Amendment of Rule 89(5) - Notification No 14/2022

[RM Shanmugam]

Is that amended new formula is applicable for the refund applications to be filed for the tax periods earlier to the date of notification 14/2022 dt 05.07.2022 ?

[Shilpi Jain]

In my view this formula would increase the refund amount eligible. Could be regarded as a substanive provision and not merely a clarificatory amendment. Hence it should be available prospectively. This would be the view of the department also.

However, on going through the SC decision in VKC Footsteps - 2021 (9) TMI 626 - SUPREME COURT, it comes out that the change in formula was requested to remove the anomaly in the formula and hence a view also exists that this beneficial rectification should be regarded as retrospective.

[Shilpi Jain]

You could consider applying with new formula, just in case there is any favourable decision in this regard in future you could benefit!!

[Amit Agrawal]

If one will not be able to utilise balance accumulated ITC (i.e., after calculation of refund amount u/r 89 (5) as per old formula) for past period/s for foreseeable future, one can definitely try to get higher refund by claiming that the subject amendment should be treated as retrospective.

However, following stumbling blocks needs to be understood before marking such litigation-journey which is expected to be long-drawn battle, having its own costs and with uncertain outcome:

A. Amendment in Para 8 (d) is not made by way of adding an explanation.

A1. Explanatory route was used in many amendments (For example: Para 3, 8 (a), 8 (c)) in very same Notification 14/2022 dt 05.07.2022

B. In very same Notification, there are many amendments (For example: Para 7, 9, 10, 19) which are specifically made retrospective.

B1. But, such amendment as retrospective, is conspicuous by its absence in the notification about the subject matter under discussion here.

C. So, using the very same reasoning given by Supreme Court in case of UNION OF INDIA & ORS. VERSUS VKC FOOTSTEPS INDIA PVT LTD. [2021 (9) TMI 626 - SUPREME COURT], it is possible to argue that GST council, after due consideration, has chosen to give such benefit only prospectively.

But, considering large number of adversely affected tax-papers, I do hope that Govt. comes up with clarificatory circular or amendment etc. to give effect of such amendment as retrospective.

Govt. should also give similar relief for ITC availed against capital goods too, both for past and future period (with treating life as 60 months, if it wants to avoid misuse, as done in Rule 43)

All this will be in spirit of ease of doing business, in my view.

These are strictly personal views of mine and the same should not be construed as professional advice / suggestion.

[Amit Agrawal]

In above post, please read as 'possible to hold that' instead of 'it is possible to argue that'.

[Shilpi Jain]

We could even wait for the council minutes to see what was the legislative intent

[Bhushan Picha]

Sir, my client is exporting goods(vegetable) on CIF value. His firm is only having export business (No domestic sales). till now he is claiming GST refund on CIF value. But due to change in formula he will get refund at lower ratio (as he is recorded sales in CIF value) and department take zero rated turnover as per FOB value and Adjusted total turnover taken as per our sales recorded means CIF value. Now Department is not ready to understand of taking two different defination of turnover in single formula. Is there any legal remedy available??

AI Summary

Amendment to Rule 89 refund formula may be treated prospectively, affecting refund claims; consider applying the new formula now.
Amendment to Rule 89(5) revises the GST refund formula and raises whether Notification 14/2022 operates prospectively or retrospectively. Commentators note arguments for prospectivity based on absence of an explanatory clause and the notification's explicit retrospective amendments elsewhere, but also note precedent supporting retrospective rectification of anomalous drafting. Practitioners recommend filing under the new formula to preserve benefit, flag litigation risks and urge a clarificatory circular and equivalent relief for ITC on capital goods; exporters face CIF versus FOB valuation disputes affecting refund quantum.