Refund related clarifications

Bunching of refund claims across Financial Years:

  • Pursuant to the order of Hon’ble Delhi HC in the matter of M/s Pitambra Books Pvt. Ltd., Master Circular on Refunds stands modified to the extent of a restriction imposed on bunching of refund claims across financial years.

  • Thus, a registered person may be allowed to file refunds clubbing months cutting across FY’s.


Refund of accumulated ITC on account of reduction in GST Rate:

  • Applicants seeking a refund of unutilized ITC on account of inverted duty structure, where the inversion is on account of reduction in GST rate, will not be eligible for a refund under Inverted duty structure, in cases where the input and the output supplies are the same.

  • Illustration: An applicant trading in goods has purchased, say goods “X” attracting 18% GST. However, subsequently, the rate of GST on “X” has been reduced to, say 12%. It is being claimed that accumulation of ITC in such a case is also covered as accumulation on account of inverted duty structure and such applicants have sought a refund of accumulated ITC.


Refund restricted to ITC on invoices reflecting in GSTR-2A:

  • Master Circular on Refund provided that refund of ITC in respect of invoices not reflected in GSTR-2A would also be admissible on proof of possession of original invoice.

  • In view of the recently introduced restriction to claim ITC, not in excess of 10% of invoices reflecting in GSTR-2A, Master Circular on Refund has been amended to restrict the refund to the extent of invoices reflecting in GSTR-2A of the applicant.

  • It may be noted that as per modified Circular, a refund of 10% excess credit may not be available to the applicant.


HSN/SAC in Statement of invoices to be submitted with application for refund of unutilized ITC:

  • In order to enable distinction between supplies i.e. as goods or services, HSN/ SAC code to be filed in a statement of invoices submitted while filing a refund claim.

  • In cases where a supplier is not mandated to mention HSN/SAC code on invoice (i.e. supplier having turnover < 1.5 crore), no need to mention HSN/SAC code in statement of invoices while filing a refund claim.


Refund in cash or credit?

  • Earlier the provision of refund sanction was silent on the manner of refund i.e. in cash or by credit. An assessee could have used this lacuna to encash balance in credit ledger by paying excess tax using credit and applying refund thereof.

  • To prevent above practice, new provision has been inserted for granting refund in cash where the amount has been debited from electronic cash ledger and refund in credit ledger in case the amount debited from electronic credit ledger i.e. on pro-rata basis.

  • The above provision is applicable on following refund applications-

Refund of excess payment of tax;

  • Refund of tax paid on intra-State supply subsequently held to be inter-State supply;

  • Refund on account of assessment/provisional assessment/appeal/any other order;

  • Refund on account of “any other” ground or reason.


Online Refund Status:

  • The functionality to track the status of refund application has been available on the GST portal https://www.gst.gov.in.

  • Now, the Public Financial Management System (PFMS) of the Controller General of Accounts (CGA) has also made available a central portal to track the status of bank account validation and disbursal of refund amount.


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