THE CENTRAL GOODS AND SERVICES TAX (THIRD AMENDMENT) RULES, 2020

[Mr. M. GOVINDARAJAN]

To bring effective to the decisions of the 39^th GST Council meeting held on 14.03.2020, the Central Government brought out ‘The Central Goods and Services Tax (Third amendment) Rules, 2020 vide Notification No. 16/2020-Central Tax , dated 23.03.2020.

The amendment rules brought amendments to the following rules-

• Rule 8 – Application for registration;
• Rule 9 – verification of the application and approval;
• Rule 25 – Physical verification of business premises in certain cases;
• Rule 43 – Manner of determination of input tax credit in respect of capital goods and reversal thereof;
• Rule 80 – Annual Return;
• Rule 86 – Electronic Credit Ledger;
• Rule 89 – Application for refund of tax, interest, penalty, fees or any other amount;
• Rule 92 – Order sanctioning refund;
• Rule 96 – Export of goods or services under bond or Letter of Undertaking;
• Rule 96B – newly inserted;
• Rule 141 – Procedure in respect of seized goods;
• Amendment in Refund form GST RFD – 1.

Registration

A new sub rule 8(4A) has been introduced in this amendment which requires the applicant to undergo authentication of aadhaar number for registration.  This procedure will come into effect from 01.04.2020.

Verification of the application and approval

A proviso is inserted to Rule 9(1) which will come into effect from 01.04.2020.  The newly inserted proviso provides that where a person, other than those notified under sub-section (6D) of section 25 (such person or class of persons or any State or Union territory or part thereof, as the Government may, on the recommendations of the Council, specify by notification), fails to undergo authentication of Aadhaar number then the registration shall be granted only after physical verification of the principle place of business in the presence of the said person, not later than sixty days from the date of application, in the manner provided under rule 25 and the provisions of sub-rule (5) shall not be applicable in such cases.

Physical verification of business premises in certain cases

By this amendment Rule 25 was substituted.  The newly substituted Rule 25 provides that Where the proper officer is satisfied that-

• the physical verification of the place of business of a person is required due to failure of Aadhaar authentication before the grant of registration; or
• due to any other reason after the grant of registration, he may get such verification of the place of business,

in the presence of the said person, done and the verification report along with the other documents, including photographs, shall be uploaded in FORM GST REG-30 on the common portal within a period of fifteen working days following the date of such verification.

Manner of determination of input tax credit in respect of capital goods and reversal thereof in certain cases

Rule 43 provides for the manner of determination of input tax credit in respect of capital goods and reversal thereof in certain cases.  The amendment brought changes this Rule.  The amendment substituted Rule 43(1) (c) and 43(1)(d), insert  explanation to Rule 43(1)(e) and omitted the Rule 43(1)(f).

The newly substituted Rule 43(1) (c) provides that the amount of input tax in respect of capital goods denoted as ‘A’ not covered under clauses (a) and (b),  being the amount of tax as reflected on the invoice, shall credit directly to the electronic credit ledger and the validity of the useful life of such goods shall extend up to 5 years from the date of the invoice for such goods.  Where any capital goods earlier covered under clause (a) is subsequently covered under this clause, input tax in respect of such capital goods denoted as ‘A’ shall be credited to the electronic credit ledger subject to the condition that the ineligible credit attributable to the period during which such capital goods were covered by clause (a), denoted as ‘Tie’, shall be calculated at the rate of 5% points for every quarter or part thereof and added to the output tax liability of the tax period in which such credit is claimed.  The amount ‘Tie’ shall be computed separately for input tax credit of central tax, State tax, Union territory tax and integrated tax and declared in FORM GSTR-3B.

The newly substituted Rule 43(1)(d) provides that the aggregate of the amounts of ‘A’ credited to the electronic credit ledger under clause (c) in respect of common capital goods whose useful life remains during the tax period, to be denoted as ‘Tc’, shall be the common credit in respect of such capital goods.

Where any capital goods earlier covered under clause (b) are subsequently covered under clause (c), the input tax credit claimed in respect of such capital good(s) shall be added to arrive at the aggregate value ‘Tc’;

The newly inserted explanation to Rule 43(1) provides that useful life of any capital goods shall be considered as 5 years from the date of invoice and the said formula shall be applicable during the useful life of the said capital goods. (T_m= T_c/60).

The Rule 43(1)(f) was omitted by this amendment.  The omitted rule 43(1)(f) provided that the amount of input tax credit, at the beginning of a tax period, on all common capital goods whose useful life remains during the tax period, be denoted as ‘T_r’ and shall be the aggregate of ‘T_m’ for all such capital goods.

Annual Return

This amendment inserts a proviso to Rule 80 (3).  The proviso provides that every registered person whose aggregate turnover during the financial year 2018-2019 exceeds five crore rupees shall get his accounts audited.   He shall furnish a copy of audited annual accounts and a reconciliation statement, duly certified, in FORM GSTR-9C for the financial year 2018-2019 electronically through the common portal.

Electronic Credit Ledger

The amendment inserted a new Rule 86(4A).  The newly inserted Rule 86(4A) provides that if 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.

Application for refund of tax, interest, penalty, fees or any other amount

The amendment substitutes Rule 89 (4) (c).  The newly substituted Rule 89 (4) (c) defines the expression ‘Turnover of zero-rated supply of goods’ as 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.

Order sanctioning refund

The amendment inserted new Rule 92(1A).  The newly inserted Rule 92(1A) provides that 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 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.

Refund of integrated tax paid on goods or services exported out of India

The amendment inserted an explanation to Rule 96(10).  The newly inserted explanation provides that the benefit of the notifications mentioned therein (notification No. 48/2017-Central Tax, dated the 18th October, 2017,  and notification No. 78/2017-Customs, dated the 13th October, 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.

New Rule 96B

The amendment inserted new Rule 96B which provides for recovery of refund of unutilized input tax credit or integrated tax paid on export of goods where export proceeds not realized.

Rule 96B(1) provides that where any refund of unutilized 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 realized , in full or in part, in India within the period allowed under the Foreign Exchange Management Act, 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-realization of sale proceeds, along with applicable interest within 30 days of the expiry of the said period or, the extended period.   Failing which the amount refunded shall be recovered as recovery of erroneous refund, along with interest. 

Where the sale proceeds, or any part thereof, in respect of such export goods are not realized by the applicant within the period allowed but the Reserve Bank of India writes off the requirement of realization of sale proceeds on merits, the refund paid to the applicant shall not be recovered.

Rule 96B(2) provides that if  the sale proceeds are realized by the applicant, in full or part, after the amount of refund has been recovered from him and the applicant produces evidence about such realization within a period of 3 months from the date of realization of sale proceeds, the amount so recovered shall be refunded by the proper officer, to the applicant to the extent of realization of sale proceeds, provided the sale proceeds have been realized within such extended period as permitted by the Reserve Bank of India.

Form GST RFD – 01

The amendment inserted a new undertaking as to deposit the amount of refund sanctioned in case of non receipt foreign exchange remittance, as given below-

 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.

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