Refund on SEZ Unit

[Vinay Kumar]

One of our clients has received an advance from the customer say as on October 2018. As per GST law, GST is to be discharged on receipt basis in case of the supply of services. Accordingly, client has discharged CGST and SGST through DRC-03. Now at the time of raising an taxable invoice the customer becomes an SEZ unit and client is opting for Zero rated supply without payment of taxes. Whether we are eligible for claiming refund of CGST and SGST paid as we cannot adjust GST paid on advance against subsequent invoices

[KASTURI SETHI]

Yes. Your client is entitled to refund under Section 54 (8)(a) of CGST Act itself. Also fulfill the condition laid down in Section 54(8)(e) of CGST Act. Refund must not be hit by the principles of unjust enrichment. An advance amount is always subject to final adjustment and your client is unable to adjust the same by virtue of being SEZ unit. Advance itself is not a 'consideration' .

[Vinay Kumar]

Dear Sir, I seek clarification on your above advice. As this transaction results to inter-state supply (Supply to SEZ) how we can claim a refund of CGST & SGST paid earlier on the same transaction.

Hence I feel refund has to be filed under 54(8)(d) which provides for a refund in case of wrong assessment of the place of supply.

[KASTURI SETHI]

Section 54 (8)(a) refund of tax paid on [export] of goods or services or both or on inputs or input services used in making such [exports];

Section 54 (8) (d) Refund of tax in pursuance of section 77;

SECTION 77.  Tax wrongfully collected and paid to Central Government or State Government.

You have not wrongfully collected tax. The unit got the status of SEZ officially on filing application by the party. Have you collected and paid wrongfully ? The word, 'wrongfully' is not applicable to your transaction. Section 54 (8)(a) is more appropriate. In case you have any doubt, apply after consultation with your jurisdictional GST Officer who is to sanction the refund.

[Alkesh Jani]

Sir,

In this matter some sort of clarification is needed, as the said amount is paid by DRC-03 and not by way of utilizing credit or cash ledger account. What kind of declaration was made in GSTR-1 and GSTR-3B at the time of receipt of advance. Please elaborate your query so that our expert can give the best advice.

Thanks,

With regards

AI Summary

Refund for GST paid on advances to SEZ units may be claimed as zero rated supply subject to refund conditions.
A supplier who paid CGST and SGST on advance receipts and later supplies to an SEZ unit as a zero rated supply without payment may claim refund under Section 54(8)(a), subject to the condition in Section 54(8)(e) and avoidance of unjust enrichment; refund under a provision for wrong assessment of place of supply was considered inapplicable since the tax was not "wrongfully" collected. Attention should be paid to the mode of tax discharge (DRC 03) and declarations in GSTR 1/GSTR 3B, and the jurisdictional officer may be consulted for sanction.