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GST Refund: An overview of clarifications

Kusum Gandhi , Last updated: 06 April 2020  

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

CBIC clarifies the issues related to Refund as under -

1. Bunching of refund claims across Financial Years

Restriction on clubbing of tax periods across different F.Y. was put in vide para 11.2 of Circular No. 37/11/2018-GST dated 15.03.2018.

Said circular was rescinded being subsumed in Master Circular on Refunds No. 125/44/2019-GST dated 18.11.2019 and the said restriction on the clubbing of tax periods across F.Y. for claiming refund thus has been continued vide Paragraph 8 of the Circular No. 125/44/2019-GST dated 18.11.2019.

As Hon'ble Delhi High Court in Order dated 21.01.2020, in case of M/s Pitambra Books Pvt Ltd., vide para 13 of the said order has stayed the rigour of paragraph 8 of Circular No. 125/44/2019-GST dated 18.11.2019 and has also directed the Government to either open the online portal so as to enable the petitioner to file the tax refund electronically, or to accept the same manually within 4 weeks from the Order.

Hon'ble Delhi High Court vide para 12 of the aforesaid Order has observed that the Circulars can supplant but not supplement the law. Circulars might mitigate rigours of law by granting administrative relief beyond relevant provisions of the statute, however, Central Government is not empowered to withdraw benefits or impose stricter conditions than postulated by the law.

As per Circular, On perusal of the provisions u/s-16(3) of IGST Act, 2017 and Section 54(3) of CGST Act, there appears no bar in claiming refund by clubbing different months across successive F.Y..

So it has been decided to remove the restriction on clubbing of tax periods across F.Y. 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.

2. Refund of accumulated ITC on account of reduction in GST Rate

As per Section 54(3)(ii) of CGST Act, Refund of accumulated ITC is available where the credit has accumulated on account of rate of tax on inputs being higher than the rate of tax on output supplies.

It is noteworthy that, the input and output being the same in such cases, though attracting different tax rates at different points in time, do not get covered under the provisions of section 54(3)(ii) of CGST Act. It is hereby clarified that refund of accumulated ITC u/s-54(3)(ii) of CGST Act would not be applicable in cases where the input and the output supplies are the same.

3. Change in manner of refund of tax paid on supplies other than Zero-rated supplies

Circular No. 125/44/2019-GST dated 18.11.2019, in para 3, categorizes the refund applications to be filed in FORM GST RFD-01.

Refund claims on supplies other than zero rated supplies, no separate debit of ITC from Electronic Credit Ledger is required to be made by applicant at the time of filing refund claim, being claim of tax already paid.

 GST refund related issues

However, the total tax would have been normally paid by applicant by debiting tax amount from both electronic credit ledger and electronic cash ledger. At present, in these cases, the amount of admissible refund, is paid in cash even when such payment of tax or any part thereof, has been made through ITC.

As this could lead to allowing unintended encashment of credit balances, this issue has been engaging attention of the Government. Accordingly, vide Notification No.16/2020-Central Tax dated 23.03.2020, sub-rule (4A) has been inserted in Rule 86 of CGST Rules, 2017.

Further, vide the same notification, sub-rule (1A) has also been inserted in Rule 92 of CGST Rules, 2017.

As per Circular, combined effect the above mentioned changes is that any such refund of tax paid on supplies other than Zero rated supplies will now be admissible proportionately in the respective original mode of payment i.e. in cases of refund, where the tax to be refunded has been paid by debiting both Electronic Cash and Credit Ledgers (other than the refund of tax paid on zero-rated supplies or deemed export), the refund to be paid in cash and credit shall be calculated in the same proportion in which the cash and credit ledger has been debited for discharging the total tax liability for the relevant period for which application for refund has been filed.

Such amount, shall be accordingly paid by issuance of order in FORM GST RFD-06 for amount refundable in cash and FORM GST PMT-03 to re-credit the amount attributable to credit as ITC in Electronic Credit Ledger.


4. Guidelines for refunds of ITC u/s- 54(3)

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.

As per Circular, 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.

5. New Requirement to mention HSN/SAC in Annexure 'B'

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.

It has been recommended that a column relating to HSN/SAC Code should be added in the statement of invoices relating to inward supply as provided in Annexure- B of circular No. 125/44/2019-GST dated 18.11.2019 so as to easily identify between the supplies of goods and services.


As per Circular, such a distinction is important in view of the provisions relating to refund where refund of credit on Capital goods and/or services is not permissible in certain cases, it has been decided to amend the said statement. Accordingly, Annexure-B of the circular No. 125/44/2019-GST, dated 18.11.2019 stands modified to that extent.

A suitably modified statement format is attached for applicants to upload the details of invoices reflecting in their FORM GSTR-2A.

Applicant is, in addition to details already prescribed, now required to mention HSN/SAC code which is mentioned on the inward invoices.

In cases, where supplier is not mandated to mention HSN/SAC code on invoice, the applicant need not mention HSN/SAC code in respect of such an inward supply.

Disclaimer: The contents of this article are solely for informational purpose. It does not constitute professional advice or a formal recommendation. No part of this article should be distributed or copied without express written permission of the author.

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Kusum Gandhi
Category GST   Report



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