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Refund of unutilised Input Tax Credit(ITC)

CA Somil Bhansali  
on 20 April 2020

LinkedIn


The CBIC has clarified that refunds of accumulated ITC shall be restricted to the ITC as per those invoices, the details of which are uploaded by the supplier in FORM GSTR-1 and are reflected in the FORM GSTR-2A of the applicant. The current circular modifies the circular which was earlier issued by CBIC and allowed claiming of refund even on those invoices which are not reflected in Form GSTR-2A.

I. Section 54(3) of the CGST Act

Section 54(3) of the CGST Act provides that a registered person may claim a refund of any unutilized input tax credit at the end of any tax period. Refund of unutilized credit is allowed in the following cases:

  1. Person making zero rated supply without payment of GST.
  2. Credit accumulation on account of inverted duty structure.

https://youtu.be/92bWwfAUw6U

II. Circular No. 125/44/2019 - GST dt 18.11.2019

As per para 36 of this circular, the applicant is required to give details of all invoices on which refund is being claimed along with the refund application. Details of invoices are required to be submitted in Annexure B attached to this Circular.

Condition for claiming refund of unutilised Input Tax Credit(ITC)

At the time of scrutinizing the application, the refund officers were instructed to rely upon Form GSTR-2A of the applicant so as verify the invoices uploaded by his supplier's vis a vis the details of invoices submitted by the applicant.

However, circular clarified that refund can be claimed even on those invoices which are not reflected in Form GSTR-2A. This circular required the applicant to upload self-certified copies of invoices that are not reflected in Form GSTR-2A. Therefore, circular allowed the applicant to claim a full refund of unutilized credit.

III. Circular No.135/05/2020 - GST dt 31.03.2020

Rule 36(4) of the CGST Rules which was introduced in October 2019 was taken into consideration by this circular. This Rule restricts availment of the input tax credit in respect of invoices or debit notes not uploaded by supplier in Form GSTR-1. Though this rule was introduced to restrict availment of credit, Circular intends to apply this rule for claiming of refund as well. The relevant para of the circular is as follows:

 

5.1 In terms of para 36 of circular No. 125/44/2019-GST dated 18.11.2019, the refund of ITC availed in respect of invoices not reflected in FORM GSTR-2A was also admissible and copies of such invoices were required to be uploaded. However, in wake of insertion of sub-rule (4) to rule 36 of the CGST Rules, 2017 vide notification No. 49/2019-GST dated 09.10.2019, various references have been received from the field formations regarding admissibility of refund of the ITC availed on the invoices which are not reflecting in the FORM GSTR-2A of the applicant.

 5.2 The matter has been examined and it has been decided that the refund of accumulated ITC shall be restricted to the ITC as per those invoices, the details of which are uploaded by the supplier in FORM GSTR-1 and are reflected in the FORM GSTR-2A of the applicant. Accordingly, para 36 of the circular No. 125/44/2019-GST, dated 18.11.2019 stands modified to that extent.

For example:A Recipient has 5 invoices for purchases made. However, the supplier has uploaded only 3 invoices in his Form GSTR-1. So only those 3 invoices are reflected in Form GSTR2A of the recipient.

 

Implication

  • As per the earlier circular refund can be claimed in respect of all 5 invoices.
  • As per the new circular refund can be claimed only on 3 invoices which are uploaded by the supplier.

Therefore, one needs to take into consideration this latest circular while claiming a refund of unutilized credit.

https://youtu.be/92bWwfAUw6U


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