Clarification on refund-related issues

Circular No.: 197/09/2023-GST
Date of Circular: 17th July 2023
Relevant Sections and Rules:

• CGST Act, 2017:
  • Section 16(2)(aa), Section 54(3), Section 41, Section 42 (now omitted), Section 168(1)
• CGST Rules, 2017:
  • Rule 36(4), Rule 89(4), Rule 96A
• Notifications:
  • 39/2021-CT, 40/2021-CT, 14/2022-CT, 18/2022-CT

Summary of Clarifications Provided:

1. Refund of Accumulated ITC Must Be Based on GSTR-2B from January 2022 Onwards:
   Earlier refunds were limited to invoices reflected in GSTR-2A. However, due to insertion of Section 16(2)(aa) and amendment to Rule 36(4) (w.e.f. 01.01.2022), refund of accumulated ITC under Section 54(3) is now restricted to ITC appearing in GSTR-2B, starting from January 2022 tax period. Refunds processed before this clarification using GSTR-2A shall not be reopened.
2. Revised Undertaking in Refund FORM RFD-01 after Omission of Section 42:
   Earlier undertakings under Para 7 of Circular 125/44/2019 required commitment referencing Section 42, which is now omitted. The revised undertaking in FORM GST RFD-01 only refers to compliance with Section 16(2)(c). Correspondingly, requirements for uploading GSTR-2A and unmatched invoices in Annexure A have been removed.
3. Adjusted Total Turnover to Align with Export Turnover Definition in Rule 89(4):
   In computing refund under Rule 89(4), the “adjusted total turnover” should now align with the amended definition of export turnover under the Explanation to Rule 89(4) (inserted via Notification 14/2022-CT). This ensures consistency with earlier clarification in Circular 147/03/2021-GST.
4. Refund Admissible Post Payment of IGST under Rule 96A Non-Compliance (Late Export):
   If exporters paid IGST and interest under Rule 96A(1) due to delayed export or delayed foreign exchange realization, they can still claim:

• Refund of unutilized ITC under Section 54(3), and
• Refund of IGST paid subsequently upon actual export/payment realization.
  However, interest paid under Rule 96A is not refundable. Refund may be claimed under the category “Excess payment of tax”, or under “Any Other” if the portal doesn’t support the former.

Source: Circular No.: 197/09/2023-GST