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Knowledge Partner Swamy Associates chennai | coimbatore | madurai | bengaluru hyderabad | ahmedabad | pune | delhi www.swamyassociates.com Editorial Team Sindhu Mangat Rasheela Basheer Abdullah Karuthedakam
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REFUNDS UNDER GST
G
Superintendent of Central Tax & Central Excise ST is all about a smooth flow of funds and compliances till
cumulative balance of input credit
the end. But the system related issues
arising out of such exports or under a
and due to heavy taxpayer base the
claim of rebate.
transition from erstwhile taxation to the present one has not been very easy. In this article, the
• Where there is an excessive payment
GST refund
of tax due to an inadvertent mistake.
process in detail so that it will mitigate and
Anand
make
your
refund
process
• When there is an accumulation of
smoother
credit resulting due to the output tax being less or nil or exempted from tax.
There are certain events where generally a refund arises.
• A refund may arise after a provisional assessment.
• In case of exports (including deemed exports), where there is a
• Where an appeal is for a respondent,
4
then the amount made as a deposit
The refund application has to be made
towards holding such appeal shall be
in Form RFD-01 (to be certified by
refunded to the appellant
a Chartered Accountant) within a period of 2 years from the “relevant
• Refund after investigation or findings
date.” This relevant date is different
by an adjudicating officer.
for different scenarios.
• Refund can be provided to foreign
1. When the goods are exported
embassies
United
through air or sea, then relevant date
Nations when the purchases are made
shall be the date on which such ship or
by them.
aircraft leaves India.
• When there is an accumulation of
2. When the goods are carried by a
credit resulting due to the output tax
land vehicle, then relevant date shall be
being of a lesser rate than the input.
the date when the goods cross the land
or
bodies
of
frontier of the country • Suppliers receiving discounts or credits through the issuance of credit
3. When goods are sent through post,
notes.
then relevant date shall be the date of despatch of goods from the Post Office.
• GST paid by foreign or international tourists are subjected to refund.
4. When the supply includes services, The taxpayers have to make an applica-
and when the same is completed
tion and follow the correct procedure
before receipt of payment, then rele-
for fetching the refund amounts in
vant date shall be the payment receipt
their bank accounts.
date. 5. Similarly, when the services are performed after receipt of an advance, then relevant date shall be the invoice date.
Refund Application Process Under
6. Where refund claim is made for
GST
excess input tax credit left unutilised, then relevant date shall be the end of
5
the financial year for which such
and an SMS. In case the system finds
refund claim is being made.
some deficiencies in the refund application, then Form RFD-03 shall be
7. Where the goods are supplied for
sent to the taxpayer to correct his
deemed exports, i.e. supply to SEZ or
application.
100% EOU, the relevant date shall be the return filing date related to such
Moreover, there are certain documents
deemed exports was filed.
that must be enclosed along with the electronic refund application. Where
8. Where refund arises due to an order
the refund application is below Rs. 5
passed in favour of the appellant, then
lakhs, then a declaration shall be made
relevant date shall be the date of such
by the taxpayer indicating that the
order.
amount of refund has not been utilised by or transferred to any other person.
9. Where tax was paid following a
Where such application exceeds Rs. 5
provisional assessment and refund
lakhs, then apart from the declaration
now arises, then relevant date shall be
above, a document evidencing that the
date at which such tax was adjusted.
amount was paid by the taxpayer shall also be attached.
10. When the person claiming refund is not the supplier, then relevant date
When the person filing refund claim is
shall be the date at which the goods are
a United Nations’ body, Consulate or a
received by such person.
foreign embassy, then the application for refund has to be filed within 90
11. For all other cases, relevant date
days from the end of the quarter for
shall be the date of payment of tax.
which the goods or services were procured. The application should be made in Form RFD-10.
It is mandatory to keep in mind these relevant dates as failure to file refund applications within mentioned time
Note: There shall be no refunds where
can lead to blockage of credit.
the amount of refund is less than Rs. 1,000/-.
Once
the
application
made,
an
acknowledgement in Form RFD-02
Scrutiny of the refund application
will be auto-generated for future refer-
As per norms, it would take about 30
ences and sent across through an email
days to process a refund application.
6
Where the refund claim exceeds a
• Has no appeal or review pending
prescribed amount, then the same shall
with respect to refunds.
be subjected to an audit process. If the same qualifies for a refund, then an
Where the authorised officer feels that
order shall be passed to that extent, or
documents are in consonance with law,
if it meets the criterion for being “un-
then he may pass a final order to that
justly enriching” the taxpayer, then the
effect.
amount shall be transferred to the Consumer Welfare Fund. The above
The Government shall maintain a cash
declaration may be required to be certi-
ledger for the taxpayer. It will be con-
fied by a Chartered Accountant.
stantly updated with the figures as mentioned or declared in the returns. The credit must match with the ledger or else the credit cannot be availed. It is similar in lines of Form 26AS in case of Income Tax, where the amount of TDS and TCS matches with the Form. In all other cases, the refund application shall be processed within 60 days
Refund Order
from the application date. Once the When the taxpayer claims refund of
authorised officer adjudges the refund
monies arising out of exports of
to be true, then he will issue a final
goods or services, then an authorised
order within a period of 60 days from
officer can issue a provisional refund
the application date. If the officer fails
order in Form RFD-04 of an amount
to pass an order within the said 60
of 90% of the refund claim. Such a
days, then the taxpayer shall receive an
provisional refund can be made when
interest @ 6% p.a. for the period
the taxpayer:
exceeding the expiry of 60 days until
• Has not been prosecuted for evading
the receipt of refund.
taxes for an amount exceeding Rs. 250 When the refund has to be adjusted
lakhs over a period of 5 years.
against the taxable amount, then Form RFD-06 shall be passed.
• Has a GST compliance rating of more than 5 out of 10.
7
2. When input goods or services have a
Other forms that are important for refund claims:
higher rate of tax and the same goods
• RFD-07: this is a show cause notice
then the accumulated input tax credit
or services have a lesser output tax, can be claimed as refund.
for complete rejection of a refund application
3. In case of a partial reverse charge, where the input tax credit cannot be
• RFD-08: Payment advice • RFD-09: In case of
used completely against the output tax. delayed
Furthermore, no refund against unuti-
payments, this is an order for interest
lized input tax credit can be given
on late payments.
when:
Refund of Input Tax Credit
• Input arises out of GST paid against goods exported out of India, that were
There are 3 cases against which a
taxable to excise duty
refund claim can be made with respect to input tax credit. All the above
• The supplier has already availed the
scenarios covered refund emanating
benefit of duty drawback paid with
from certain specified transactions.
respect to excise duty.
1. Input tax credit left unutilized when the goods or services being supplied are zero rated or exempted from GST.
8
EXPORTS UNDER GST AN OVERVIEW
S.RajaPandian
Head - Audits - Coimbatore
Swamy Associates
E
procurement of goods/services for export as well as taxes, if any , paid on actual exports.
xports are referred as ‘zero rated supplies’ under GST.
Goods can be exported with payment
Zero rated supplies include supply of
of tax and without payment of tax.
goods or services outside India as well
For exports with payment of tax, on
as supplies to SEZ Developer or unit.
each export IGST will have to be paid.
It is the policy of every government
IGST can be paid through using input
that ‘taxes’ should not be exported.
credit and if credit balance is insuffi-
Therefore , exports are made ‘tax
cient, by payment through cash. Such
free’. The concept of ‘GST’ provides
IGST paid is eligible for refund subject
for refund of taxes incurred on
to conditions prescribed.
9
On the other hand, goods can be
CGST Act, 2017 (12 of 2017) or the
exported without payment of tax by
IGST Act, 2017 (13 of 2017) or any
executing Letter of
of the existing laws in force where the
Undertaking
(LUT for short). Exports under LUT
amount of tax evaded exceeds two
is also subject to certain conditions.
hundred and fifty lakh rupees (Notifi-
In respect of goods/services exported
cation No.37/2017 dated
under LUT, the tax paid on procure-
04.10.2017 : link :
ment of inputs/services are eligible
http://www.cbec.gov.in/re-
for refund.
sources//htdocs-cbec/gst/notfctn-37-central-tax-english.pdf ).
Export under Letter of Undertak-
The registered person shall fill and
ing
submit LUT in Form GST RFD-11 on the GST portal. An LUT shall be
The facility of export under LUT has
deemed to be accepted once the Appli-
been extended to all registered
cation Reference Number (ARN) is
persons who intend to supply goods
generated online. No documents need
or
without
to be physically submitted to the juris-
payment of IGST. The Letter of
dictional office for acceptance of LUT.
services
for
export
Undertaking shall be furnished on the letter head of the registered person, in
If it is found that an exporter whose
duplicate, for a financial year in the
LUT has been so accepted, was ineligi-
annexure to FORM GST RFD – 11
ble to furnish an LUT in place of
referred to in sub-rule (1) of rule 96A
Bond as per Notification No.37/2017
of the Central Goods and Services
dated 04.10.2017, then the Exporter’s
Tax Rules, 2017. The LUT shall be
LUT will be liable for rejection. Refer-
executed by the working partner, the
ence is also drawn to Circular No.
Managing Director or the Company
40/14/2018-GST dated 06.04.2018
Secretary or the proprietor or by a
(link
person duly authorised by such work-
sources//htdocs-cbec/gst/circular-
ing partner or Board of Directors of
no-40-cgst.pdf;jsessionid=8B87F7A23
such company or proprietor.
DDAE41EEC9EFDB5CB6E40BE ).
Facility of export through LUT is
Refund under LUT: As per the
restricted to those who have been
scheme of GST law, all applications
prosecuted for any offence under the
for refund is to be submitted online.
10
:
http://www.cbec.gov.in/re-
Due to incapability of GST portal to
appropriately in the refund register.
provide for online applications for
The proper officer shall validate the
refund, GST council has recom-
GSTIN details on the portal to validate
mended for application and process-
whether return in FORM GSTR - 3 or
ing of such refunds manually.
FORM GSTR - 3B as the case may be, has been filed. The provisional refund
The application for refund in respect
will be sanctioned within seven days of
of unutilized ITC on inputs or input
receipt of application. The final order is
services used for zero-rated supplies
issued within sixty days of the receipt
shall be filed in GST RFD-01A on
of the complete application form.
the common portal gst.gov.in and the amount claimed as refund shall
After the refund claim is processed in
get debited from the amount in the
accordance with the provisions of the
electronic credit ledger maintained at
CGST Act and the rules made thereun-
portal. The GST portal shall gener-
der and where any amount claimed as
ate a proof of debit in ARN (Ac-
refund is rejected under rule 92 of the
knowledgement Receipt Number). A
CGST Rules, either fully or partly, the
Print out of Form GST RFD-01A
amount debited, to the extent of rejec-
submitted along with mention of
tion, shall be re-credited to the elec-
ARN number shall be submitted to
tronic credit ledger by an order made in
the jurisdictional proper officer and
FORM GST PMT-03. The amount
with all necessary documents as
would be credited by the proper officer
prescribed under Rule 89 (2) of
using FORM GST RFD-01B.
CGST Rules, 2017 as applicable, Export paying IGST and Refund
within the time stipulated for filing of such refund under the CGST Act,
This refund pertains to cases where
2017.
exports have been made paying Once such a refund application in
applicable IGST.
FORM GST RFD-01A is received in
The refund of integrated tax paid on
the office of
the jurisdictional
goods exported out of India is gov-
proper officer, an entry shall be
erned by Rule 96 of the CGST Rules.
made in a refund register to be main-
The shipping bill filed by an export-
tained for this purpose and all com-
er shall be deemed to be an applica-
munications shall also be recorded
tion for refund in such cases. The
11
duced for invoice mis-match cases. Reference is invited to Circular No. 05/2018-Customs dated 23.02.2018 (link :http://www.eepcindia.org/download/180224180901.pdf ). Since the last few months had been the initial phase of GST , many mistakes application shall be deemed to have
had been committed inadvertently by
been filed only when export mani-
taxpayer while declaring details of zero
fest or export report is filed and the
rated supplies in their return. Taking in
applicant has furnished a valid return
to account such issues, the government
in FORM GSTR-1 or FORM
has issued a comprehensive circular
GSTR-3B, as the case may be. Upon
Circular F. No. 450/35/2018-Cus IV
receipt of the information regarding
dated 28.03.2018 with measures to
furnishing of a valid return in
rectifying the errors. http://ccobz.gov-
FORM
.in/scan/itgrievance.pdf
GSTR-1
or
FORM
GSTR-3B, the system designated by the Customs shall process the claim
Although the GST law is foolproof in
for refund and an amount equal to
providing mechanism for refund, the
the integrated tax paid in respect of
eligible amount of taxpayer is delayed
such export shall be electronically
due to belated initiation of refund
credited to the bank account of the
process by the government and mis-
applicant.
match of details at the end of exporter. It is positively anticipated that the
In case of this refund also, since
proactiveness of government is an indi-
GST portal is not ready, any order
cation of its intention to make exports
regarding
hassle free under GST and thereby
withholding
of
such
refund or its further sanction respec-
promote exports and exporters.
tively in PART-B of FORM GST RFD-07 or FORM GST RFD-06 shall be done manually till the refund module is operational on the GST portal. An alternative mechanism with officer interface has been intro-
12
B E F O R E PARTING
MAD IN INDIA “Goods and services may be exported but not the taxes” - Mahatma Gandhi
E
xports are the backbone of any economy. The forex they bring in,
are the most valuable princely treasure to every nation, be it developed, developing or under-developed. In line with the global economic principles, every Government comes up with a variety of incentive schemes to neutralize the tax incidence and not to transmit the domestic levies across borders and India is no exception.
S. Jaikumar
In the pre-GST era, there were loads of
Advocate & Country-Head,
export schemes, whereby, import /
Swamy Associates
domestic
[email protected]
65
procurement
of
goods
required for exports were allowed
available hitherto, also compounded
duty-free (e.g. Advance Authorisa-
the misery and the export communi-
tion (AA), EPCG etc.) apart from
ty had slowly started bleeding to
various incentives like Drawback /
death.
FPS etc. When the bubble was about to burst, With the roll out of GST, the entire
the GST think-tank, in their October
export schemes are thoroughly
gathering, burnt their midnight oil
rejigged. Like many of the GST
and came up with various ideas to
related issues, the Government mis-
resolve the emerging crisis, including
erably failed in handling this key
a novel “e-wallet” scheme.
issue relating to exports too, owing to inadequate preparation / founda-
While the AA/EPCG/EOU were
tion, thus adding one more thorn to
given “deemed exports” status with
its already punctured flesh.
refund of the GST paid, the merchant exports were given a 0.1% rate.
Under GST, there was a paradigm
From October, as the drawback rates
shift in the taxing policy relating to
are slashed only to neutralize the
exports,
of
Basic Customs duty component,
exempting at the procurement stage,
presently, the only reasonable alter-
the exporters were forced to pay the
native to the export community is
GST upon procurement and then
the refund route. Though the GST
get post-export refunds. This insen-
proclaimed automated refunds, with
sible rather insensitive proposition
the GSTN shamelessly caving in, the
has lead to a huge block of
exporters are currently navigated to
over-heads and thus resulting in
“apply” for refunds with the depart-
serious
ment, which is literally jumping from
whereby,
cash-flow
instead
issues.
The
frying pan to the fire.
after-effects of this cash crunch started affecting the bottom line and thus started pressing the panic
In their March meeting, the GST
button among the exporters. Fur-
council has reviewed the progress
ther, the non-availability of exemp-
and had patted their back themselves
tion to the job-workers, which was
claiming, “All is well”. They had also
66
“gracefully” extended the half-baked
always very near to the ICU.
(refund schemes) and deferred the uncooked (e-wallet scheme) till
Whenever I address a gathering on
October 2018. Along with the
export issues, I always refer to the open-
exporting community, I am at a loss
ing quote, and that day, I did the same to
to understand as to how the above measures
had
addressed
a gathering at Kandla. Suddenly from the
or
audience, an old gentleman rose and
redressed the “cardiac block” (cash
asked me in a very mild voice, “Sir, I have
block) of the exporters. The export
read the entire writings of Mahatma but
community, who got admitted in the
when did he say this?”
emergency ward during July are
That was my last meeting at Gujarat and my last reference to Mahatma.
presently ailing in the intensive care. Lets all be aware, unless immediate treatment is given, the morgue is
67
