GST REFUND – FY 2022-23 UPDATES

Measures intended to facilitate trade there are following changes in Refund under GST during the F.Y 2022-23 like Transfer of CGST/IGST cash ledger balance has been allowed between ‘distinct persons’ (entities having same PAN but registered in different states, Facility has been provided for withdrawal of refund applications made under GST by the taxpayers, a mechanism has been prescribed for refund of accumulated ITC on export of electricity ,procedure of sanction of IGST Refund in case of export of goods where the exporters have been identified as risky has been streamlined, to expedite verification and processing of such claims.

Notification/Circular/Instruction related to refund issued during the last year is as below ::

Prescribing manner of filing an application for refund by unregistered person (Circular 188/20/2022-GST)

• In the cases of premature cancellation of long-term service contract where the supplier is not in a position to issue credit note in terms of the provisions of Section 34(2) of the CGST Act, the recipient (i.e., unregistered person refund) shall be entitled to claim refund in FORM GST RFD-01 under the category ‘Refund for unregistered person’.,
• The unregistered person would be required to obtain temporary registration before filing the above refund application through the GSTN portal.
• The refund amount claimed should not exceed the total amount of tax declared by the supplier on the invoices (against which refund is being claimed) issued by him.
• Separate refund applications will be filed in respect of invoices issued by different suppliers.
• As per sub-section (1) of section 54 of the CGST Act, time period of two years from the relevant date has been specified for filing an application of refund. Accordingly, in the cases, where the refund claim is being made by the unregistered person (i.e., the recipient), the relevant date will be the date of issuance of letter of cancellation of the contract/ agreement for subject supply by the supplier as the said date will be considered as the date of receipt of the services by the unregistered person (i.e., the recipient) in terms of clause (g) of Explanation (2) under section 54 of the CGST Act.
• No refund shall be claimed by unregistered person if the amount is less than one thousand rupees.

Clarification on refund related issues (Circular 181/13/2022-GST)

According to sub-section (3) of section 54 of CGST Act, 2017, which provides for the refund of unutilized input tax credit in cases where credit is accumulated on account of rate of tax of inputs being higher than the rate of tax on output supplies i.e. on account of inverted duty structure. And Sub-rule (5) of rule 89 of CGST Rules, 2017 prescribes the formula for grant of refund in cases of inverted duty structure.

Amendment has been made in formula prescribed in sub-rule (5) of Rule 89 of CGST Rules, 2017 for calculation of refund of unutilized Input Tax Credit on account of inverted rated structure vide Notification No. 14/2022-Central Tax dated 05.07.2022. The amended formula takes into account utilization of ITC on account of inputs and input services for payment of output tax on inverted rated supplies in the same ratio in which ITC has been availed on inputs and input services during the said tax period.

Further, vide Notification No. 09/2022-Central Tax (Rate) dated 13.07.2022, which has been made effective from 18.07.2022, the restriction has been placed on refund of unutilized input tax credit on account of inverted duty structure in case of supply of certain goods falling under chapter 15 and 27.

Manner of filing refund of unutilized ITC on account of export of electricity (Circular 175/07/2022-GST)

Amendment in CGST Rules to provide for refund of unutilized Input Tax Credit on account of Export of
Electricity. This would facilitate the exporters of electricity in claiming refund of utilized ITC on zero rated
supplies.

Prescribing manner of re-credit in electronic credit ledger using FORM GST PMT-03A (Circular 174/06/2022-GST)

The taxpayer shall deposit the amount of erroneous refund along with applicable interest and penalty, wherever applicable, through FORM GST DRC-03 by debit of amount from electronic cash ledger. Till the time an automated functionality for handling such cases is developed on the portal, the taxpayer shall make a written request, in given format to jurisdictional proper officer. The proper officer, on being satisfied that the full amount of erroneous refund along with applicable interest, as per the provisions of section 50 of the CGST Act, and penalty, wherever applicable, has been paid by the said registered person in FORM GST DRC-03 by way of debit in electronic cash ledger, he shall re-credit an amount in electronic credit ledger, equivalent to the amount of erroneous refund so deposited by the registered person, by passing an order in FORM GST PMT-03A, preferably within a period of 30 days from the date of receipt of request for re-credit of erroneous refund amount so deposited or from the date of payment of full amount of erroneous refund along with applicable interest, and penalty, wherever applicable, whichever is later.

Clarification on issue of claiming refund under inverted duty structure. (Circular 173/05/2022-GST)

Where the supplier is supplying goods under some concessional notification. The intent of para 3.2 of Circular No. 135/05/2020-GST dated 31.03.2020 was not to cover those cases where the supplier is making supply of goods under a concessional notification and the rate of tax of output supply is less than the rate of tax on input supply (of the same goods) at the same point of time due to supply of goods by the supplier under such concessional notification. Therefore, it is clarified that in such cases, refund of accumulated input tax credit on account of inverted structure as per clause (ii) of sub-section (3) of section 54 of the CGST Act, 2017 would be allowed in cases where accumulation of input tax credit is on account of rate of tax on outward supply being less than the rate of tax on inputs (same goods) at the same point of time, as per some concessional notification issued by the Government providing for lower rate of tax for some specified supplies subject to fulfilment of other conditions.

Guidelines for Refund Claims in GST (Instruction No. 03/2022-GST)

CBIC (GST Policy Wing) has issued guidelines on the procedure relating to sanction, post audit and review of refund claims. For ensuring uniformity in procedure and enabling effective monitoring of sanction of refund claims in order to safeguard interest of revenue, Board has issued guidelines for sanction, post audit and review of refunds.

For sanction of refund:

• While passing the refund sanction order in FORM GST RFD-06, the proper officer should also upload a detailed speaking order along with refund sanction order in FORM GST RFD-06. To ensure uniformity in issuance of such speaking order, CBIC has clarified that such speaking order should inter alia contain details as per guidelines.
• Certain additional details will be required in case of the refund of accumulated ITC (on account of zero-rated supplies/ inverted rated structure) and refund of IGST paid on account of zero-rated supplies, deemed exports, refund of excess balance in cash ledger etc.

For post audit & review:

• All refund orders are required to be reviewed for examination of legality and propriety of the refund order and for taking a view whether an appeal to the appellate authority under provisions of section 107(2) of the CGST Act is required to be filed against the said refund order.
• Post-audit may henceforth be conducted only for refund claims amounting to Rs. 1 lakh or more till further instructions.
• Till the time the functionality for conducting post-audit online is developed on ACES-GST portal, post-audit of refund orders may be conducted in offline mode.

The post-audit and review of the refund claims shall be conducted keeping in mind the following guidelines:

1. All the refund orders passed should be immediately transmitted online to the review module after issuance of refund order in FORM GST RFD-06. The review and post- audit officers shall have access to all documents/ statements on ACES-GST portal pertaining to the said refund claims.
2. For the purpose of post-audit of refund order, a Post-Audit Cell under a Deputy/Assistant Commissioner along with one/ two Superintendents and Inspectors as required, may be created in Commissionerate Headquarters.
3. The post-audit should be concluded within 3 months from the date of issue of FORM GST RFD-06 order. The findings of the post-audit shall be communicated to the review branch within the said time period of 3 months.
4. The review of refund order shall be completed at least 30 days before the expiry of the time period allowed for filing appeal under Section 107(2) of the CGST Act.

Important circular notifications and instructions are attached herewith for your ready reference.

Disclaimer:  This Article is only a knowledge sharing initiative and is based on the Relevant Provisions as applicable and as per the information existing at the time of the preparation. In no event RMPS & Co. or the Author or any other persons be liable for any direct and indirect result from this Article or any inadvertent omission of the provisions, update etc if any.

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