GST Refund Simplified - Claim Excess ITC Online
The Central Board of Indirect Taxes & Customs (CBIC) has issued a circular (Circular No. 79/53/2018-GST) on 31st December, 2018 simplifying the procedure for granting refund under the GST regime.
The Board laid down following clarifications in order to simplify refund process:-
Physical mode to electronic mode of submission of refund claims
- Earlier the complete electronic refund module was not available and the Board had permitted physical submission of refund application. However, the Board received complaints on physical submission of documents in the jurisdictional tax office as it is causing undue hardship to the taxpayers.
- Now in order to simplify the refund process, the statement of invoices and copies of only those invoices whose details are not found in FORM GSTR-2A for the relevant period shall be electronically uploaded on the portal at the time of filing the claim of refund in FORM GST RFD-01A.
That means refund application and supporting documents shall not be required to be submitted physically in the office of the jurisdictional proper officer.
This is to be noted that the option to submit refund application physically to the jurisdictional proper officer is not restricted totally i.e., taxpayer can also go for physical submission of refund application.
Calculation of refund amount for claims of refund of accumulated ITC on account of inverted duty structure
- The circular has also put light on the issue regarding refund of unutilized ITC on account of inverted tax structure (i.e., where tax rate on input is more than tax rate on output supply). The departmental officers are denying the refund of ITC of GST paid on those inputs which are purchased at equal or lower rate of GST than the rate of GST on outward supply, by not including the amount of such ITC while calculating the maximum refund amount as specified in GST rules.
- The refund of unutilized ITC in case of inverted tax structure is available where ITC remains unutilized even after setting off of available ITC for the payment of output tax liability.
Further, it has been clarified that where there are multiple inputs attracting different tax rates, the term ‘Net ITC’ covers the ITC availed on all inputs in the relevant period irrespective of their tax rates.
eg: A manufacturer produces product Z (GST rate 12%) by using input P (GST rate 5%) and Q (GST rate 18%).
Assuming ITC availed on P & Q is Rs. 300 and Rs 22 respectively. Net ITC is Rs. 322 (300+22)
Output tax liability is Rs. 300 on the supply of product Z.
Maximum refund allowed= Rs. 22 (322-300)
Disbursal of refund amounts after sanction
- If an order has been passed to refund the tax and the same is not refunded within 60 days of the date of receipt of application (ARN), interest @ 6% on the refund amount shall be granted to the claimant.
The period of interest calculation shall start from the date immediately after the expiry of 60 days from the date of receipt of ARN till the date on which the amount is credited to the bank account of the claimant.
Non-consideration of ITC of GST paid on invoices of earlier tax period availed in the subsequent tax period
- As GST law mandates that ITC can be availed only after the goods are received by the recipient thereby raising an issue in cases where supplier raises invoice in different month and goods are received by the recipient in a different month.
eg: Supplier raises an invoice in Aug, 2018 and the goods reach the recipient’s premises in Sep, 2018. In this case, the recipient can only avail the ITC on such goods in the FORM GSTR-3B filed for the month of Sep, 2018. In such cases, officers are excluding such invoices from the calculation of refund of unutilized ITC filed for the month of Sep, 2018.
- In this regard, it has been clarified that ‘Net ITC’ means ITC availed on input goods and services during the relevant period (i.e., for which the refund claim has been filed). ITC can be said to have been availed when it is reflected in the electronic credit ledger on the basis self-declaration made in FORM GSTR-3B for a particular tax period. Therefore, the ITC of invoices issued in Aug, 2018 availed in Sep, 2018 cannot be excluded from the calculation of the refund amount for the month of Sep, 2018.
Misinterpretation of the meaning of the term ‘inputs’
- Departmental officers do not consider ITC on stores and spares, packing materials, materials purchased for machinery repairs, printing and stationery items as part of ‘Net ITC’ on the grounds that these are not directly consumed in the manufacturing process and do not qualify as input.
Further, stores and spares which are charged as revenue expenditure and is not capitalized in books of accounts by the claimant are considered as capital goods and ITC availed on them is not included in Net ITC.
- ITC of GST paid on inward supplies of stores and spares, packing material, printing and stationery items etc. shall be available as ITC as long as these inputs are used for the purpose of the business.
Further, capital goods mean those goods whose value has been capitalized in the books of account and which are used in the course or furtherance of business. As stores and spare are charged as revenue expenditure in the books of account, cannot be held as capital goods.
Refund of accumulated ITC of input services and capital goods arising on account of inverted duty structure
- CGST Act allows the refund of unutilized ITC on inputs which has accumulated on account of inverted duty structure. Wherein inputs has been defined as goods other than capital goods used in the course or furtherance of business. These inputs do not include services and capital goods.
Therefore, refund of tax paid on input services and capital goods as part of a refund of ITC accumulated on account of inverted duty structure is not allowed.
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