TaxTMI 
TaxTMI 
Processing of final refund under the GST.
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....under GST law. Central Board of Indirect Taxes and Customs (CBIC) had also issued the Circulars on the captioned subject matter. 1.2. Since issuance of aforesaid Circular(s), it has brought to the notice of this office that in many cases, during the verification of the claim of refund either provisionally or, as the case may be, the final refund, there are instances where the tax payer, has either erroneously claimed the refund of accumulated credit, or of the IGST paid in case of exports. It has also been reported that in certain cases the refund is claimed in respect of input tax credit that is inadmissible under the GST law or where there is mis-match or un-match of the input tax credit availed by the recipient and that passed on by the supplier. It is further reported that due like reasons, Nodal Officer(s) have denied the refund either partly or fully. Therefore, under such circumstances, the Nodal Officers have rejected the refund so claimed. 1.3. On this background, refund claimed or granted erroneously necessitates the initiation of proceedings for Demand and Recovery under appropriate provisions of GST law. 1.4. For aforesaid reasons an Internal Circular 19A of 20....
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....mary documents that facilitates determination of the eligible amount of refund under SGST Act/CGST Act/IGST Act/Cess Act. 1.2. Among aforesaid documents, the applicant is required to submit along with refund application in FORM-GST-RFD-01A with requisite declarations and undertakings, the tax invoices, Statement in Proforma (in Excel) attached to Internal Circular 19A of 2018 dated 18th July 2018 and soft copy of latest GSTR-2A consisting details of supplies made for the month for which refund application is filed. 1.3. In case, the supplier has carried out the amendments, to the invoices uploaded with return in FORM-GSTR-1, in the subsequent return period or has added certain missed invoices in the subsequent month GSTR-1 return, it becomes necessary to provide all such information i.e. auto-drafted GSTR-2A in order to cross-verify the ITC availed by the refund applicant and that passed on by the supplier. 1.4. There would be situations where the refund applicant is filing return in GSTR-1 with monthly periodicity, whereas the supplier is filing his GSTR-1 return quarterly. Under such eventuality, to compute the match, mis-match or un-match of ITC qua these tax payers who....
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....ay to the supplier of goods or services both (except the supplies where tax is payable on reverse charge basis), the amount towards the value pf supply along with tax payable thereon within a period of 180 days from the date of issue of invoice by the supplier then such input tax credit may be taken once said outstanding payment is made to the supplier. (7) In case, the registered person has claimed depreciation in respect of the tax component of the cost of the capital goods and plant and machinery, as per the Income Tax Act, 1961, then the ITC in respect of said component of tax shall not be allowed. So as to ascertain this, the Nodal Officer need to raise specific query to the tax payer and ask for the explanation in this behalf. The ITC claimed under this scenario is in-eligible/in-admissible. In other words, no refund is available in respect of such ITC; even in the cases where refund is claimed of IGST paid. (8) The registered person shall not be entitled to take ITC in respect of any invoice or the debit note for supply of goods or services or both after the due date for furnishing the return for the month of September of the following financial year to which such tax ....
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....er registered person having the same Permanent Account Number. In other words, the restriction of 50% ITC in relation to inter-branch taxable supply is not applicable. Example. State Bank of India, Mazgaon Branch make the tax paid supply to State Bank of India, Delhi branch or one business vertical of SBI is making tax paid supply to another business vertical of SBI provided they are having the same PAN. The aforesaid restriction of 50% ITC is not applicable. (3) In addition to the aforesaid aspects, it may be noted that the registered taxable person shall not take credit of input tax in respect of the contingencies given in clause (A) to (I) below: - (A) motor vehicles and other conveyances except when they are used for making the following taxable supplies, - • of such vehicles or conveyances; or • of transportation of passengers; or • for imparting training on driving, flying, navigating such vehicles or conveyances; (B) motor vehicles and other conveyances for transportation of goods; (C) the following supply of goods or services or both- (i) food and beverages, outdoor catering, beauty treatment, health servi....
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.... which he has become liable for registration. [Section 18(1)(a)] in respect of inputs held, - (i) in stock and (ii) inputs contained in semi-finished or finished goods held in stock • on the day immediately preceding the date from which he becomes liable to pay tax under the provisions of this Act (2) Registration has been taken voluntarily [See section 25(3) of the MGST Act] provided that the Turn-over has not been exceeded the threshold limit on the date of registration. [Section 18(1)(b)] in respect of inputs held, - (i) in stock and (ii) inputs contained in semi-finished or finished goods held in stock • on the day immediately preceding the date of grant of registration. (3) Where registered person ceases to pay tax under section 10. [Section 18(1)(c)] in respect of inputs held,- (i) in stock and (ii) inputs contained in semi-finished or finished goods held in stock and on capital goods • on the day immediately preceding the date from which he becomes liable to pay tax at normal rate. • input tax credit shall be available as determined under rule 44 of MGS....
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....e MGST Rules. • it may be noted that any balance remaining in the electronic credit ledger after payment as aforesaid shall lapse. (3) (a) In case of supply of capital goods or plant and machinery, on which input tax credit has been taken, (b) where refractory bricks, moulds and dies, jigs and fixtures are supplied as scrap, [Section 18(6)] • shall pay on transaction value as determined under section 15, an amount equal to the input tax credit taken on the said capital goods or plant and machinery • the credit in respect of capital goods shall be reduced as given in rule 44(3) of the MGST Rules. 2.6. To determine the admissibility of ITC the provisions of section 19 relating to taking credit in respect of inputs and capital goods sent for job work; section-20 manner of distribution of credit by the Input Service Distributor and section 21-dealing with the manner of recovery of credit pertaining to the input service distributed in excess need to be kept in mind. These provisions may not be applicable to all tax payers seeking refund, however, these would be useful in the cases where aforesaid circumstances exist. 3. Availment ....
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....is filed. 1.4. The return filing frequency of the supplier as also the amendments made to the subsequent months GSTR-1 and addition of missing invoices by the supplier shall also be taken into account while determining the match, un-match or mis-match in the input credit availed by the refund applicant and that is passed on by the supplier. Example: (a) Recipient M/s ABC has filed the refund application for Rs. 1,00,000/- for the month of December-2017 having monthly periodicity of filing GSTR-1. (b) M/s ABC has received the inward supply from the supplier, - • M/s XYZ whose frequency of filing return is monthly. He has supplied the goods through 4 invoices. However, while filing GSTR-1 he has missed one invoice and for one invoice ITC passed on is wrongly stated i.e. instead of say Rs, 500 of SGST and CGST credit each it has shown Rs. 300 each. • M/s XYZ has amended the one invoice in the month of February-2018 and shown the correct credit passed on at Rs. 500/- CGST and SGST each. • M/s XYZ has added the missed invoice in the month of April-2018. (c) In this case, the Nodal Officer is required first to confirm the mismatch or ....
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.... therewith. These aspects had already been explained in the earlier Circulars issued in this behalf. (2) Comparison of Turn-over shown in refund application in FORMGST-RFD-01A, GSTR-3B and GSTR-1, any deviation in this respect shall be reconciled. Unless said deviation is reconciled properly refund shall not be granted. Any deficiency in the refund application to be dealt with the procedure given in the earlier Circular(s). (3) The return filing status of refund applicant and status about the suppliers filing of GSTR-3B and GSTR-1 shall be confirmed. This may be done on the basis of the data provided by the EIU. (4) In case, the supplier has failed to file return in FORM-GSTR-3B or GSTR-1 or both, then this may be brought to the notice of the tax payer. After giving reasonable compliance window, if the default is not made good then the input tax credit in relation to these non-filers shall not be allowed. (5) In case of refund is on account of availment of IGST credit from the supplier who is located in other State and who has not filed the GSTR-3B or GSTR-1 or both, then recipient may be asked to pursue the supplier to make this default good. (6) The Nodal Officer s....
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...., inverted tax structure or the deemed exports. (3) On carrying out the verification as above, the eligible amount of refund need to be determined on the basis of the nature of refund viz. refund on account of IGST paid on export of services, refund of accumulated credit on account of export of goods etc. It may be noted that the rule 89(4) of the MGST Act/CGST Act provides for the formula for determination of refund amount. (4) Refund on account of inverted tax structure shall be processed as given in rule 89(5). (5) Retrospective change in formula for calculation of refund on account of Inverted tax structure: The amendment to rule 89(5) is explained below: (a) Prior to 18th April 2018, the refund of accumulated input tax credit on account of inverted tax structure was calculated as per the formula given below: Maximum Refund Amount = {(Turnover of inverted rated supply of goods) x Net ITC / Adjusted Total Turnover} - tax payable on such inverted rated supply of goods. * Adjusted TO means total Turn-over less Nil rated and Exempted but including Zero rated supplies. * ITC was having the same meaning given in rule 89(4) of the MGST Rule....
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....refund rejection order in FORM-GST-RFD-06 shall be issued. (4) However, in the cases where the refund relating to the inverted duty structure, on account of supplies made to SEZ developer or unit or refund on account of deemed export is pending as on the date of issuance of this Trade Circular then is all such cases the refund shall be granted only after undertaking the Audit as contemplated under section 65 of the MGST Act. (5) The refund rejected as above shall be re-credited and for this the order in FORM-GST-1B shall be issued along with issuance of FORM-GST-PMT-03. 4. Initiation of Audit proceedings as per section 65 of the MGST Act: 4.1. Circumstances under which the Audit proceedings need to be issued: (1) Audit as per provisions of section shall be initiated in all the cases where, - (a) provisional and final refund of 90% and 10% is granted i.e. the order in FORM-GST-RFD-04 or, as the case may be FORM-GST-RFD-06 respectively, has been issued before the date of issuance of Internal Circular 19A of 2018 dated the 18th July 2018. (b) the provisional refund of 90% is given before the issuance of Internal Circular 19A of 2018. (c) refun....
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....o pay the amount as determined then is all such cases, as provided under section 65(7) of the MGST Act, the proceedings for demand and recovery shall be initiated as per the provisions of the section 73 or 74 of the MGST Act. 5. The issues that need to be considered while issuing the Show-cause Notice for Demand and recovery of the refund granted erroneously or ITC availed/utilized wrongly etc. : 5.1. Legal provisions: Section 73 of MGST Act, provides for determination of tax not paid or short paid or erroneously refunded, input tax credit wrongly availed or utilized for any reason other than fraud or any willful mis-statement or suppression of facts. 5.2. Whereas, the section 74 provides for determination of tax not paid or short paid or erroneously refunded input tax credit wrongly availed or utilized by reason of fraud or any willful misstatement or suppression of facts. 5.3. Thus depending upon the nature of demand and recovery the provisions of section 73 or section 74 need to be used. 5.4. Issuance of Show-cause notice: (1) Show Cause Notice (for short "SCN") is the starting point of legal proceedings against the tax payer. It lays down the entire framework ....