated on account of a reduction in GST rate. Clarification: - The taxpayer claimed refund u/s 54(3)(ii) of the CGST Act, 2017 under inverted duty structure. As per the provisions, a refund of input can be claimed where the GST rate on input is higher than the GST rate on the output. In the issue above, the input goods and output goods are both the same and so a refund cannot be applied u/s 54(3)(ii). Issue No. 3: - Whether refund will be paid in cash or will be credited in the electronic credit ledger in the following cases: - 1. Refund of excess payment of tax 2. Refund of tax paid on intra-state supplies which subsequently was held to be inter-state supplies 3. Refund on account of assessment/ provisional assessment/ appeal or any other order Example: - A taxpayer has paid erroneously paid excess tax of Rs. 120. He had utilized ITC of Rs. 110 and paid in cash Rs. 10. Clarification: - The taxpayer shall file Form GST RFD-01 within the prescribed time limit. It is clarified that the Proper Officer shall issue the refund in cash upto the amount paid in cash and refund by way of crediting the electronic credit ledger of the amount which was earlier utilized for payment of output tax liability from such ledger. The refund in cash shall be issued in Form RFD-06 and the amount to be re-credited in electronic credit ledger shall be in Form PMT-03. In the example given above, the proper officer shall issue the refund in cash of Rs. 10 and refund shall re-credited in an electronic credit ledger of Rs. 110.

Issue No. 4: - Rule 36(4) of CGST rules, 2017 states that credit shall be availed to the extent of 110% as appearing in GSTR-2A. Will this rule also apply in case where the input tax is not appearing in GSTR- 2A and refund of such input is sought to be obtained?

Example: - ITC appearing in GSTR-2A – Rs. 1,000/- ITC accumulated for refund – Rs. 1,200/-

Whether refund shall be issued of Rs. 1,000 or Rs. 1,200/-?

Clarification: - The refund of ITC shall be restricted to the invoices which are uploaded by the supplier in GSTR-1 and are appearing in GSTR-2A. Earlier, para 36 of Circular No. 125/44/2019-GST allowed taxpayers to obtain refund of ITC which are not appearing in GSTR-2A by uploading the such invoices. This circular stands amended to the extent of this clarification. Hence, in the above example the refund shall be allowed to the extent of invoices appearing in GSTR-2A i.e. Rs. 1,000/-.

Issue No. 5:- Mentioning of HSN/SAC code in Annexure 'B'

Clarification: - To distinguish between the input of capital goods/ services out of the Total input it has been mandated to mention HSN/ SAC codes in Annexure ‘B’ which is filed along with the refund application in Form GST RFD-01. In case, the supplier is exempted to mention the HSN/SAC code, in that case the refund applicant shall not mention the HSN/SAC code.

Warm Regards

CA. Mehul Gupta


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