Refund has always been considered as the most peculiarized feature of GST regime. The mechanism of sanctioning refund is an essential process as it facilitates trade through release of blocked funds.
Refund of ITC is an integral part of GST. Due to technicalities involved, numerous efforts have been made to streamline and standardize the whole procedure by clarifications, amendments & notifications. Over a period, GST refund procedure witnessed a stabilization to a great extent but there are many issues which remain unsolved.
Elucidation 1: Bunching of refund claims across financial years
Earlier restriction was placed on clubbing of tax periods in different financial years at the time of claiming GST Refund.
It was earlier clarified that the refund claims can be bunched across various tax periods (i.e. combining several months/quarters) however the said bunching could not be spread across different financial years. This posed genuine difficulties.For instance, a taxpayer might have received the goods in March but undertaken the export in April.But unless the said period is not bunched, the exporter would not be able to avail the refund of the accumulated ITC.
The said restriction has now been removed.
Elucidation 2: Refund of accumulated input tax credit (ITC) on account of reduction in GST Rate
Taxpayers are seeking refund of unutilized ITC on account of inverted duty structure where the inversion is due to change in the GST rate on the same goods i.e a particular commodity in which trading was being made may be reduced to 12% from 18%. Now the stock he accumulated is of 18% & he supplied the same at 12% which ultimately leads to accumulation of ITC. Now, it is clarified that this situation will not be covered under section 54 (3).
In other words, refund on account of inverted duty structure is available in cases where GST rate on inputs is higher than GST rate on outputs, wherein input and output are not same goods.
Elucidation 3: Change in manner of refund of tax paid on supplies other than zero rated supplies
Rule 86(4A) and Rule 92(1A) has been inserted to provide, in case of refund claims other than due to zero-rated supplies/inverted rate structure, that the refunds shall be granted in cash as well as ITC depending on whether the payment of the tax sought as the refund has been made in cash or ITC or both.
Below are the cases of refund,
- Excess payment of tax
- Tax paid on intra state supply subsequently held to be interstate supply and vice versa
- Assessment/ provisional assessment/ appeal/any other order
- “any other” ground or reason
at present, the amount of admissible refund, is paid in cash.
Clarification issued provides that the refund to be paid in cash and credit shall be calculated in the same proportion in which the cash and credit ledger has been debited for discharging the total tax liability.
Elucidation 4: Guidelines for refund of ITC under Section 54(3) i.e. Invoices mentioned in GSTR 2A or not
Refund of accumulated ITC shall be available only for those input invoices which are reflected in GSTR 2A.
Refund of ITC availed on invoices/documents relating to imports, ISD invoices and RCM supplies etc shall be available even though the same is not reflected in GSTR 2A.
Elucidation 5: New requirement to mention HSN/SAC in Annexure ‘B’
It is required to mention HSN/SAC code mentioned on inward invoices in Annexure B forming part of refund application.
In cases where supplier is not mandated to mention HSN/SAC code on invoice, the applicant need not mention HSN/SAC code in respect of such an inward supply.
The clarifications issued are focused to make refunds a hassle-free affair.
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