REFUND OF GST AGAINST INVERTED DUTY STRUCTURE

[SAFETAB LIFESCIENCE]

Dear Experts,

We have obtained refund of accumulated GST against inverted duty structure in March-2018 for the period of earlier months. The refund included ITC credited against goods (inputs) and services. Now we have been instructed to repay the refund received against input services against Notification No. 26/2018 dt. 13.06.2018 retrospective effect from 01.07.2017.

Now, my query is shall reverse the demanded amount from Electronic Credit Ledger today as I have sufficient balance now or I have to pay only in Cash Ledger. I think this reversal of GST is eligible for re-credit of ITC as the Department has not denied the credit and denied only the refund. If I pay cash in Cash Ledger, shall I use the amount for offset of GST payment immediately in the same month itself.

[KASTURI SETHI]

In my view, the amount of refund has to be deposited in Central Govt. Account under proper Accounting Head. There are specific Accounting Heads from where the Central Govt. withdraws money to pay to any person. Specific Accounting Head is mentioned in Refund Sanctioning Order (Order-in-Original). Re-credit may be allowed on the basis of the proof of such deposit.

[Nandan Khambete]

Have you received SCN from the Department for recovery u/s 73 or 74?

Refund was granted to you on basis of Law at that time. Later retrospective change cannot affect already passed orders and is bad in law. If the amount is big, you can go in appeal as this recovery won’t stand test in courts.

if you wish to go ahead with repayment, it is advisable to pay the same in Cash ledger and , in your next 3B , utilise this Cash Ledger balance first instead of ITC of that month, till such cash ledger balance comes to Zero. With this, the logic of keeping that amount in Credit ledger will be complete. Also, this is not the correct solution but best solution available.

With due respect to you and expert comment above, there is no question of re credit above. There is no Refund claim pending and ITC portion available with officer to “re credit” the same as, re credit is only allowed on basis of order RFD 01B and nothing else. I have assumed you have already received RFD 06.

[KASTURI SETHI]

Electronic Cash Ledger is equal to erstwhile PLA (Personal Ledger Account). In this account an assessee deposits tax amount through e-challan and debits from the same to transfer in Central Govt. Account. Anyhow, the ball is in the court of the Department.

[SHIVKUMAR SHARMA]

I agree with Shri Nandan Khambete.

[SAFETAB LIFESCIENCE]

Dear Sirs,

We have not received any SCN for this u/s 73 or 74.

We received refund under order RFD-06 only.

We do not want to go for appeal.

We can pay in Cash Ledger and make use of it in 3B in the same month itself.

Can we proceed ??

[Nandan Khambete]

As per my view, it is not advisable to make any payment based on verbal communication from Department officials till SCN is received.

Even though SCN is received later, be rest assured that you won’t have to pay neither Interest nor penalty for “ erroneous refund” received which will be contended by Department because it is change of law from retrospective effect.

[SAFETAB LIFESCIENCE]

Respected Sir,

We recived a letter from Department to repay the amount.

[KASTURI SETHI]

Dear Querist,. If you want to repay the amount of refund already sanctioned and paid, you can debit from Electronic Cash Ledger. You must get in writing from the department before repayment. You must get a letter at least.

.

[KASTURI SETHI]

Dear Querist,

Govt. has disallowed the refund in cash and you want to repay the same by way of debit from Electronic Cash Ledger.

After repayment of this amount in cash through Electronic Cash Ledger, the entry of re-credit of this very amount is required in Electronic Credit Ledger and, thereafter, you can use it for offsetting liability in GSTR 3B in the same month. Re-credit of the same is your substantive right.The availment of credit of input service is not under challenge.

I am sure you understand the formula for sanction of refund very well.

[SAFETAB LIFESCIENCE]

Dear Mr. Kasthuri Seithi,

Once I paid cash and if it comes in Cash Ledger, then why I need to take in Credit Ledger.

Already that amount will be in Cash Ledger and availble for offsetting. If I take again in

Credit Ledger the very same amount as you told, it may double credit, Am I right.

[KASTURI SETHI]

I fail to understand your first query dated 8.11.18. There are some confusion in it.

[Nandan Khambete]

Amount cannot be recredited from Cash Ledger to Credit Ledger. Recredit means to credit ITC again wrt ITC debited.Once RFD 06 is received for full ITC Debited to Credit ledger, it cannot be “re credited”.

Yes, Safetab, you are correct it may double credit.

If amount is substantial,It is advisable to check if letter is received as per provisions of law and only then proceed with payment. Also, if it is as per law, Write letter asking the department officer only to give in writing about proposed procedure as per law.

[KASTURI SETHI]

RULE 93. Credit of the amount of rejected refund claim.

[KASTURI SETHI]

On this issue an article has been published in GST Law Times (Issue dated 8.11.18 Vol.18 Part 2.)

[Nandan Khambete]

Dear Sethi Sir,

The Company has already received full refund and also RFD 06 in “full”.

Now the department is asking to repay the “erroneous refund” sanctioned by them due to retrospective amendment in law.

As per procedure, PMT 03 is issued for refund rejected(inadmissible) while sanctioning final Refund in RFD 06. As per my limited experience and understanding, it cannot be issued after RFD 06 is issued with no rejection a dn that to since not claim amount is held back and that too after 6 months of RFD 06.

[KASTURI SETHI]

Sh.Nandan Khambete Ji, Sir, I agree with you to the extent that the amount of sanctioned refund cannot be recovered from the party after six months as explained by you inasmuch as the party is not at fault at all. Thus the remaining issues are relegated to the background. I also agree with your logic that the party must not rrepay the amount without letter or SCN irrespective of the fact whether the amount is small or huge. To repay the amount of sanctioned refund in view of retrospective amendment and that too after the expiry of six months is unconstitutional. When the department is on weak wicket regarding merits/legal aspect, the department tries to recover through persuasive strategy. It appears to me the party is ready to repay the amount on the basis of verbal request or written letter and not SCN. On the other hand, for the sake of having cordial relationship with the department, the approach of the party is positive and appreciable. During my service I have seen so many assessees who deposit the Govt. dues on the basis of letter or verbal request.

AI Summary

Repayment of refunded GST should not be made without formal written demand to avoid improper re-credit or double credit.
Repayment of a sanctioned refund following retrospective amendment should not be made on verbal instruction; a written departmental demand or SCN is required. Voluntary repayment may be made from the Electronic Cash Ledger, but funds cannot be converted into Electronic Credit Ledger balance by simple transfer; re-credit of ITC depends on formal refund/rejection procedures (RFD forms and Rule 93) and documentary proof of deposit if re-credit is sought. Taking credit twice risks double crediting, so secure written departmental direction before adjustment.