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 Rescinded vide Circular No. 125/44/2019 – GST dated 18.11.2019.

Circular No.: 59/33/2018-GST
Date of Circular: 4th September 2018
Relevant Sections and Rules:

• Central GST Act, 2017:
  • Section 54: Refund of tax
  • Section 73 & 74: Recovery of tax
  • Section 168(1): Power to issue instructions
• CGST Rules, 2017:
  • Rule 89, 90, 93, 96(10): Refund-related rules
• Notification:
  • Notification No. 39/2018-CT dated 04.09.2018

Summary of Circular:

This circular addresses several practical and procedural issues related to refund of unutilized ITC, re-credit mechanism, system validations, refund filing errors, and the scope of Rule 96(10).

1. Simplified Submission of Invoices for Refund:
   • Instead of submitting all invoices, taxpayers may now submit FORM GSTR-2A printout and a manually filled Annexure-A listing invoice-wise ITC claims.
   • Hard copies of invoices may be requested only if they are not reflected in GSTR-2A.
2. System Validations for Refund Calculations:
   • Refund of unutilized ITC is system-validated using the least of 3 amounts:
     1. Refund formula (Rule 89(4)/(5))
     2. Credit balance at period-end
     3. Credit balance at application time
   • Debits must follow sequence: IGST → CGST + SGST equally, manually enforced until system is updated.
3. Re-credit on Refund Rejection:
   • If refund is rejected due to ineligible ITC, re-credit via FORM RFD-01B and a demand notice under Sec. 73/74 must be issued.
   • If refund is rejected for other reasons, re-credit only after obtaining an undertaking from the claimant not to appeal or post-appeal rejection.
4. Clarification on Rule 96(10) Restriction (as amended retrospectively):
   • The refund restriction applies only to importers/purchasers who directly avail exemptions (e.g. under Advance Authorization, EPCG).
   • A buyer from such importer, who pays full tax, can export and claim IGST refund.
5. Disbursal of Refund by Counterpart Authority:
   • No authority can withhold refund sanctioned by the counterpart (State/Centre).
   • Any disagreement must be resolved by appeal, not by refusal to disburse.
6. Deficiency Memo (RFD-03) – No SCN or Adjudication:
   • If RFD-03 is issued, it ends the application.
   • A new application must be filed; no SCN or refund order (RFD-04/06) should follow for the previous rejected claim.
7. Refund Below ₹1,000 – Per Tax Head Limit:
   • Refund below ₹1,000 is rejected only per tax head, not on cumulative basis.
   • This restriction does not apply to refund of excess balance in the cash ledger.

Source: Circular No.: 59/33/2018-GST