In response to refund issues being experienced by companies under GST, the CBEC has now issued a detailed circular. The circulate aims at clarifying some the common concern. A summary of the clarifications is provided below.
NASSCOM has been highlighting the issues experienced by IT industry regarding difficulties in claiming refund and we are hopeful that these clarifications should address some of those issues.
Supply of goods/ services made without payment of IGST under Rule 96A without furnishing of a bond/ LUT to not be denied “export/ deemed export” benefit (Para 4)
· The Circular has clarified that substantive benefits of zero rating may not be denied due to the delay in furnishing of LUT, where it has been established that exports in terms of the relevant provisions have been made.
· It has further clarified that the delay may be condoned and the facility for export under LUT may be allowed on ex post facto basis taking into account the facts and circumstances of each case.
· This clarification is indeed welcome.
· Companies have been receiving demand notices on account of delays in filing of Bond/ LUT. This Circular now therefore provides the much needed relief.
Deficiency memo in case of refund claims to be issued only once (Para 6)
· Rule 90(3) of the CGST Rules provides for communication of deficiencies in refunds in GST RFD-03. The Rule requires that once a deficiency memo is issued, the claimant is required to file a fresh refund application.
· In this connection, a clarification has been provided that the deficiency memo can only be issued once.
· It is further clarified that once an application has been submitted afresh, pursuant to a deficiency memo, the proper officer will not serve another deficiency memo with respect to the application for the same period, unless the deficiencies pointed out in the original memo remain unrectified, either wholly or partly, or any other substantive deficiency is noticed subsequently.
· This clarification may help reduce the delays faced in processing of claims since the Officer will now be required to detail all his requirements in the said deficiency memo.
· It is hoped, however, that refunds are not rejected on frivolous grounds simply owing to the fact that a clarification/ document was not sought in the deficiency memo.
No requirement of furnishing self-declaration for non-prosecution for refunds (Para 7)
· The Circular clarifies that there is no requirement of filing of self-declaration for non-prosecution in respect of refunds.
· This is because the exact same declaration would have already been filed at the time of furnishing of Bond/ LUT.
Refund of transition credit/ taxes paid under erstwhile laws cannot be claimed (Para 8 and 10)
· The Circular clarifies that no refund can be claimed on transition credit.
· It also clarifies that where any claim for refund of CENVAT credit is fully or partially rejected, the amount so rejected shall lapse and therefore, will not be transitioned into GST and further no refund of the amount of CENVAT credit should be granted in cash where the refund allowed has been transitioned under GST.
· This clarification puts to rest any doubts on eligibility of refund under GST on transition credit or in respect of rejection of refund amounts under the erstwhile laws.
Filing frequency of refunds (Para 11)
· It is clarified that the exporter, at his option, may file refund claim for one calendar month / quarter or by clubbing successive calendar months / quarters. The calendar month(s) / quarter(s) for which refund claim has been filed, however, cannot spread across different financial years.
· This clarification is a welcome one since filing of monthly refund claims may be cumbersome.
· Interestingly, the Circular provides that refunds can even be clubbed for months as well as for quarters.
· This will thus help reduce the number of refund claims to be filed and processed and reduce the burden on both taxpayer as well as administration.
· Also, it puts to rest doubts in cases where exports may not have been made in that period in which the inputs or input services were received and input tax credit has been availed.
BRC/FIRC for export of goods (Para 12)
· It is clarified that insistence on proof of realization of export proceeds for processing of refund claims related to export of goods has not been envisaged in the law and hence should not be insisted upon.
· The difficulties faced by service exporters with respect to non-issuance of FIRC’s by Banks given the new RBI guidelines and the difficulty in obtaining BRC’s has therefore not been addressed.
Documents to be furnished for processing refund claims (Para 14)
· In addition to the above, the Circular provides a list of documents which are required for processing the various categories of refund claims on exports namely:
· It is clarified that apart from the documents listed in the above Table, no other documents should be called for from the taxpayers, unless the same are not available with the officers electronically.
· This comes as huge relief to service exporters who have been asked to submit voluminous documents and additional evidences in support of their claims.
· However, implementation of this instruction at the ground level will now have to be seen.