Refund under GST - Amendment in CGST Rules w.e.f. 23.03.2020

[Pawan Arora]

In this Article, an effort has been made to sum-up the Changes related to Refund under CGST Rules amended vide Notification No. 16/2019- Central Tax dated 23.03.2020, effective from 23.03.2020

1. Refund in Electronic Credit Ledger [Rule 86(4A)]:

• Where a registered person has claimed a refund of any tax that has been wrongly paid or tax paid in excess (which was paid through electronic credit ledger), the said refund, if found admissible, shall be credited to Electronic Credit Ledger.

2. Refund shall be granted both in cash and credit [New Rule 92(1A)]:

• Where refund of any amount paid as tax (other than the refund of tax paid on zero-rated supplies or deemed export), is due and payable, the proper officer shall make an order in FORM RFD-06 sanctioning the amount of refund to be paid, in the following manner:

-  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.

3. Maximum Value of zero-rated supply of goods for claim of refund of Unutilized ITC [Rule 89(4)(C)]:

• In case of zero-rated supply of goods made without payment of tax under bond or LUT, the Government has capped the maximum value of turnover of zero-rated supply of goods which has to be considered for computation of refund claim of unutilized ITC.

“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 LUT, or

- the value which is 1.5 times the value of like goods domestically supplied by the same supplier or supplied by any other supplier similarly placed, 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.

4. Recovery of Refund granted on export of goods in case of non-realization of export proceeds [Newly inserted Rule 96B]:

• Where any refund of unutilized ITC on account of export of goods or IGST paid on exported goods has been refunded to an applicant, and
• the sale proceeds in respect of the same has not been realized, in full or in part, by the exporter within the time limit allowed under the Foreign Exchange Management Act, 1999 (42 of 1999), including any extension of such period, the said person, within 30 days of the expiry of the said period or, as the case may be, the extended 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.
• If the person fails to deposit such amount within 30 days, then the same shall be recovered in accordance with the provisions of section 73 or 74 of the CGST Act, as the case may be, as is applicable for recovery of erroneous refund, along with interest under section 50 of the CGST Act.

• Exception to the above recovery proceedings: No such recovery proceedings shall be initiated against the said person, if the Reserve Bank of India writes off the requirement of realization of sale proceeds on merits.
• Refund of recovered amount post realization of sale proceeds: If the sale proceeds are realised by the Applicant, in full or part, after the amount of refund has been recovered from him as explained above, 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.
• New undertaking to be given in FORM GST RFD-01: A new undertaking has to be given by the applicant seeking refund in FORM GST RFD – 01 which reads as under:

“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”.

5. An explanation has been inserted under Rule 96(10)(b) w.e.f. 23.10.2017.

Date: 04.04.2020

Pawan Arora, Joint Partner (ALA Legal), Anubhav Gupta (Manager) and Arpit Paliwal (Associate)