LATEST DETAILS

Amendement in GST Rules Regarding Provisions of Refund

Article Dated 19th April, 2020

 

AMENDEMENT IN GST RULES REGARDING PROVISIONS OF REFUND

By Sh. Rajesh K. Arora,
SUPERINTENDENT (Retd.), CUSTOMS, GST & C.EX

The Central Government in terms of Notification No. 16/2020-Central Tax, New Delhi dated 23rd March, 2020, amended the following rules in the Central Goods and Services Tax Rules, 2017 with effect from 01.04.2020. These rules may be called the Central Goods and Services Tax (Third Amendment) Rules, 2020.

(A) (i) In the said rules, in rule 86, after sub-rule (4), the following sub-rule shall be inserted, namely:-

“(4A) Where a registered person has claimed refund of any amount paid as tax wrongly paid or paid in excess for which debit has been made from the electronic credit ledger, the said amount, if found admissible, shall be re-credited to the electronic credit ledger by the proper officer by an order made in FORM GST PMT-03”.

(ii) Rule 86 pertains to Electronic credit ledger. Sub rule (3) of rule 86 stipulates that where a registered person has claimed refund of any unutilized amount from the electronic credit ledger in accordance with the provisions of section 54, the amount to the extent of the claim shall be debited in the said ledger.

(iii) Effect of the amendment:- Sub rule (3) of rule 86 did not dealt with refund of excess payment of tax wrongly paid through electronic credit ledger. Now, this issue has been dealt and sub rule (4A) has been inserted, which states that a registered person claiming refund of any amount wrongly paid as tax or paid in excess through electronic credit ledger and if the said amount found admissible, shall be re-credited to the electronic credit ledger by the proper officer by an order made in FORM GST PMT-03”.

(B) (i) In the said rules, in rule 89, in sub-rule (4), for clause (C), the following clause shall be substituted, namely:-

 “Turnover of zero-rated supply of goods” means the value of zero-rated supply of goods made during the relevant period without payment of tax under bond or letter of undertaking or the value which is 1.5 times the value of like goods domestically supplied by the same or, similarly placed, supplier, as declared by the supplier, whichever is less, other than the turnover of supplies in respect of which refund is claimed under sub-rules (4A) or (4B) or both;”.

(ii) Previously, clause (C) of sub rule 4 was as under:-

(C) “Turnover of zero-rated supply of goods” means the value of zero-rated supply of goods made during the relevant period without payment of tax under bond or letter of undertaking, other than the turnover of supplies in respect of which refund is claimed under sub-rules (4A) or(4B)or both.

(iii) Effect of the Amendment:-

Rule 89 of the CGST Rules, 2017 pertains to the provisions regarding application for refund of tax, interest, penalty, fees or any other amount. Clause (C) of Sub Rule 4 of the said rule stipulates the meaning of “turnover of Zero rated supply of goods”. This substituted clause includes a new aspect, besides the previous meaning of value of zero rated supply of goods, i.e. the value which is 1.5 times the value of like goods domestically supplied by the same or, similarly placed, supplier, as declared by the supplier, whichever is less has been incorporated in the said clause. Thereby meaning that now, value of zero rated supplies of goods, besides value of zero rated goods made without payment of tax under bond or letter of undertaking, will also include the value which is 1.5 times the value of like goods domestically supplied. Thus, for refund purposes, turnover of zero rated supply of goods will also include the value of like goods domestically supplied.  

(C) (i) In the said rules, in rule 92, after sub-rule (1), the following sub-rule shall be inserted, namely:-

(1A) Where, upon examination of the application of refund of any amount paid as tax other than the refund of tax paid on zero-rated supplies or deemed export, the proper officer is satisfied that a refund under sub-section (5) of section 54 of the Act is due and payable to the applicant, he shall make an order in FORM RFD-06 sanctioning the amount of refund to be paid, in cash, proportionate to the amount debited in cash against the total amount paid for discharging tax liability for the relevant period, mentioning therein the amount adjusted against any outstanding demand under the Act or under any existing law and the balance amount refundable and for the remaining amount which has been debited from the electronic credit ledger for making payment of such tax, the proper officer shall issue FORM GST PMT-03 re-crediting the said amount as Input Tax Credit in electronic credit ledger.”;

(ii) in sub-rule (4), after the words, brackets and figure “amount refundable under sub-rule (1)”, the words, brackets, figure and letter “or sub-rule (1A)”, shall be inserted.

(iii) in sub-rule (5), after the words, brackets and figure “amount refundable under sub-rule (1)”, the words, figures and letter “or sub-rule (1A)”, shall be inserted.

(iv) Effect of the amendment:- Sub rule (1) of rule 92 stipulate that upon examination of the application, the proper officer is satisfied that a refund under sub-section (5) of section 54 is due and payable to the applicant, he shall make an order in FORM GST RFD-06 sanctioning the amount of refund to which the applicant is entitled.

A new sub rule (1A) has been inserted which pertains to the cases of refund of any amount paid as tax other than the refund of tax paid on zero-rated supplies or deemed export. The proper officer after satisfying himself the legality under sub-section (5) of section 54 of the Act, shall make an order in FORM RFD-06. He will sanction the amount of refund to be paid, in cash and that will be refunded in proportionate to the amount debited in cash against the total amount paid for discharging tax liability, mentioning therein the amount adjusted against any outstanding demand under the Act. The balance amount refundable and for the remaining amount which has been debited from the electronic credit ledger for making payment of such tax, the proper officer shall issue FORM GST PMT-03 and the same will bere-credited as Input Tax Credit in electronic credit ledger.

Corresponding amendment have also been made sub rule (4) and (5) of the said rule to give effect to provisions inserted vide sub rule (1A) of the said rule.

(D) (i) In the said rules, in rule 96, in sub-rule (10),in clause (b) with effect from the 23rd October, 2017, the following Explanation shall be inserted, namely:-

Explanation.- For the purpose of this sub-rule, the benefit of the notifications mentioned therein shall not be considered to have been availed only where the registered person has paid Integrated Goods and Services Tax and Compensation Cess on inputs and has availed exemption of only Basic Customs Duty (BCD) under the said notifications.”.

(ii) Rule 96 pertains to Refund of integrated tax paid on goods or services exported out of India. Sub Rule (10) of Rule 96 pertains to certain conditions that the persons claiming refund of integrated tax paid on exports of goods or services (under rule 96) should not have -

(a) received supplies on ………..ordinary, Part II, Section 3, Sub-section (i), vide number G.S.R 1321 (E), dated the 23rd October, 2017 has been availed; or

(b) availed the benefit under notification No.78/2017-Customs, dated the 13th October, 2017, published in the Gazette of India, Extraordinary, Part II, Section 3, Sub-section (i), vide number G.S.R 1272(E), dated the 13th October, 2017 or notification No.79/2017-Customs, dated the 13th October, 2017, published in the Gazette of India, Extraordinary, Part II, Section 3, Sub-section (i), vide number G.S.R 1299 (E), dated the 13th October, 2017 except so far it relates to receipt of capital goods by such person against Export Promotion Capital Goods Scheme.

(iii) Notification No. 78/2017-Cus dated 13.10.2017 pertains to exemption of goods imported by EOUs from payment of integrated tax and compensation cess. Notification No. 79/2017-Cus dated 13.10.2017 pertains to amendment in various Customs exemption notifications to exempt Integrated Tax/Cess on import of goods under AA/EPCG Schemes.  

(iv) Effect of the amendment:- Sub Rule (10) of Rule 96 pertains to certain conditions that the persons claiming refund of integrated tax paid on exports of goods or services (under rule 96) should not have

clause (b) : availed the benefit under notification No.78/2017-Customs, dated the 13th October, 2017 or notification No.79/2017-Customs, dated the 13th October, 2017, except so far it relates to receipt of capital goods by such person against Export Promotion Capital Goods Scheme.

Notification No. 78/2017-Cus dated 13.10.2017 and Notification No. 79/2017 dated 13.10.2017 pertains to exemption of goods, from payment of integrated tax and compensation cess, imported by EOUs and under AA/EPCG Schemes.

Now, Explanation to clause (b) retrospectively, with effect from 23.10.2017 stipulate that the benefit of the notifications mentioned therein i.e 78/2017-Cus dated 13.10.2017 and 79/2017-Cus dated 1310.2017, shall not be considered to have been availed only where the registered person has paid Integrated Goods and Services Tax and Compensation Cess on inputs and has availed exemption of only Basic Customs Duty (BCD) under the said notifications.

Meaning thereby that the goods imported by EOUs and under AA/EPCG Schemes, availing exemption of only Basic Customs Duty (BCD) under the notifications 78/2017-Cus and 79/2017-Cus both dated 13.10.2017 and paying Integrated Goods and Services Tax and Compensation Cess on inputs, will be considered as satisfying the conditions of clause (b) of sub rule 10 of rule 96 i.e. have not availed the benefit of Notification No. 78/2017-Cus dated 13.10.2017 and 79/2017-Cus dated 13.10.2017.

(E) (i) In the said rules, in rule 96A, the following rule shall be inserted, namely:-

“96B. Recovery of refund of unutilised input tax credit or integrated tax paid on export of goods where export proceeds not realised. –

(1) Where any refund of unutilised input tax credit on account of export of goods or of integrated tax paid on export of goods has been paid to an applicant but the sale proceeds in respect of such export goods have not been realised, in full or in part, in India within the period allowed under the Foreign Exchange Management Act, 1999 (42 of 1999), including any extension of such period, the person to whom the refund has been made shall deposit the amount so refunded, to the extent of non-realisation of sale proceeds, along with applicable interest within thirty days of the expiry of the said period or, as the case may be, the extended period, failing which the amount refunded shall be recovered in accordance with the provisions of section 73 or 74 of the Act, as the case may be, as is applicable for recovery of erroneous refund, along with interest under section 50:

Provided that where sale proceeds, or any part thereof, in respect of such export goods are not realised by the applicant within the period allowed under the Foreign Exchange Management Act, 1999 (42 of 1999), but the Reserve Bank of India writes off the requirement of realisation of sale proceeds on merits, the refund paid to the applicant shall not be recovered.

(2) Where the sale proceeds are realised by the applicant, in full or part, after the amount of refund has been recovered from him under sub-rule (1) and the applicant produces evidence about such realisation within a period of three months from the date of realisation of sale proceeds, the amount so recovered shall be refunded by the proper officer, to the applicant to the extent of realisation of sale proceeds, provided the sale proceeds have been realised within such extended period as permitted by the Reserve Bank of India.”

(ii) Rule 96A pertains to Refund of integrated tax paid on export of goods or services under bond or Letter of Undertaking

(iii) Effect of Rule 96B:-

Rule 96B prescribes the modalities for recovery of refund of unutilised input tax credit or integrated tax paid on export of goods,where export proceeds not realised. This recovery procedure has been linked with realization of export proceeds, similar to recovery of drawback amount in Customs Act, where sale proceeds have not been realized.

Rule 96B (1) stipulate that in cases of export of goods, where any refund of such unutilised input tax credit or of integrated tax paid, has been paid to an exporter but the sale proceeds in respect of such export goods have not been realised, in full or in part, within the period prescribed including any extension of such period. Then the person, who has received the said amount of refund, shall deposit the amount so refunded, to the extent of non-realisation of sale proceeds, along with applicable interest within thirty days of the expiry of the said period including the extended period. If that refunded amount has not been deposited, then proceedings will be initiated in accordance with the provisions of section 73 or 74 of the Act, as the case may be, along with interest under section 50.

One proviso has been inserted, that in those cases, where the sale proceeds, or any part thereof, in respect of such export goods are not realised within the period allowed, but the Reserve Bank of India writes off the realization of said sale proceeds on merits, the refund paid to the exporter/applicant shall not be recovered.

Rule 96B (2) prescribes that even after the amount of refund has been recovered from him under sub-rule (1) and in case, if the sale proceeds are realised by the applicant, in full or part, and he produces evidence about such realisation within a period of three months from the date of realisation of sale proceeds. Then in such cases, the amount so recovered shall be refunded to the applicant to the extent of realisation of sale proceeds.

(F) (i) In the said rules, in FORM GST RFD-01, after the declaration under rule 89(2)(g), the following undertaking shall be inserted, namely:-

“UNDERTAKING”

I hereby undertake to deposit to the Government the amount of refund sanctioned along with interest in case of non-receipt of foreign exchange remittances as per the proviso to section 16 of the IGST Act, 2017 read with rule 96B of the CGST Rules 2017.

Signature
Name 

Designation / Status

(ii)  Effect of Undertaking:
 
Form GST RFD-01 is a format of application for refund. This format of application contains other formats of declarations, self-declarations under the provisions of rules. The applicant has to abide by these declarations and self-declarations.

A new undertaking, after the declaration under rule 89(2)(g), under the proviso to section 16 of the IGST Act, 2017 read with rule 96B of the CGST Rules 2017, has been incorporated. This undertaking is in sync with insertion of rule 96BVide this undertaking the applicant is required to undertake that in case of non-receipt of foreign exchange remittances i.e sale proceeds of exports, the applicant/exporter would deposit the amount of refund sanctioned along with interest to the Government.