Important issues  in GST refund resolved

In a recent circular cbec has clarified on various important matters related to refund in GST. We all know that exporters are stuck with their money in government’s account. There is a lot of dust on various issues. In this article we will simplify those clarifications for you.Here you will be able to see issues in GST refund which are addressed by CBEC.

Condonation for delay in LUT for Export:

Many taxpayers were not aware of provisions of GST related to LUT. In the beginning the provisions were not clear. Initially LUT was allowed to a restricted class of taxpayers fulfiling the criteria of turnover and receipts in foreign exchange. Later on it was open for all except the taxpayer having a prosecution for tax evasion of more than 2.5 Crores. While the law was evolving many taxpayers move with export even without LUT or payment of IGST. In this circular cbec has condoned that delay in LUT and even the exports made before an LUT are covered under that LUT.

Rule 96A (1) of CGST Rules provide that any registered person may export goods or services without payment of IGST after furnishing a LUT/Bond and that he would be liable to pay tax due along with the interest as applicable within a period of fifteen days after the expiry of specified period. This time limit can be extended by commissioner if export is made within that extended time limit.

Frequency to apply for a refund:

This is an another important issue. Rule 89 of CGST Rules provide for the formulae of refund amount in case of exports. The formula mentioned in rule 89 of CGST rules is reproduced below:

“Refund Amount = (Turnover of zero-rated supply of goods + Turnover of zero-rated supply of services) x Net ITC ÷Adjusted Total Turnover
Where, –
(A) “Refund amount” means the maximum refund that is admissible;
(B) “Net ITC” means 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;
(C) “Turnover of zero-rated supply of goods” means the value of zero-rated supply of goods made during the relevant period without payment of tax under bond or letter of undertaking, other than the turnover of supplies in respect of which refund is claimed under sub-rules (4A) or (4B) or both;
(D) “Turnover of zero-rated supply of services” means”

Example to understand this resolution:

Here some practical issues arise due to this formula.

Mr. A have following purchase in last 4 months:

October:Rs. 10 lac plus CGST and SGST of Rs. 90000 each respectively.

November: Rs. 15 lac plus CGST and SGST of Rs. 135000 each respectively.

December: Rs. 20 lac plus CGST and SGST of Rs. 180000 each respectively.

January: Rs. 10000 plus CGST and SGST of Rs. 900 each respectively.

Now they applied for refund for each of above month. Details of their export is as follows:

October: no export

November : No Export

December: No Export

January: Export of Rs. 40,00,000

Now his amount of refund will be:

October: 180000*0/0=0

November: 270000*0/0=0

December: 360000*0/0=0

January : 1800*10000/10000=1800

Now the issue is that if there is no export in any month then there will be no refund as amount of export turnover will be zero that will convert amount of refund in zero.

Resolution: CBEC provided the resolution to this issue by allowing exporter to apply for refund of period they want to. It need not be monthly. It can be for two months or for quarter or for any period they want to apply.

Related Topic:
Delay in refund – Right of assessee to claim interest from department

Refund of taxes in GST when drawback is availed by taxpayer:

It is also a contentious issue in GST. There is ambiguity in the language of third proviso to section 54(3) of CGST Act.Relevant portion of third proviso of section 54(3) is reproduced here:

“Provided also that no refund of input tax credit shall be allowed, if the supplier of goods or services or both avails of drawback in respect of central tax or claims refund of the integrated tax paid on such supplies.”

Here the term “Central tax” is creating a confusion as there is no drawback of central tax in GST. The term central tax as defined in section.It is reproduced here:

“central tax” means the central goods and services tax levied under section 9″

Drawback of excise, service tax and customs duty was available in past regime. When imported goods were used in manufacture,process or operation on goods exported than a drawback was alloed as per prescribed rates.

When drawback of customs duty is taken:

In current circular no. 37/11/2018-GST dated 15th March 2018 cbec has clarified that the refund of input tax credit will be allowed even if the drawback of customs duty is availed. Also it has clarified a typographical error in circular 24/24/2017 -GST dated 21st December 2018.{Reference to section 54(3)(ii) should be taken as reference to section 54(3)(i)}.

When Drawback of central tax is taken:

The circular no. 37/11/2018-GST dated 15th March 2018 clarified that when the drawback of central tax is taken the refund of input tax credit of state tax will still be allowed. Although here also they forget to clarify the meaning of central tax. This a term of GST and defined as to mean the CGST but drawback of the same is not allowed.If it try to indicate the central taxes before GST than we can say that refund of state tax will be available if drawback of central taxes in earlier regime is taken. Although it should be the purposive interpretation but clarification is still required.

Important points to take care while filing return by an exporter:

1. Exporter is required to file GSTR 3b with taxable value for exports and IGST paid against export indicated in appropriate fields.
2. The aggregate amount of IGST claimed in GSTR 1 or Table 6A should not be greater than the IGST paid amount indicated in Table 3.1b of corresponding month.

Modification in errors made while filing GSTR 1 and table 6:

Exporters are advised to use table 9 of the following month to modify the data filed in earlier months.In table 9 you will be able to change the following fields:

a) Invoice number.

b) Invoice date.

c) Port code

d) Shipping bill.

e) Invoice amount.

f) Whether it is with payment of GST or without payment of GST.

g) If is it taxable at differential rate (e.g.motor vehicle)

Following items although cant be change via table 9:

a) Nature of supply.

b) We cant shift a supply from export to domestic.

c) We cant shift a domestic supply into Export.

d) We cant shift an SEZ supply to normal export and vice versa.

No demand of unwanted documents by the department:

Many taxpayers are facing this issue that a long list of documents is provided by department officers. Many time the irrelevant documents are also required. CBEC has clarified that there is not requirement of asking irrelevant documents e.g

• Self declaration for prosecution which is already given at the time of LUT.
• FIRC/BRC in case of export of goods.
• But a list of invoices may be required by department.

A list of documents is also provided in circular:You can access it at following link. Circular 37/11/2018 GST 

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