Given the growing concerns in the industry due to the delay in processing of refund claims, the government has taken steps in the form of initiating a refund processing drive and issuance of circular to clarify various issues faced during the processing of refund claims.
‘Refund fortnight’ initiative by CBEC
The Central Board of Excise and Customs (CBEC) has started a nationwide drive from 15 March 2018 to 29 March 2018 to expedite processing of refund claims of exporters. Key highlights of this drive are:
- Special refund cells with dedicated manpower and infrastructure shall be operated at all Customs formations during this time for speeding up the sanction of refunds.
- New facilities have been provided for sanction of IGST refunds which were held up due to:
- Mismatch in the invoice related information provided in shipping bills, vis-à-vis GSTR-1/Table 6A – Special procedure has been put in place for removal of errors.
- Errors associated in the filing of Export General Manifest (EGM) in gateway airport – Options have been given to officers at Inland Container Depot (ICD) or at the gateway port, depending on the error to make necessary amendments.
- A facility to check the status of the refund claims has been provided on ICEGATE – Exporters may simply log into https://www.icegate.gov.in/iceLogin/loginAction and register to know the status of their shipping bills.
Clarifications on export-related refund issues
The government vide Circular No. 37/11/2018-GST dated 15 March 2018 has issued certain clarifications in relation to the difficulties being faced by the exporters in obtaining refunds. Certain key clarifications are:
- ITC in cases of drawback
Input Tax Credit (ITC) is not available in cases where the exporter claims drawback in respect of central tax. In this regard, certain clarifications have been issued which are:
|Drawback claimed for||Whether ITC for GST is available|
|Basic customs duty||Yes|
|Central GST||Yes, but only in respect of state GST|
- Delay in executing Letter of Undertaking (LUT)
It has been clarified to the field officers that in cases where zero-rated supplies have been made before filing LUT and the LUT is filed later, substantive benefits of zero rating should not be denied. In such cases, delay in filing LUT should be allowed and the facility for export under LUT can be allowed on a retrospective basis, taking into account the facts and circumstances of the case.
- Fresh filing of application in case of a deficiency memo
Once a deficiency memo has been issued in respect of a refund application, the applicant will have to file a fresh refund application manually in Form GST RFD-01A. This fresh application should be accompanied by the original Application Reference Number (ARN), debit entry number generated originally and a hard copy of the refund application filed online.
- Self-declaration in case of refund application
It has been clarified that a self-declaration form stating that the claimant of refund has not been prosecuted for any offense under the CGST Act or the IGST Act is not required to be filed with every refund claim. For this purpose, the self-declaration filed at the time of submission of LUT should suffice.
- Refund of transitional credit
Transitional credit pertains to duties and taxes paid under the erstwhile central excise and service tax laws. Therefore, it cannot be treated as part of ‘net ITC’ for calculation of amount eligible for a refund in accordance with sub-rule (4) and (5) of Rule 89 of the Central Goods and Services Tax Rules, 2017.
- Discrepancy between values of GST invoice and shipping bill/bill of export
In certain cases, a discrepancy between the value of GST invoice and shipping bill/bill of export has been observed. This has resulted in refund claims not being processed. In such cases, the refund should be sanctioned at the lower of the two values.
- Refund of taxes paid under the erstwhile laws
- Any claim of refund of tax/duty paid under the erstwhile indirect tax laws has to be made in accordance with the procedures laid down under such laws. Any claim in this regard made in Form GST RFD-01A under GST will be rejected.
- If any claim for refund of CENVAT credit is partially or fully rejected, the amount so rejected will lapse and therefore it cannot be transitioned into GST.
- Frequency of filing of refund claims
The exporter at his convenience may file a refund claim for one calendar month/quarter or by clubbing successive calendar months/quarters. However, such clubbed months/quarters should not be spread across different financial years.
- BRC/FIRC for export of goods
It has been clarified that proof of realization of export proceeds for processing of refund claims related to the export of goods has not been envisaged in the law and therefore, Bank Realization Certificate (BRC)/Forward Inward Remittance Certificate (FIRC) should not be insisted upon by officers for processing of such refund claims.
- Supplies to merchant exporters
- Supplies to merchant exporters are taxable at a concessional rate of 0.1% in accordance with Notification No. 40/2017-Central Tax (Rate) dated 23 October 2017 and Notification No. 41/2017-Central Tax (Rate) dated 23 October 2017 respectively. It has been clarified that such benefit is optional.
- Furthermore, the exporter will be eligible to take credit of tax paid at such concessional rate. The supplier of such goods is also eligible to claim a refund on account of inverted tax structure.
- Documentation required for processing of refunds
Given that due to delays in operationalizing the requisite modules on the GST portal, the refund claims are being filed in a semi-electronic environment, and a list of documents have been specified for processing of refund claims. The same has been encapsulated in the table below.
|Type of refund||Document|
|Export of services with payment of tax (refund of IGST paid on export of services)||
|Export (goods or services) without payment of tax (refund of accumulated ITC of IGST/CGST/SGST/UTGST/Cess)||
- These clarifications will apply to all exports made on or after 1 July 2017.
- The ‘refund fortnight’ drive is an excellent initiative for exporters to understand their errors during the filing of returns and enables them to process returns quickly.
- The clarifications issued by way of the circular are comprehensive in nature and should speed up the processing of refund claims by minimizing the errors made by exporters and reducing the demand for avoidable procedural compliances from the GST field officers.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.