Clarification on refund related issues. Rescinded vide Circular No. 125/44/2019 – GST dated 18.11.2019.

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Circular No.: 79/53/2018-GST
Date of Circular: 31st December 2018
Relevant Sections and Rules:

  • CGST Act, 2017:
    • Section 54(3), 56: Refund of unutilized ITC, interest on delay
    • Section 168(1): Power to issue instructions
    • Section 2(59), 16(4), 17(5): Definitions, time limits, and ITC restrictions
  • CGST Rules, 2017:
    • Rule 89(4), 89(5), 90(2): Refund procedure and formulas
  • Notifications:
    • Notification No. 13/2017-CT; 26/2018-CT

Summary of Circular:

This circular provides clarifications on various refund-related issues to ensure uniform application of rules across field formations. Key clarifications are grouped below.

  1. Electronic Submission of Refund Applications (RFD-01A):
  • Refund claims must now be fully submitted online, including statements, undertakings, invoices.
  • Physical submission not required, except optionally or for taxpayers without assigned jurisdiction.
  • ARN is generated after complete electronic submission, which determines the start of the 15-day window for acknowledgment or deficiency memo.
  • Applications sent to incorrect jurisdiction can be electronically reassigned within 3 days.
  1. Refund for Inverted Duty Structure – Inclusion of All Inputs:
  • All inputs, regardless of their GST rate, should be considered in “Net ITC” under Rule 89(5).
  • Example clarified refund computation even when inputs attract varying GST rates.
  • Refund of ITC on lower or equal rated inputs is not to be excluded.
  1. Interest on Delayed Refunds:
  • Interest at 6% per annum applies if refund is not disbursed within 60 days from date of ARN.
  • Tax is considered refunded only on actual bank credit, not order issuance.
  1. Unsubmitted RFD-01A Applications (Pre-Circular):
  • Applications not physically received (pre-circular):
    • If claim < ₹1,000 → rejected and re-credited.
    • If claim ≥ ₹1,000 → applicant notified by email, must submit documents in 15 days or be rejected.
  1. Compensation Cess Refund Clarifications:
  2. Availment in later period:
  • If cess ITC (e.g. on coal) is availed in July 2018 for July 2017–May 2018, refund must be recomputed retrospectively.
  • Refund allowed if retrospective computation ≤ July 2018 refund.
  1. Electricity as intermediate product:
  • Refund of cess on inputs used in captive electricity generation (e.g. coal) is allowed, as electricity is used for export product.
  1. Partial reversal of ITC:
  • Reversed cess is not considered “availed”; cannot be included in refund unless re-availed later with accounting reversal.
  1. Invoices of Prior Period Claimed in Later Period:
  • ITC claimed in GSTR-3B for later period (due to receipt of goods) is valid for refund computation in that later period.
  1. Definition of Inputs – Inclusion of Indirect Supplies:
  • Items like stores, spares, packaging, repair materials, etc. are eligible ITC if used in business and not capitalized.
  • If treated as revenue expense, such goods are not capital goods and refund of ITC is allowed.
  1. Refund Not Allowed for Input Services and Capital Goods:
  • Under inverted duty structure, refund is allowed only on inputs, not on input services or capital goods, in line with Section 54(3) and Rule 89(5).
  • Rule amended via Notification 26/2018-CT to clarify this restriction.

Source: Circular No.: 79/53/2018-GST

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