TaxTMI 
TaxTMI 
Clarifying the fully electronic refund process through FORM GST RFD-01 and single disbursement
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....r to make the process of submission of the refund application electronic, Circular No. 79/2018-GST dated 01.01.2019 was issued wherein it was specified that the refund application in FORM GST RFD-01A, along with all supporting documents , shall be submitted electronically. However, various post submission stages of processing of the refund application continued to be manual. 2. The necessary capabilities for making the refund procedure fully electronic , in which all steps of submission and processing shall be undertaken electronically, have been deployed on the common portal with effect from 26.09.2019. Accordingly, the Circulars issued earlier laying down the guidelines for manual submission and processing of refund claims need to be suitably modified and a fresh set of guidelines needs to be issued for electronic submission and processing of refund claims. With this objective and in order to ensure uniformity in the implementation of the provisions of law across field formations, the Chief Commissioner of State tax, in exercise Page 1 of 43 of the powers conferred by section 168 (1) of t....
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..../declarations/undertakings which are part of FORM GST RFD-01 itself, and also uploading of other documents/invoices which shall be required to be provided by the applicant for processing of the refund claim. A comprehensive list of such documents is provided at Annexure-A and it is clarified that no other document needs to be provided by the applicant at the stage of filing of the refund application. The facility of uploading these other documents/invoices shall be available on the common portal where four documents, each of maximum 5MB, may be uploaded along with the refund application. Neither the refund application in FORM GST RFD-01 nor any of the supporting documents shall be required to be physically submitted to the office of the jurisdictional proper officer. b. The Application Reference Number (ARN) will be generated only after the applicant has completed the process of filing the refund application in FORM GST RFD-01, and has completed uploading of all the supporting documents/undertaking/statements/invoices and, where required, the amount has been debited from the electronic credit/cash ledger. c. As soon as the AR....
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....ity while the refund claim is under processing. However, if such an applicant gets assigned to one of the tax authorities after generation of the ARN and a deficiency memo gets issued for the refund application submitted by him, then the re-submitted refund application, after correction of deficiencies, shall be treated as a fresh refund application and shall be forwarded to the jurisdictional proper officer of the tax authority to which the taxpayer has Page 4 of 43 now been assigned, irrespective of which authority handled the initial refund claim and issued the deficiency memo. 6. Any refund claim for a tax period may be filed only after furnishing all the returns in FORM GSTR-1 and FORM GSTR-3B which were due to be furnished on or before the date on which the refund application is being filed. However, in case of a claim for refund filed by a composition taxpayer, a non-resident taxable person, or an Input Service Distributor (ISD) furnishing of returns in FORM GSTR-1 and FORM GSTR-3B is not required. Instead, the applicant should have furnished returns in FORM GSTR-4 (along with FORM GST CMP-08), FORM GSTR-5 or FORM GSTR-6, as....
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.... where deficiencies are noticed within the aforesaid period of 15 days. It is clarified that either an acknowledgement or a deficiency memo should be issued within the aforesaid period of 15 days starting from the date of generation of ARN. Once an acknowledgement has been issued in relation to a refund application, no deficiency memo, on any grounds, may be subsequently issued for the said application. 10. After a deficiency memo has been issued, the refund application would not be further processed and a fresh application would have to be filed. Any amount of input tax credit/cash debited from electronic credit/ cash ledger would be re-credited automatically once the deficiency memo has been issued. It may be noted that the re-credit would take place automatically and no order in FORM GST PMT-03 is required to be issued. The applicant is required to rectify the deficiencies highlighted in deficiency memo and file fresh refund application electronically in FORM GST RFD-01 again for the same period and this application would have a new and distinct ARN. 11. It is further clarified that once an application has been submitted afresh, pu....
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....less than the amount of refund sanctioned provisionally through FORM GST RFD-04. For example, consider a situation where an applicant files a refund claim of Rs. 100/- on account of zero-rated supplies. The proper officer, after prima-facie examination of the application, sanctions Rs. 90 as provisional refund through FORM GST RFD-04 and the same is electronically credited to his bank account. However, on detailed examination, it appears to the proper officer that only an amount of Rs. 70 is admissible as refund to the applicant. In such cases, the proper officer shall have to issue a show cause notice to the applicant, in FORM GST RFD-08, under section 54 of the GGST Act, read with section 73 or 74 of the GGST Act, requiring the applicant to show cause as to why: 16. (a) the amount claimed of Rs. 30/- should not be rejected as per the relevant provisions of the law; and (b) the amount of Rs. 20/- erroneously refunded should not be recovered under section 73 or section 74 of the GGST Act, as the case may be, along with interest and penalty, if any. The proper officer for adjudicating the above case shall be the same as the prope....
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....sed that while processing refund claims, information contained in Table 9 of FORM GSTR-1 of the relevant tax period as well as that of the subsequent tax periods should also be taken into cognizance, wherever applicable. In this regard, Circular No. 26/2017-GST dated 29.12.2017 may be referred, wherein the procedure for rectification of errors made while filing the returns in FORM GSTR-3B has been provided. Therefore, in case of discrepancies between the data furnished by the taxpayer in FORM GSTR-3B and FORM GSTR-1, the proper officer shall refer to the said Circular and process the refund application accordingly. 19. Detailed guidelines laid down in subsequent paragraphs of this Circular covering various types of refund claims may also be followed while scrutinizing refund claims for completeness and eligibility. Page 9 of 43 Re-crediting of electronic credit ledger on account of rejection of refund claim 20. In case of rejection of refund claim of unutilized/accumulated ITC due to ineligibility of the input tax credit under any provisions of the GGST Act and rules made thereunder, the proper officer shall have to issue a show ca....
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....m of unutilized/ accumulated ITC of Rs. 100/-, only Rs.80/- is sanctioned (Rs.15/- is rejected on account of ineligible ITC and Rs.5/- is rejected on account of any other reason). As stated above, a show cause notice, in FORM GST RFD-08 shall have to be issued to the applicant, requiring him to show cause as to why the refund claim amounting to Rs.20/- should not be rejected under the relevant provisions of the law and why the ineligible ITC of Rs. 15/- should not be recovered under section 73 or section 74, as the case may be, with interest and penalty, if any. If the said notice is decided against the applicant, Rs. 15/-, along with interest and penalty, if any, shall be entered by the officer in the electronic liability register of the applicant through issuance of FORM GST DRC-07. Further, Rs. 20/- would be re-credited through FORM GST PMT- 03 only after the receipt of an undertaking from the applicant to the effect that he shall not file an appeal or in case he files an appeal, the same is finally decided against the applicant. 24. Continuing with the above example, further assume that the applicant files an appeal against thi....
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.... State tax by State tax officers, was causing undue hardship to the refund applicants. In order to facilitate refund applicants on this account, it has now been decided that for a refund application assigned to a Central tax officer, both the sanction order (FORM GST RFD-04/06) and the corresponding payment order (FORM GST RFD-05) for the sanctioned refund amount, under all tax heads, shall be issued by the Central tax officer only. Similarly, for refund Page 12 of 43 applications assigned to the State tax officer, both the sanction order (FORM GST RFD-04/06) and the corresponding payment order (FORM GST RFD- 05) for the sanctioned refund amount, under all tax heads, shall be issued by the State tax officer only. 28. The sanctioned refund amounts, as entered in the payment orders issued by the Central and State tax officers, shall be disbursed through the Public Financial Management System (PFMS) of the Controller General of Accounts (CGA), Ministry of Finance, Government of India. On filing of a refund application in FORM GST RFD-01, the common portal shall generate a master file for the applicant containing the relevant details l....
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....f a payment order in FORM GST RFD-05. However, in certain exceptional cases, it is possible that a validation error occurs after issuance of the payment order. In such cases, the said payment order will be invalidated by the common portal and a new payment order will have to be issued by the proper officer after following the rectification process described in paras 29 and 30 above. The re-issued payment order will have a new reference number and shall contain the newly selected bank account details. However, there will be no change in either the original ARN or the sanction order number or the amount for which the payment order was originally issued. 32. It may be noted that the applicant, at the time of filing of refund application in FORM GST RFD-01, can select a bank account only from the list of bank accounts provided by him at the time of registration in FORM GST REG-01, or subsequently through filing a non-core amendment in FORM GST REG-14. The same account details will be auto-populated in the payment order issued in FORM GST RFD-05. Any change in these auto- populated bank account details shall not be allowed unless there is ....
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....elines for refunds of unutilized Input Tax Credit 36. Applicants of refunds of unutilized ITC, i.e. refunds pertaining to items listed at (a), (c) and (e) in para 3 above, shall have to upload a copy of FORM GSTR-2A for the relevant period (or any prior or subsequent period(s) in which the relevant invoices have been auto-populated) for which the refund is claimed. The proper officer shall rely upon FORM GSTR-2A as an evidence of the accountal of the supply by the corresponding supplier(s) in relation to which the input tax credit has been availed by the applicant. Such applicants shall also upload the details of all the invoices on the basis of which input tax credit has been availed during the relevant period for which the refund is being claimed, in the format enclosed as Annexure-B along with the application for refund claim. Such availment of ITC will be subject to restriction imposed under sub-rule (4) in rule 36 of the GGST rules inserted vide Notification No. 49/2019-ST dated 10.10.2019. The applicant shall also declare the eligibility or otherwise of the input tax credit availed against the invoices related to the claim period i....
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....ity in relation to the process through which an application in FORM GST RFD-01 is generated. 39. For all refund applications where refund of unutilized ITC of compensation cess is being claimed, the calculation of the refundable amount of compensation cess shall be done separately and the amount so calculated will be entirely debited from the balance of compensation cess available in the electronic credit ledger. 40. The third proviso to sub-section (3) of section 54 of the CGST Act states that no refund of input tax credit shall be allowed in cases where the supplier of goods or services or both avails of drawback in respect of Central Page 17 of 43 tax. It is clarified that if a supplier avails of drawback in respect of duties rebated under the Customs and Central Excise Duties Drawback Rules, 2017, he shall be eligible for refund of unutilized input tax credit of Central tax/ State tax/ Integrated tax/ Compensation cess. It is also clarified that refund of eligible credit on account of State tax shall be available if the supplier of goods or services or both has availed of drawback in respect of Central tax. Guidelines for refun....
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....16 of the IGST Act has been mutatis mutandis made applicable to inter-State supplies under the Cess Act vide section 11 (2) of the Cess Act. Thus, it implies that input tax credit of Compensation Cess may be availed for making zero-rated supplies. Further, by virtue of section 54(3) of the CGST Act, the refund of such unutilized ITC shall be available. Accordingly, it is clarified that a registered person making zero rated supply of aluminium products under bond or LUT may claim refund of unutilized credit including that of compensation cess paid on coal. Such registered persons may also make zero- rated supply of aluminium products on payment of Integrated tax but they cannot utilize the credit of the compensation cess paid on coal for payment of Integrated tax in view of the proviso to section 11(2) of the Cess Act, which allows the utilization of the input tax credit of cess, only for the payment of cess on the outward supplies. 43. As regards the certain issues related to refund of accumulated input tax credit of compensation cess on account of zero-rated supplies made under Bond/Letter of Undertaking on which clarifications have ....
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....application(s) for refund of compensation cess (not claimed earlier) in respect of the past period. b) Issue: A registered person uses coal for the captive generation of electricity which is further used for the manufacture of goods (say aluminium) which are exported under Bond/Letter of Undertaking without payment of duty. Refund claim is filed for accumulated Input Tax Credit of compensation cess paid on coal. Can the said refund claim be rejected on the ground that coal is used for the generation of electricity which is an intermediate product and not the final product Page 20 of 43 which is exported and since electricity is exempt from GST, the ITC of the tax paid on coal for generation of electricity is not available? Clarification: There is no distinction between intermediate goods or services and final goods or services under GST. Inputs have been clearly defined to include any goods other than capital goods used or intended to be used by a supplier in the course or furtherance of business. Since coal is an input used in the production of aluminium, albeit indirectly through the captive generation of electricity, which is ....
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....lso reversed. Clarifications on issues related to making zero-rated supplies 44. Export of goods or services can be made without payment of Integrated tax under the provisions of rule 96A of the GGST Rules. Under the said provisions, an exporter is required to furnish a bond or Letter of Undertaking (LUT) to the jurisdictional Commissioner before effecting zero rated supplies. A detailed procedure for filing of LUT has been specified vide Circular No. 8/8/2017 -GST dated 4.10.2017. It has been brought to the notice of the Chief Commissioner of State tax that in some cases, such zero-rated supplies were made before filing the LUT and refund claims for unutilized input tax credit got filed. In this regard, it is emphasized that the substantive benefits of zero rating may not be denied where it has been established that exports in terms of the relevant provisions have been made. The delay in furnishing of LUT in such cases may be condoned and the facility for export under LUT may be allowed on ex post facto basis taking into account the facts and circumstances of each case. 45. Rule 96A (1) of the GGST Rules provides that any regis....
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....equirement is already satisfied in case of exports under LUT and asking for self-declaration with every refund claim where the exports have been made under LUT is not warranted. 47. It has also been brought to the notice of the Chief Commissioner of State tax that in certain cases, where the refund of unutilized input tax credit on account of export of goods is claimed and the value declared in the tax invoice is different from the export value declared in the corresponding Page 23 of 43 shipping bill under the Customs Act, refund claims are not being processed. The matter has been examined and it is clarified that the zero-rated supply of goods is effected under the provisions of the GST laws. An exporter, at the time of supply of goods declares that the goods are meant for export and the same is done under an invoice issued under rule 46 of the GGST Rules. The value recorded in the GST invoice should normally be the transaction value as determined under section 15 of the GGST Act read with the rules made thereunder. The same transaction value should normally be recorded in the corresponding shipping bill / bill of export. During the....
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....s Act, 1962, if any. Further, the exporter would be eligible for refund of unutilized input tax credit of Central tax, State tax, Integrated tax and compensation cess in such cases. Refund of transitional credit 50. Refund of unutilized input tax credit is allowed in two scenarios mentioned in sub-section (3) of section 54 of the GGST Act. These two scenarios are zero rated supplies made without payment of tax and inverted tax structure. In sub-rule (4) and (5) of rule 89 of the GGST Rules, the amount of refund under these scenarios is to be calculated using the formulae given in the said sub-rules. The formulae use the phrase 'Net ITC' and defines the same as "input tax credit availed on inputs and input services during the relevant period other than the input tax credit availed for which refund is claimed under sub-rules (4A) or (4B) or both". It is clarified that as the transitional credit pertains to duties and taxes paid under the existing laws viz., under Gujarat Value Added Tax Act, 2003 and Gujarat Tax on Entry of Specified Goods into Local Areas Act, 2001, the same cannot be said to have been availed during the relevant....
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....ntegrated tax paid on exports and would not be hit by the restrictions provided in sub-rule (10) of rule 96 of the GGST Rules. Clarification on calculation of refund amount for claims of refund of accumulated ITC on account of inverted tax structure 53. Sub-section (3) of section 54 of the GGST Act provides that refund of any unutilized ITC may be claimed where the credit has accumulated on Page 26 of 43 account of rate of tax on inputs being higher than the rate of tax on output supplies (other than nil rated or fully exempt supplies). Further, sub-section (59) of section 2 of the GGST Act defines inputs as any goods other than capital goods used or intended to be used by a supplier in the course or furtherance of business. Thus, inputs do not include services or capital goods. Therefore, clearly, the intent of the law is not to allow refund of tax paid on input services or capital goods as part of refund of unutilized input tax credit. It is clarified that both the law and the related rules clearly prevent the refund of tax paid on input services and capital goods as part of refund of input tax credit accumulated on account of inver....
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....fore, multiplying Net ITC by the ratio of turnover of inverted rated supply of goods and services to the adjusted total turnover will give the figure of Rs. 385/-. vi. From this, if we deduct the tax payable on such inverted rated supply of goods or services, which is Rs. 360/-, we get the maximum refund amount, as per rule 89(5) of the GGST Rules which is Rs. 25/-. Refund of TDS/TCS deposited in excess 55. Tax deducted in accordance with the provisions of section 51 of the GGST Act or tax collected in accordance with the provisions of section 52 of the GGST Act is required to be paid while discharging the liability in FORM GSTR 7 or FORM GSTR 8, as the case may be, by the deductor or the collector, as the case may be. 56. It has been reported that, there are instances where taxes so deducted or collected is deposited under the wrong head (e.g. an amount deducted as Central tax is deposited as Integrated tax/State tax), thereby creating excess balance in the cash ledger of the deductor or the collector as the case may be. Page 28 of 43 Doubts have been raised on the fate of this excess balance of TDS/TCS in the cash ledger....
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....tion check on the common portal which prevents the value of input tax credit in Statement 1A of FORM GST RFD-01A from being higher than the amount of ITC availed in FORM GSTR-3B of the relevant period minus the value of ITC reversed in the same period. This results in registered persons being unable to claim the full amount of refund of accumulated ITC on account of inverted tax structure to which they might be otherwise eligible. What is the solution to this problem? GST RFD-01A. It is emphasized that this application for refund should relate to the same tax period in which such reversal has been made. b) The application shall be accompanied by all statements, declarations, undertakings and other documents which are statutorily required to be submitted with a "refund claim of unutilized ITC on account of accumulation due to inverted tax structure". On receiving the said application, the proper officer shall himself calculate the refund amount admissible as per rule 89(5) of Gujarat Goods and Services Tax Rules, 2017 (hereinafter referred to as “GGST Rules"), in t....
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....rsed belatedly. Such interest shall be calculated starting from the due date of filing of return in FORM GSTR-3B for the month of August, 2018 till the date of reversal of said amount through FORM GSTR-3B or through FORM GST DRC-03, as the case may be. b) The registered person who has reversed the amount of credit to be lapsed in the return in FORM GSTR-3B for any month subsequent to August, 2018 or through FORM GST DRC-03 subsequent to the due date of filing of the return in FORM GSTR-3B for the month of August, 2018 would remain eligible to claim refund of unutilized ITC on account of accumulation due to inverted tax structure w.e.f. 01.08.2018. However, such refund shall be granted only after the reversal of the amount of credit to be lapsed, either Page 32 of 43 Sl. No. Issue 4 Clarification How should a merchant exporter claim refund of input tax credit availed on supplies received on which the supplier has availed the benefit of the Government of Gujarat, Finance Department, notification No. 40/2017-State Tax (Rate), dated the 23rd October, 2017, or notifica....
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....s exported in Table 3.1(b) of FORM-GSTR-3B. In addition, the exporter is expected to furnish the details of the exported goods in Table 6A of FORM GSTR-1 of the relevant period. Only where the common portal is able to validate the consistency of the details so entered by the applicant, the relevant information regarding the refund claim is forwarded to Customs Systems. Upon receipt of the information from the common portal regarding furnishing of these details, the Customs Systems processes the claim for refund and an amount equal to the Integrated tax paid in respect of such export is electronically credited to the bank account of the applicant. Page 34 of 43 Clarifications on other issues 59. Notification No. 40/2017 State Tax (Rate) and notification No. 41/2017 Integrated Tax (Rate) both dated 23.10.2017 provide for supplies for exports at a concessional rate of 0.05% and 0.1% respectively, subject to certain conditions specified in the said notifications. It is clarified that the benefit of supplies at concessional rate is subject to certain conditions and the said benefit is optional. The option may or may not be availed by....
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....is happens when the said taxable person files his/her monthly return in FORM GSTR-3B. Further, section 16(4) of the GGST Act stipulates that ITC may be claimed on or before the due date of filing of the return for the month of September following the financial year to which the invoice pertains or the date of filing of annual return, whichever is earlier. Therefore, the input tax credit of invoices issued in August, 2019, "availed" in September, 2019 cannot be excluded from the calculation of the refund amount for the month of September, 2019. 62. It has been represented that on certain occasions, departmental officers do not consider ITC on stores and spares, packing materials, materials purchased for machinery repairs, printing and stationery items, as part of Net ITC on the grounds that these are not directly consumed in the manufacturing process and therefore, do not qualify as input. There are also instances where stores and spares charged to revenue are considered as capital goods and therefore the ITC availed on them is not included in Net ITC, even though the value of these goods has not been capitalized in his books of accoun....
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....in case of export of services and shipping bill (only in case of exports made through non-EDI ports) in case of goods BRC/FIRC document /any other indicating the receipt of sale proceeds of services entered in made with payment of tax Page 38 of 43 Self-certified copies of invoices entered in Annexure-A whose details are not found in GSTR-2A of the relevant period Self-declaration regarding non-prosecution under sub- rule (1) of rule 91 of the SI. No. Type of Refund Refund of unutilized Declaration/Statement/Un dertaking/Certificates to be filled online Declaration under third proviso to section 54(3) Statement 5 under rule 89(2)(d) and rule 89(2)(e) Supporting documents to be additionally uploaded GGST Rules for availing provisional refund Copy of GSTR-2A of the relevant period Statement of invoices (Annexure-B) Self-certified copies of invoices entered in Annexure-B whose details are not found in GSTR-2A of the relevant period Endorsement(s) from the specified officer of the SEZ Statement 5A under rule ....
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.... are not found in GSTR-2A of the relevant period Documents required under Notification No. 49/2017- State Tax dated 18.10.2017 and Circular No. 14/14/2017- GST dated 06.11.2017 Page 40 of 43 SI. No. Type of Refund supplies Declaration/Statement/Un dertaking/Certificates to be filled online Declaration under rule 89(2)(g) Undertaking in relation to sections 16(2)(c) and section 42(2) Self-declaration under rule 89(2)(1) if amount claimed does not exceed two lakh rupees, certification under rule 89(2)(m) otherwise Statement 5(B) under rule 89(2)(g) Supporting documents to be additionally uploaded required under Documents Circular No. 14/14/2017- GST dated 06.11.2017 Undertaking in relation to sections Declaration under rule Refund to 89(2)(g) recipient of tax paid 7 on deemed export supplies section 42(2) 16(2)(c) and Self-declaration under rule 89(2)(1) if amount claimed does not exceed two lakh rupees, certification under rule 89(2)(m) otherwise Statement 7 under rule 89(2)(k) Undertaking in relation to Refund of s....