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Refund of unutilized or accumulated ITC is allowed only in following two cases:

  1. Zero rated supplies made without payment of tax: Zero rated supply of goods or services or both under bond or Letter of Undertaking. Input procure in respect of such supply is not utilizing because there is not any output liability for utilizing such credit.
  2. Inverted duty structure: Where the credit has accumulated on account of rate of tax on inputs being higher than the rate of tax on output supplies (other than nil rated or fully exempt supplies), except supplies of goods.

Refund of ITC in case of supply of exempted or non taxable supply

  • As per section 16(2) of IGST Act, credit of ITC may be avail for making Zero rated supply, notwithstanding that such supply is exempt supply(includes non taxable supply).

Refund process of ITC accumulated in case of Zero rated supply without payment of tax:

  • The application for refund of unutilized input tax credit on inputs or input services used in making such zero-rated supplies shall be filed in FORM GST RFD-01A on the common portal.
  • The amount claimed for refund is debited from electronic credit ledger to the extent of claim.
  • The common portal shall generate a proof of debit (Acknowledgement Receipt number) which would be mentioned in FORM GST RFD-01A.
  • If refund amount is more than 2 lakh, certifying that the incidence of such tax had not passed into any other person by CA, Cost Accountant.
  • Document for manual submission to jurisdictional proper officer as follow:
  • Copy of FORM RFD-01A and filed in common portal.
  • ARN along with Electronic credit ledger.
  • Copy of statement 3A of FORM RFD-01A generated on common portal.
  • Copy of statement 3 of FORM RFD-01A.
  • Invoices w.r.t. input and input services, currently refund of ITC shall be accompanied by a print-out of FORM GSTR-2A of the claimant for the relevant period for which the refund is claimed. There may be situations that FORM GSTR-2A may not contain all the invoices relating to ITC availed because of supplier has not filed return or any other reasons, than proper officer may call for the hard copies of such invoices.
  • BRC (Bank realisation certificate)/FIRC for export of services.
  • Undertaking/ Declaration in FORM RFD-01A.

Statement-3

  • In case of Goods: In this statement details relating to the number and date of shipping bills or bills of export, the number and the date of the relevant export invoices.
  • In case of services: This statement contains the number and date of invoices and the relevant Bank Realisation Certificates or Foreign Inward Remittance Certificates.

     

Statement-3[rule89(2)(b)(c)]           

             

Refund Type:

                   

Export without payment of Tax-Accumulated ITC

                 

S.N

Invoice details

Shipping Bill/Bill of export

EGM

BIRC/FIRC

Invoice No

Invoice date

Value

Goods/services

Port Code

Shipping Bill No

Shipping Bill Date

Ref no

EGM Date

BIRC NO

Date


Statement 3A

Refund of ITC shall be granted as per the following formula:
Refund Amount = (Turnover of zero-rated supply of goods + Turnover of zero-rated supply of services) x Net ITC ÷Adjusted Total Turnover

  • Refund Amount= Maximum refund that is admissible
  • Net ITC= Input tax credit availed on inputs and input services during the relevant period (other than 4A or 4B).
  • Turnover of Zero-rated supply of goods or services= Value of zero-rated supply of goods or services or both made during the relevant period without payment of tax under bond or letter of undertaking.
  • Adjusted Total Turnover= Turnover as defined in section 2(112)+ Turnover of zero-rated supply of services and non-zero-rated supply of services- the value of exempt supplies other than zero-rated supplies-rule 4A.

 

Statement- 3A [rule 89(4)]

 

Refund Type:

     

Export without payment of tax (accumulated ITC) – calculation of refund amount

Turnover of zero rated supply of goods and services

Net input tax credit

Adjusted total turnover

Refund amount


Example:

A ltd, a manufacturing company made export as well as domestic sale, export ratio is more than as compare to domestic sale and procurement of raw is all from domestic, so there is accumulated ITC. The details relating to sale & purchase for the month of Aug-18 as follow (excluding of Tax):

  • Domestic sale-R.s 200000 (including 10000 is a exempted goods)
  • Export with payment of Tax- R.s 100000
  • Export without payment of tax- R.s 500000 (including 50000 is a exempt goods)
  • Purchase of raw martial=R.s 400000

Let’s assume tax rate on outward and inward supply is @18%
Total ITC availed by company in GSTR-3B Setoff domestic sale and export and balance shall be carried forward.

Calculate refund amount as per Statement 3A

Ans:

Net ITC=ITC credit availed=Credit available-Reversed

Credit Available=400000*18%=72000
Credit reversal=72000*10000/800000=900 (as per rule 42) exempt supply =10000 and Total Turnover=800000
Credit availed=72000-900=71100

Note: In case of Zero rated supply ITC in respect of exempted goods can be taken as per section 16(2) of IGST Act.

There is not any implication in relating setoff of ITC, in refund amount as per Statement 3A
Turnover of zero rated supply of goods and services=Zero rated supply without payment of Tax=500000
Adjusted Total turnover=200000+100000+500000-10000=790000

Refund amount as per Statement 3A=Net ITC * Zero rate supply/Adjusted total turnover
=71100*500000/790000=45000

Maximum refund to be claimed

Applicant can file maximum refund in FORM RFD-01A is lowest of the following:

  • Refund calculated as per statement 3A
  • Accumulated balance in electronic credit ledger at the time of filling of refund application
  • ITC availed during period on which such refund claimed

Example:

Above example company wants to file RFD-01 for the month of Aug-18 in month of Oct-2018 following additional points are:

  1. Accumulated credit balance on the begging of Sep-18 month is  (71100-52200)=18900 (ITC availed-setoff)
  2. Total Accumulated credit balance in the month of Oct-18 is R.s 60000 (after offsetting the liability)  (Assume)

Maximum Refund is eligible in RFD-01 is lower of the following:

  • Refund calculated as per statement 3A=45000
  • Accumulated balance in electronic credit ledger =60000 (Please note that accumulated balance shall be taken in the month where RFD-01 is filled)
  • ITC availed during period on which such refund claimed=71100

Refund shall be claimed to the extent of R.s 45000

Refund application rejected by officer:

i. Application for refund is rejected by officer due to ineligibility of credit under subsection (1),(2),(5) of section 17 or any other reasons (like:-refund claimed access of balance ITC) .

ii. In case of rejection of claim for refund of unutilized input tax credit, on account of any reason other than the eligibility of credit:

  • The rejected amount shall be re-credited to the electronic credit ledger of the claimant using FORM GST RFD-01B.
  • The above amount shall re-credited only after the receipt of undertaking from the claimant to the effect that he shall not file an appeal or in case he files an appeal, the same is finally decided against the claimant.

In case of rejection of application due to ineligibility of credit as per section 17:

  • Proper officer shall order for rejected amount to be re-credited to the electronic credit ledger of the claimant using FORM GST RFD-01B.
  • For taking ineligible credit, proper officer shall issue a demand notice for recovery of such ineligible credit taken by claimant, under section 73 or section 74 of CGST Act.
  • In case of demand is confirmed by order under section 73 or 74 of CGST Act, as the case may be, the said amount shall be added to the electronic liability register of the claimant through FORM GST DRC-07.
  • Alternatively, the claimant can voluntarily pay this amount, along with interest and penalty, if applicable, before service of the demand notice, and intimate the same to the proper officer in FORM GST DRC-03.

Example:

A ltd applied a refund application for accumulated ITC of Rs. 50000, on which only Rs. 20000 is sanctioned and balance is rejected because of following reasons:

  • Rs. 10000 due to ineligible ITC
  • Rs. 20000 due to another reasons

In the above case the electronic credit ledger has been debited at the time of filling of application for refund of Rs. 50000, but refund of only Rs. 20000 is sanctioned, balance of amount of credit ledger shall be re-credited in following manner:

10000 due to ineligible ITC:-

  • Rs. 10000 would be re-credited using FORM GST RFD-01B and
  • Simultaneous issue of notice under section 73 or 74 of the CGST Act for recovery of ineligible ITC

20000 due to another reasons:

  • Rs. 20000 would be re-credited through FORM GST RFD-01B only after receipt of undertaking from the claimant to the effect that he shall not file an appeal or in case he files an appeal, the same is finally decided against the claimant.
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