The Central Board of Indirect Taxes and Customs (‘CBIC’) has recently issued circular No. 197/09/2023 – GST (’circular’) to provide essential clarifications on various refund-related matters arising under the Central Goods and Services Tax (‘CGST’) Act, 2017. This circular aims to offer comprehensive guidance and clarity on four distinct categories of refund-related matters within the GST framework. It addresses different aspects and intricacies of the refund processes, to ensure smooth and efficient operation of the GST system. The circular specifically clarifies and covers the following key topics:
1. Refund of Accumulated Input Tax Credit
The circular explains and clarifies the process for refunding accumulated Input Tax Credit (‘ITC’) under s. 54(3) of the CGST Act. It explicitly states the availability of a refund for accumulated ITC should be limited to the ITC available as per the invoices reflected in FORM GSTR–2B. Previous guidelines that allowed refunds for invoices not present in FORM GSTR-2A are no longer valid.
Additionally, the circular elaborates on the amendments made in s. 16 (2)(aa) of the CGST Act and r. 36(4) of the CGST Rules, 2017, concerning the utilization of ITC as per FORM GSTR–2B. It is important to note that refund claims made for the tax period of January 2022, which were already disposed of before the issuance of this circular, shall not be reopened in light of these clarifications. Importantly, ITC can be refunded if the taxpayer has not claimed any ITC during the relevant tax period. Hence, this process applies to refund claims beginning in January 2022 onwards.
2. Requirement of Undertaking in FORM RFD-01
Regarding the undertaking in FORM RFD-01[i], which serves as a declaration by the applicant regarding their ITC claims on goods and services received from their suppliers, taxpayers applying for a refund of accumulated ITC are required to submit this undertaking.
The circular removes references to s. 42[ii] of the CGST Act, FORM GSTR–2 as well as FORM GSTR–3, which have been omitted from the CGST Rules. Additionally, certain amendments have been made in Annexure-A to the original circular dated 18.11.2019.
As per the current requirements, the undertaking in FORM RFD-01 remains a mandatory step for taxpayers seeking a refund of accumulated ITC. This undertaking confirms that they will repay the refund amount with interest if non-compliance with s. 16(2)(c)[iii] of the CGST Act is discovered. The undertaking must be submitted to the GST authorities before processing the refund claim. It serves as an assurance that the applicant has not already claimed ITC on the goods and services received from their suppliers, ensuring compliance and proper utilization of ITC in the refund process.
3. Manner of calculating Adjusted Total Turnover
The circular provides clarification on the calculation of "adjusted total turnover" for determining eligibility for the refund of accumulated ITC under the CGST Act. This clarification is in response to the Explanation[iv] inserted in r. 89(4) of the CGST Rules. It further specifies that the value of goods exported outside India should be considered for calculating adjusted total turnover as per the formula prescribed in r. 89(4) of the CGST Rules.
By providing this clarification, the circular ensures that the correct value of exports is considered in the calculation of adjusted total turnover, which is crucial for determining eligibility and the amount of refund of accumulated ITC under the CGST Act. This clarity is essential for taxpayers to accurately comply with the refund provisions and to facilitate seamless refund processing by the GST authorities.
4. Admissibility of Refund for Exporters in compliance with r. 96A
The circular also clarifies that the exporters who have complied with the provisions of r. 96A(1) of the CGST Rules are eligible to claim a refund of integrated tax and interest, including unutilized ITC, paid on the export of goods or services. It explains that the refund of unutilized ITC and interest can be sought even beyond the prescribed time limit specified in r. 96A(1) of the CGST Rules, provided there is evidence of actual exports or receipt of payments for such exported goods or services.
The circular ensures that exporters who have adhered to the provisions of r. 96A(1) of the CGST Rules can claim a refund of integrated GST paid on their exports, and they may still be eligible for a refund of unutilized ITC and interest even if they apply for the refund beyond the specified time limit, as long as they can provide evidence of actual exports or receipt of payments for the exported goods or services. The circular provides that such exporters who voluntarily paid integrated tax and interest due to non-export of goods or non-receipt of payment for export of services may file a refund application under the “Excess payment of tax” category once this option is available on the portal; for now, they should file it under the category named “Any other”.
Conclusion:
This Circular is a significant step forward to help taxpayers claim their refunds on time, as it addresses various factors for determining eligibility. It provides clarity on various refund-related provisions under the CGST Act, ensuring a uniform procedure and implementation of the CGST Rules. The Circular has thus become a reliable resource for taxpayers and exporters.
The circular's comprehensive guidance on refund-related matters has been well-received by taxpayers and exporters as it brings certainty and transparency to the refund process. It serves as a reliable resource for taxpayers, helping them navigate the complexities of the CGST Act and Rules, enabling them to claim their rightful refunds in a streamlined manner.
End Notes
[i] Inserted vide circular No. 125/44/2019-GST dated 18.11.2019.
[ii] Omitted with effect from 01.10.2022 vide Notification No. 18/2022-CT dated 28.09.2022.
[iii] Section 16 of the CGST Act, 2017:
(2) Notwithstanding anything contained in this section, no registered person shall be entitled to the credit of any input tax in respect of any supply of goods or services or both to him unless,—
(c) subject to the provisions of section 41, the tax charged in respect of such supply has been actually paid to the Government, either in cash or through utilisation of input tax credit admissible in respect of the said supply.
[iv] Inserted vide Notification No. 14/2022-CT dated 05.07.2022.
Authored by Aishwarya Pawar, Advocate at Metalegal Advocates. The views expressed are personal and do not constitute legal opinion.