CBIC has issued circular no.135 dated 31.03.2020 wherein Government has issued certain clarifications in respect of refunds related to exports under GST. The summary of the clarifications have been provided below-
1. It has been decided to remove the restriction on clubbing of tax periods across Financial Years. This was decided in 39th GST council meeting and accordingly, circular No. 125/44/2019-GST dated 18.11.2019 is rescinded to the extent i.e. the restriction on bunching of refund claims across financial years shall not apply. We have already informed you in our earlier update about this decision in the GST council meeting.
Hon'ble Delhi High Court in Order dated 21.01.2020, in the case of M/s Pitambra Books Pvt Ltd. has stayed the rigour of paragraph 8 of Circular No. 125/44/2019-GST dated 18.11.2019 in which such restriction was imposed 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. Hon'ble Delhi High Court 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. This clarification is big relief to all taxpayers because if goods were received in the month of March 2019 and export was made in April 2019, then the taxpayers would apply refund for the period March 2019 to May 2019. Earlier, this was debarred but this clarification removed such restriction.
2. Refund of accumulated input tax credit (ITC) on account of reduction in GST Rate- In case the tax rate on input reduces e.g. From 18% to 12% and due to this reduction, the tax rate on input and output stands same. Then, the taxpayer cannot claim refund of inverted duty tax structure under section 54(3) of the CGST Act, 2017. 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 clause (ii) of sub-section (3) of section 54 of the CGST Act.
3. Change in manner of refund of tax paid on supplies other than zero rated supplies- Refund in the following cases -
i. Refund of excess payment of tax;
ii. Refund of tax paid on intra-State supply which is subsequently held to be inter State supply and vice versa;
iii. Refund on account of assessment/provisional assessment/appeal/any other order;
iv. Refund on account of 'any other' ground or reason
shall now be sanctioned in the same proportion in which the cash and credit ledger has been debited for discharging total tax liability. This allows for sanctioning of refund by re credit the electronic credit ledger by the department. This clarification has been given in alignment of the insertion of rule 86(4A) and 92(1A) in the CGST Rules, 2017 vide notification no. 16/2020-Central Tax dated 23.03.2020. It may be noted that the above restriction would not apply to refund of ITC on account of zero rated supplies and deemed exports.
A detailed update on this issue has already being circulated amongst our netizens for more clarifications.
4. Guidelines for refunds of Input Tax Credit under Section 54(3)- 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. This clarification was much required after enactment of Rule 36(4) in the CGST Rules, 2017. It is noteworthy to mention that such restriction has not been imposed in the Act or rules. Circular inconsistent with the Act or Rules is void ab-intio and cannot be implemented. The landmark judgment given in the case of Dhiren Chemicals was reversed in the case of Commissioner of Central Excise, Bolpur v/s M/s Ratan Melting & Wire Industries [2008-TIOL-194-SC-CX-CB]. In this case, it was held that the Board circular will not prevail over the Order of the Supreme Court. It was further held that a circular which is contrary to the statutory provisions has no existence in law. This circular will create a havoc among taxpayers as already refund sanction process takes time and such restrictions will block their working capital for indefinite period. When the Rule 36(4) allows 10% extra credit then how it can be denied in the refund claim and that too by a circular. There should be provision in the Act for the same.
5. New Requirement to mention HSN/SAC in Annexure 'B'- We are already aware of the fact that 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. Now the applicant shall be required to mention HSN/SAC code in annexure B 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. Already uploading of refund claim is a very tedious job. We have already highlighted the same in our GST Johnny update. But now requiring further information will be impossible task. Moreover, the distinction of capital goods and inputs cannot be done on the basis of HSN code. One HSN code say bearings 8482 might be capital goods for a manufacturer but it will be input for machine manufacturer. Hence, deciding input and capital goods on the basis of HSN code will be difficult task.