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Processing of timely GST refunds will help businesses and facilitate trade through the discharge of blocked working capital funds. Under GST, the GST Council created a uniform system to process GST refund claims during a simple procedure for the taxpayers. The whole process of GST refund claim is online based and the same can be done on the GST Portal. during this article, we would take a glance at when the GST refund is claimed by taxpayers.
A person registered under GST Act 2017, shall be eligible for GST refund, that has arisen due to –
As per the GST Act 2017, an applicant is required to file GST refund claims within 2 years from the prescribed date and the same be made in form RFD – 01. If the claim is so as, the refund should be sanctioned within a period of 60 days from the date of receipt of the claim. Interest on the withheld refund shall apply at the speed of 6%. In case of delayed refund, the applicant will be eligible to receive interest @ 9% P.A.
The RFD-01 must be mandatorily filed on a monthly basis, broadly for the subsequent cases:
RFD-01 may be filed for multiple tax periods. One refund application is accepted for multiple tax periods, which are in one twelvemonth. In the case of a supply of products to SEZ units or SEZ developers, a supplier has got to file this form once the receipt of products is confirmed through the authentication from the zonal officer.
However, within the case of supply made to SEZ units or by the SEZ developers, the supplier is required to file for refund, once the evidence of service receipt has been confirmed by the zonal officer.
APPLICATION UNDER RFD-01 AND RFD-01A
As discussed above, in all cases of refund except for deemed export and SEZ supplies, the taxpayer is eligible to claim the refund of accumulated ITC. It is to be noted that the taxpayer can also claim a refund in respect of excess cash balance lying in their electronic cash ledger.
In case of deemed exports and SEZ supplies, either the recipient or the supplier can apply for a refund of GST. However, for a specific invoice, the supplier as well as the recipient cannot apply for refund.
One of the main categories under which, claim for GST refund arises is export. Exports (whether of products or services), yet as supplies to SEZs, are categorized under GST as Zero-Rated Supplies. Since these supplies are charged with 0% GST, the supplier is eligible to claim the refund of ITC paid on such supplies.
Currently, exporters are eligible to claim refund in respect of 0% supplies under two options. Firstly, the exporter can export supply under a Bond/LUT and claim a refund in respect of accumulated ITC or secondly, the exporter may export the supply on the payment of IGST and claim refund of the same later on. However, under both the above-mentioned methods, there has been consistent delays in processing GST refunds and this has adversely impacted the capital cycle of many corporate entities. Thus, in order to quicken and streamline the GST refund process, the Government of India announced the introduction of an e-wallet facility for exporters.
Where the amount of GST refund claim is below Rs. 2 Lakhs, then in such a situation, a self-declaration is required to be filed by the applicant and the same be submitted, stating that the incidence of tax hasn’t been passed by him, to any other person. However, where the amount of GST refund claims exceeds Rs. 2 Lakhs, the same shall be accompanied with a certificate from a Chartered Accountant/ Cost Accountant.
The applicant shall produce the subsequent documents to say GST refund:
Where the applicant applies for a refund claim in respect of supplies as exports or supplies made to SEZ, the applicant is required to submit a valid invoice for each of the said transaction. Together with the invoice, an announcement containing the quantity and date of shipping bills or bills of export and also the number and also the date of the relevant export invoices, during a case where the refund is on account of export of products must even be provided.
Also, a relevant bank realization certificate shall also be produced, evidencing the receipt of payment in foreign currency.
Also Read Blog : Reasons for the Movement of Goods under the GST
Where a supplier claims GST refund on account of supplies made to any SEZ unit, the applicant is required to submit an endorsement, issued by a Proper Officer, and the same shall evidence the receipt of such goods/ services within the SEZ, along with the relevant tax Invoice. Further, the applicant is also required to produce a declaration, being received from the respective SEZ unit, providing that the applicant hasn’t availed the ITC from the supplier.
Where the applicant applies for GST refund claim in respect of accumulated ITC, the same is required to publish a press release providing for invoice details in respect of which the GST refund is claimed.
It’s important to notice that no refund of the unutilized input tax credit is allowed on CGST and IGST paid, just in case of the provision of services for the development of a fancy, building, civil structure or an element thereof, including a fancy or building intended for sale to a buyer, wholly or partly.
Also, no refund of the unutilized input tax credit is going to be allowed for CGST and IGST, where the credit has accumulated on account of GST rate applicable on inputs exceeds the rate of GST applicable on output supplies.
Where the claim of GST refund is made in respect of any order or judgment of appellate authority or court, the reference number of the said order shall be provided along with the relevant tax invoices.
The applicant is required to file the refund application in E-form RFD 01 and the same shall be filed within two years from the respective date. The refund application shall be accompanied with a certification from a Cost Accountant or Chartered Accountant, provided the amount of refund exceeds Rs 2 lakhs.
The GST refund application may then either undergo inspection or an audit, because the case is also. After approval of the refund application, the taxpayer shall receive the GST refund amount claim within the registered bank account.
With the introduction of GST, the matter in respect of eligibility for claiming cess credit under law has been subject to material and intense debate. As per sction 140 (1) of CGST Act, 2017, a person registered under GST was allowed to hold the amount of CENVAT Credit, which included the Cess Credit as well. Since it failed to debar the carry over of ‘Cess credit’, there was attempt made by the Central Government by way of the retrospective amendment which is discussed herein below.
As per section 28 of CGST (Amendment) Act, 2018, amended was made to section 140. The proposed amendment was to ibid to refer the definition of ‘Eligible duties’ as given under Explanation 1 & 2 of the Section 140 of CGST Act, 2017 which don’t cover the credit of EC & SHEC and hence an attempt was made to deny the transfer of EC & SHEC into GST.
Owing to use of the words ‘after Explanation 2 as so amended, the subsequent Explanation shall be inserted and shall always be deemed to have been inserted, namely’, it’s submitted that the explanation 3 requires the amendment in explanation 2. because the amendment in explanation 2 isn’t notified, the consequently the reason 3 wouldn’t take effect.
The explanation 3 was amended to take effect, independent of explanation 2 amendment, and hence refers to the expression ‘eligible duties and taxes’ whereas the impugned Section 140(1), ibid uses the expression ‘eligible duties’ only. In view of the above, it’s possible & plausible to mention that EC & SHEC is eligible for the shift into GST even after the amendment.
Also, the registered person can avail the benefit by re-availing the credit under intimation to department and apply for SCN to contest under GST. Alternatively, one could evaluate the likelihood of claiming the refund of the same based on a number of the basic principles discussed below:
No specific provision has been provided for under the GST Act, for lapsing the vested accrued right and hence the same can’t be removed. Similarly, no specific provision has been provided for restricting/allowing the GST refund. The various HC’s has different views and hence the matter was taken to the SC for the final verdict. Since the Supreme Court is the highest authority of law, the final say of SC on Tran credit will have a binding effect on all the judgement. If finally settles in favor, the amount would be refunded instead become the price. Hence, it’s advisable to create an effort to claim refund and fight in absence of any additional cost/consequences.
Read our articles: E-Invoice Mechanism under the GST
Another important question that arises is that, whether any limit be applicable in respect of filing of the refund claim. As per the clause (f) of explanation to Sec 11B, the date for payment of duty has been provided for. However, the means for determination of credit amount is still unclear and goes to common pool? No specific provision u/s. 11B, hence one would want to evaluate if the principles of reasonable period/Limitation Act can be applicable? One could consider the filing of refund considering the judgment of Supreme Court extending limit of limitation in sight of the Covid.
Wherever advantage of cess credit isn’t availed, one could consider taking below action for evaluating if benefit is admissible:
Can also read our articles: Blocking/Unblocking the E-Way Bill creation system if fails to file GSTR-3B: GSTN
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