gst refund process by jayesh rawal

CA JAYESH RAWAL - A N GAW

ADE & Co.

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GOODS AND SERVICE TAXREPORT

OF THE JOINT COMMITTEE ON BUSINESS

PROCESSES FOR GST ON

REFUND PROCESSES

CA Jayesh Rawal PartnerA N Gawade & Co.Chartered Accountant80/84, Dadiseth Agiary Lane2nd Floor Office No. 28, Kalbadevi RoadMumbai-400002Web : www.angca.comTel : 022 6556 3124

http://www.angca.com/

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ADE & Co.SITUATIONS WHERE REFUNDS WOULD ARISE: 1. Excess payment of tax due to mistake or

inadvertence.

2. Export

3. Finalization of provisional assessment

4. Refund of Pre – deposit for filing appeal including refund arising in pursuance of an appellate authority’s order

5. Payment of duty / tax during investigation but no/ less liability arises at the time of finalization of investigation / adjudication

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ADE & Co.SITUATIONS WHERE REFUNDS WOULD ARISE: 6. Refund of tax payment on purchases made by

Embassies or UN bodies

7. Credit accumulation due to output being tax exempt or nil-rated

8. Credit accumulation due to inverted duty structure i.e. due to tax rate differential between output and inputs.

9. Year-end or volume based incentives provided by the supplier through credit notes.

10. Tax Refund for International Tourists

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ADE & Co.1. EXCESS PAYMENT OF TAX DUE TO

MISTAKE OR INADVERTENTCE: Such excess payment may be on account of:

wrong mention of nature of tax (CGST / SGST / IGST), wrong mention of GSTIN, or wrong mention of tax amount.

In first two situations The taxpayer may file a refund application which should be

decided within a period to be prescribed by the GST Law The tax administration is required to verify the correctness of

the taxpayer’s claim.

In the third situation Automatically carried forward for adjustment against future

tax liabilities Refunded on submission of application

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ADE & Co.2. WHEN GOODS / SERVICES ARE

EXPORTED

GST regime separately discussed the following due to their inherent nature

EXPORT OF GOODS

EXPORT OF SERVICES

DEEMED EXPORT OF GOODS OR SERVICES

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ADE & Co.

2.1 EXPORT OF GOODS

Presently under the Central Law, every exporter has three options available for neutralization of taxes paid on inputs

Obtaining non duty paid inputs

Obtaining duty paid inputs and claiming refund

Obtaining duty paid inputs, availing the input tax credit thereon and exporting finished goods after payment of duty and thereafter claiming the rebate of the duty paid on exported goods.

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ADE & Co.

2.1 EXPORT OF GOODS In the proposed GST regime, exports are

proposed to be Zero rated

The GST to be paid on the inputs will be refunded either through cash or by utilization of input tax credit

This would serve two objectives The ITC chain through the various dealers will not

be broken The exporter of the finished goods will get the

refund of the GST paid on the inputs

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ADE & Co.

2.1 EXPORT OF GOODS

Option to procure duty free inputs for exported goods should not be available in the GST regime.

Online Export Verification process is proposed to simplify and fasten the refund process IEC details will be captured during registration Refund of ITC will be granted on submission of

application Online verification of actual export through

ICEGATE of custom administration

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ADE & Co.

EXPORT VERIFICATION Normally Documents Required

Verification under new system

Shipping Bill Can be verified through ICEGATEMate’s Receipt / Transporter’s Challan

Scanned copies of the same with online refund application

Export invoice (Details included in shipping bill)Packing list (Details included in shipping bill)Bill of Lading/ Airway Bill Scanned copies of the same with

online refund applicationBank Realization Certificate (BRC).

Submission of BRC may not be insisted as exporter has time period of 1 year for remittance of export proceeds. (e-BRC module may be integrated in the Refund process under GST )

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ADE & Co.

2.2 EXPORT OF SERVICES Export of services there are no custom documents

that can substantiate the occurrence

No shipping bill is required to be filed

Documents that can substantiate the occurrence of event of exports. Invoice Bank Realization Certificate (BRC)

Hence it is recommended that BRC would be required before sanction of refund of GST paid on inputs (input services)

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ADE & Co.2.3 DEEMED EXPORT OF GOODS

OR SERVICES

There is a concept of deemed export for situations listed in Chapter 8 of the Foreign Trade Policy.

Domestically produced duty paid goods when supplied to EOUs / SEZs / Projects under International Competitive Bidding (ICB) / Mega Power Plants / World Bank Funded Projects

It is recommended that the deemed export need to be treated on equal footing as export

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ADE & Co.

DEEMED EXPORT - EXECPTIONS Suppliers will pay IGST on Deemed Exports

and can claim refund, only IGST is not collected from recipient.

Recipient should not avail ITC in respect of such supplies (Verification will be required)

Chartered Accountant Certificate – certifying non-passing of GST burden, being claimed as refund along with refund application

Self-declaration may be allowed below certain limit

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ADE & Co.REFUND ON EXPORT GENERAL RECOMMENDATION

It is recommended that partial refund may not be allowed and entire refund claim may be sanctioned within the time limit laid down in the GST Law

Certain goods on which Customs Export Duty may be leviable, ITC of GST paid on inputs may not be admissible.

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ADE & Co.

3. FINALIZATION OF PROVISIONAL ASSESSMENT In the proposed GST regime the returns of

the taxpayer will be electronically filed.

In the return itself there should be a field for indicating whether the tax being paid is provisional or final.

In case the tax has been paid on provisional basis, there should be a drop box that would indicate the reasons for which the tax has been paid on provisional basis.

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ADE & Co.3. FINALIZATION OF PROVISIONAL ASSESSMENT Thereafter the return may be taken up for finalization once

the issue involved in provisional assessment is settled

GST law may prescribe time period for finalization i.e. 90 days and this time line should not be breached, as far as possible.

The refund would be granted only if the incidence of GST paid by him has not been passed on to the consumer

Chartered Accountant’s Certificate certifying the fact of non-passing of the GST burden by the taxpayer.

Self-declaration may be allowed below certain limit

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ADE & Co.

4. REFUND – ARISES DUE TO APPEALS Refund need to be paid unless the jurisdictional

authority has obtained a stay from the higher appellate authority.

GST Law may provide for certain predefined period during which refund may not be granted, regarded as the mandatory waiting period for the outcome of the appeal / application for stay.

Powers to senior level for withholding the refund in exceptional cases on the condition that interest at appropriate rate has to be paid.

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ADE & Co.5. REFUND OF TAX PAID DURING INVESTIGATION BUT NO LIABILITY ARISES If the GST Law does not debar suo-motto payments during

investigation / audit process.

And ultimately no / less demand arises.

Amount of tax paid during investigation become non leviable once the investigation is finalized.

Taxpayer should be immediately eligible to claim refund of the amount that is found to have been paid in excess during investigation.

The taxpayer may file a simple refund application along with a Chartered Accountant’s Certificate (or Self- declaration) certifying the fact of non-passing of the GST burden by him.

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ADE & Co.6. REFUND TO GOVERNMENT AND UN BODIES Presently the UN and Government bodies are

eligible for refund of taxes paid by them at the time of purchases made by them from the market

UN Bodies may be assigned a unique identification number (ID) the structure of which would be uniform across the States in conformity with the GSTIN Structure

While making supplies to such bodies, the suppliers must indicate the Unique ID on the invoices.

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ADE & Co.6. REFUND TO GOVERNMENT AND UN BODIES The UN Bodies may file their purchase

statements (without purchase invoices) along with their claim for refund.

The net claim will be related to GST paid on total purchases minus GST paid on ineligible purchases

The net claim will be related to GST paid on total purchases minus GST paid on ineligible purchases

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ADE & Co.6. REFUND TO GOVERNMENT AND UN BODIES The refund may be granted based on the

matching and the limited manual verification

unmatched invoices will get marked by the IT system and the supplier will be notified accordingly.

The personal purchases by the staff may also be done seeking ID of the UN body on the invoice

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ADE & Co.7. REFUND DUE TO ITC ON TAX FREE GOODS Certain goods or services which may be

either exempted or NIL rated in GST regime

Certain goods or services which may not be brought under GST regime

Persons supplying such exempted / nil rated / non-GST goods or services would be receiving goods or services as their input supplies after payment of GST.

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ADE & Co.7. REFUND DUE TO ITC ON TAX FREE GOODS ITC is allowed to remove cascading and under

modern VAT laws.

Tax is charged on value addition only and not on tax paid at the earlier level of supply chain.

Ultimate consumer is liable to bear the tax.

Most State VAT administrations as well as Centre do not allow refund of ITC on inputs used for tax exempt / nil rated goods.

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ADE & Co.7. REFUND DUE TO ITC ON TAX FREE GOODS It is recommended that the model GST Law

may provide that the suppliers of exempted / NIL rated / non GST goods or services would not be entitled to the ITC of GST paid on inputs (including input services or capital goods) received by them and consequently for refund of GST paid by them.

In case of mixed supplies, ITC may be allowed proportionately.

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ADE & Co.8. REFUND OF CARRY FORWARD

INPUT TAX CREDIT ITC may accumulate on account of the following

reasons Inverted Duty Structure i.e. GST on output supplies is

less than the GST on the input supplies CASH REFUND MAY BE GRANTED AFTER DUE AUDIT

Stock accumulation ITC COULD ONLY BE CARRY FORWARD

Capital goods ITC COULD ONLY BE CARRY FORWARD

Partial Reverse charge mechanism for certain services CASH REFUND MAY BE GRANTED AFTER DUE AUDIT

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ADE & Co.

9. REFUND ON ACCOUNT OF YEAR END INCENTIVE AND CREDIT NOTE Such practice is being misused by the trade

where the downstream dealers show negative value-additions. Some States have placed restrictions on such ITC

The refund would be granted on submission of a simple application along with a Chartered Accountant’s Certificate certifying (Or Self Declaration) the fact of non-passing of the GST burden by the taxpayer

ITC at the buyer’s end and the output liability at the supplier’s end will get simultaneously.

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ADE & Co.10. TAX REFUND FOR INTERNATIONAL TOURISTS:

Nearly 52 countries have adopted such kind of refund mechanism

Refund of GST will be available at designated airports and ports only

A part of the eligible amount of refund will be deducted as handling fee for services rendered.

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ADE & Co.TIME PERIOD FOR FILING OF REFUND AND RELEVANT DATE:

It is recommended that a period of one year from the relevant date may be allowed for filing of refund application.

It is recommended that Relevant date for filing of each kind of refund needs to be defined separately.

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ADE & Co.

OTHER RECOMMENDATION Applicant may be given the option of filing refund application

either through the GSTN portal or through the respective State / Central Tax portal.

It is recommended that the State Tax authorities shall deal with the SGST refund

Central Tax authorities shall deal with refund of CGST and IGST

It is recommended that the preliminary scrutiny may be carried out within 30 common working days

Deficiency, if any, should be communicated to the applicant directly from the respective tax portal.

Applicant may file his reply through the respective tax authority portal / GSTN.

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ADE & Co.

OTHER RECOMMENDATION Applicant may file his reply through the respective

tax authority portal / GSTN.

Any further queries should be raised only with the approval of higher authorities so that unnecessary queries are avoided.

Once the refund application is found to be complete in all respect, the same may be communicated to applicant via SMS and e mail and the date of communication shall be considered as the relevant date for the purpose of time limit prescribed for sanctioning of refund and initiation of interest clause.

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ADE & Co.

OTHER RECOMMENDATION If the refund is not found to be legal or correct for any

reason, then the jurisdictional authority should issue Show Cause Notice (SCN) to the applicant.

The refund will be kept in abeyance in the system till the SCN is adjudicated.

In case, the refund application is found to be in order but does not satisfy the test of unjust enrichment, the refund amount, after sanction, would be credited to the Consumer Welfare Fund.

It is recommended that an amount in the range of Rs. 500-1000/- may be fixed shall not be granted.

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ADE & Co.

INTEREST: It is recommended that the GST Law may provide for a

prescribed time limit of 90 days from the date of the system generated acknowledgment of refund application within which refund has to be paid.

It may also be provided in the GST law that, interest clause will start automatically once the prescribed time limit for sanctioning of refund has been breached.

The Committee recommends that the rate of interest in case of refund may be around 6% and that in case of default in payment of interest may be around 18%.

To discourage refund sanctioning authority from rejecting refund claims on frivolous grounds, interest will accrue from the last date when refund should have been sanctioned.


ADE & Co.

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THANKS AND REGARDSCA JAYESH RAWALMOB: +91 9029044954EMAIL: [email protected]

A N GAWADE & Co.Chartered AccountantsWeb: www.angca.com

gst refund process by jayesh rawal

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