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The Central Board of Indirect Taxes and Customs (CBIC) had issued Master Circular on Refunds No. 125/44/2019-GST dated 18.11.2019 rescinding all earlier circulars. Recently CBIC has issued Circular and brought amendment to CGST Rules, 2017 to bring major changes for claiming refund under GST. It include submission of additional details, realization of exports proceeds, documents and additional compliance, etc. 

This note discusses the changes proposed in the refund filing mechanism and impact which may have on quantum of refund as well as process of filing/claiming refund:

Recently CBIC has issued Circular No 135/05/2020 - GST dated 31st March, 2020 clarifying additional issues in claiming GST Refund. Below is the summary of the clarifications issues and changes being brought:

GST Refund: Process and Guidelines

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Bunching of refund claims across Financial Years

  • Circular No. 37/11/2018-GST (Para 11.2) dated 15.03.2018  had put the restriction on clubbing of tax periods across different financial years for claiming GST Refund
  • The said circular was rescinded being subsumed in the Master Circular on Refunds No. 125/44/2019-GST dated 18.11.2019 and the said restriction on the clubbing of tax periods across financial years for claiming refund thus has been continued vide Paragraph 8 of the Circular No. 125/44/2019-GST dated 18.11.2019
  • Hon’ble Delhi High Court in Order dated 21.01.2020, in the case of M/s Pitambra Books Pvt Ltd., has stayed the rigor of paragraph 8 of Circular No. 125/44/2019-GST dated 18.11.2019. Hon’ble Delhi High Court further observed that the Circulars can supplant but not supplement the law.
  • Representations have been received by Govt including those from Merchant exporters who receive the supplies of goods in the last quarter of a Financial Year and make exports in the next Financial Year i.e. from April onwards. The restriction imposed vide para 8 of the master refund circular prohibits the refund of ITC accrued in such cases as well.
  • Section 16(3) of the IGST Act, 2017 and Section 54 (3) of the CGST Act, does not impose any bar in claiming refund by clubbing different months across successive Financial Years
  • Hence, Central Govt. has decided to remove the restriction on clubbing of tax periods across Financial Years. Accordingly, circular No. 125/44/2019-GST dated 18.11.2019 stands modified to that extent i.e. the restriction on bunching of refund claims across financial years shall not apply.

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Refund of accumulated input tax credit (ITC) on account of reduction in GST Rate

  • CBIC has noticed that some of the applicants 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.
  • For example - An applicant trading in goods has purchased, say goods “X” attracting 18% GST. However, subsequently, the rate of GST on “X” has been reduced to, say 12%. It is being claimed that accumulation of ITC in such a case is also covered as accumulation on account of inverted duty structure and such applicants have sought refund of accumulated ITC under clause (ii) of sub-section (3) of section 54 of the CGST Act
  • As per Provisions of Clause (ii) of Sec 54(3) allows refund of accumulated ITC where the credit has accumulated on account of rate of tax on inputs being higher than the rate of tax on output supplies.
  • Further, since the input and output being the same in such cases, though attracting different tax rates at different points in time, do not get covered for refund.
  • It is hereby clarified that refund of accumulated ITC in this case, would NOT be applicable in cases where the input and the output supplies are the same.


Guidelines for refunds of Input Tax Credit under Section 54(3)

Refund of ITC for Invoices appearing in GSTR 2A -

  • As per Master 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 (earlier)
  • Pursuant to insertion of sub-rule (4) to rule 36 of the CGST Rules, 2017 vide notification No. 49/2019-GST dated 09.10.2019, field formations represented on the admissibility of refund of the ITC availed on the invoices which are not reflecting in the FORM GSTR-2A of the applicant
  • Hence, 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. (Amended Provision)

New requirement to Mention HSN/SAC in Annexure B -

  • In certain cases, Refund is only allowed for ITC accumulated on Inputs and same is not allowed on ITC for Input Services and Capital Goods. The HSN wise details of goods and services are not available in FORM GSTR-2A and therefore it becomes very difficult to distinguish ITC on capital goods and/or input services out of total ITC for a relevant tax period
  • Annexure-B of the circular No. 125/44/2019-GST, dated 18.11.2019 stands modified to that extent. (New Requirement)

Further CGST Rules has been amended vide the Central Goods and Services Tax (Third Amendment) Rules, 2020 on dated 23rd March, 2020 amending various provisions of refund. A summary of such amendments to the CGST Rules has been incorporated below:


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Rule 89 (4) (C)

Turnover of zero-rated supply of goods

  • Turnover of zero-rated supply of goods" means the value of zero-rated supply of goods made during the relevant period without payment of tax under bond or letter of undertaking or the value which is 1.5 times the value of like goods domestically supplied by the same or, similarly placed, supplier, as declared by the supplier, whichever is less, other than the turnover of supplies in respect of which refund is claimed under sub-rules (4A) or (4B) or both; (no such rule for exports with payment of tax)


Rule 96B

Recovery of refund of unutilized input tax credit or integrated tax paid on export of goods where export proceeds not realized

  • Recovery of refund of unutilized input tax credit or integrated tax paid on export of goods where export proceeds not realized under the Foreign Exchange Management Act, 1999 (42 of 1999), including any extension of such period, the person to whom the refund has been made shall deposit the amount so refunded, to the extent of non-realization of sale proceeds, along with applicable interest within thirty days of the expiry of the said period or, as the case may be, the extended period.
  • Further where sale proceeds, or any part thereof, in respect of such export goods are not realized by the applicant within the period allowed under the FEMA, 1999, but the RBI writes off the requirement of realization of sale proceeds on merits, the refund paid to the applicant shall not be recovered
  • Where the sale proceeds are realized by the applicant, in full or part, after the amount of refund has been recovered from him and the applicant produces evidence about such realization within a period of three months from the date of realization of sale proceeds, the amount so recovered shall be refunded, to the extent of realization of sale proceeds, provided the sale proceeds have been realized within such extended period as permitted by the Reserve Bank of India


Rule 92 (1A)

Proportionate refund in the respective original mode of payment

Manner of refund of tax paid on supplies other than ZERO Rated Supplies -

  • Refund of any amount paid as tax other than the refund of tax paid on zero-rated supplies or deemed export, Order in FORM RFD-06 shall be sanctioned for the amount of refund to be paid, (after adjusting any outstanding demand under the Act or under any existing law) proportionately in the respective original mode of payment i.e. either Electronic Cash ledger or Electronic Credit Ledger


Rule 89 (2) (g)

Undertaking for filing Refund

New Undertaking -

“I hereby undertake to deposit to the Government the amount of refund sanctioned along with interest in case of non-receipt of foreign exchange remittances as per the proviso to section 16 of the IGST Act, 2017 read with rule 96B of the CGST Rules 2017.”


Published by

Rohit Kumar Singh
(Founder - TaxMarvel Consulting Services LLP)
Category GST   Report

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