Allowing Refund and Auto-Population of HSN Summary in GSTR-9

Representation for (1) Allowing Refund of ITC on Capital Goods under Inverted Tax Structure and Export, (2) Removal of Refund Restriction on Edible Oil Sector, and (3) Auto-Population of HSN Summary in GSTR-9

A number of provisions have been enacted in recent times through the route of subordinate legislation (Rules) bypassing both the GST Council as well as the legislatures. It is the basic principle of judicial system that substantive rights of a person cannot be taken away except by a due process of law. The recent amendments in GST Rules (like restricting refund on capital goods and edible oil ) have far reaching implications and have been made without even of an iota of discussion in the Council. The delegation of authority provided to a Committee of Officers (GST Implementation Committee) was meant for mundane matters while the same is being misused to carry out substantive changes. Some of them are as follows:-

At present, refund of unutilized Input Tax Credit (ITC) is permitted only in respect of inputs (input goods) and does not extend to:

1. ITC accumulated on Capital Goods, and
2. Certain sectors such as Edible Oil industry, where refund restrictions have been imposed.

1 Issue Regarding Capital Goods

Under the current provisions of Section 54(3) of the CGST Act, refund of accumulated ITC excludes credit pertaining to capital goods. This leads to:

• Blocking of substantial working capital
• Increased cost of production
• Reduced competitiveness of domestic manufacturers
• Financial strain especially on MSMEs

Capital goods are integral to manufacturing and form part of the cost structure. Denying refund on capital goods ITC in cases of inverted tax structure and export against Latter of under taking (LUT) results in unintended cascading effects, which GST was designed to eliminate

2. Hardship Faced by Edible Oil Industry

In the edible oil sector, the GST rate structure often results in:

• Higher GST on inputs (such as crude oil, packaging materials, etc.
• Lower GST on outward supply

Further, restrictions imposed on refund of ITC in certain notified goods have caused:

• Continuous accumulation of ITC
• Severe liquidity crunch
• Increase in compliance burden
• Distortion in pricing

This adversely affects small traders, refiners, and processors across the country

1. Auto-Population of HSN Summary in GSTR-9 (Annual Return)

At present, taxpayers are required to manually compile and report HSN-wise summary of outward supplies in GSTR-9.

Practical Difficulties:

• Duplication of data already available in GSTR-1
• High risk of clerical errors
• Time-consuming reconciliation process
• Increased compliance cost
• Unnecessary notices due to minor mismatches

Since HSN details are already reported monthly/quarterly in GSTR-1 and available on the GST portal, manual re-entry in GSTR-9 serves no substantive purpose.

Our Suggestion:

• Enable auto-population of HSN summary in GSTR-9 from filed GSTR-1.
• Allow editing only where corrections are required.
• Reduce compliance burden, especially for MSMEs.

This will significantly improve ease of doing business and align with the Government's digitization objectives.

Conclusion

The above measures will:

• Improve liquidity in the manufacturing and edible oil sectors
• Reduce working capital blockage
• Strengthen MSMEs
• Enhance compliance efficiency
• Promote true GST neutrality

Further the vision of 'Ease of Doing Business