Central Tax Circulars

CGST Circular 70/2018

To,

The Principal Chief Commissioners/ Chief Commissioners /
Principal Commissioners / Commissioners of Central Tax (All)/

The Principal Directors General / Directors General (All)

The Principal CCA, CBIC

Madam/Sir,

Subject: Clarification on certain issues related to refund –
Reg.

1) The Board is in receipt of representations seeking
clarification on certain issues relating to refund. In order to
clarify these issues and to ensure uniformity in the
implementation of the provisions of law across the field
formations, the Board, in exercise of its powers conferred by
section 168 (1) of the Central Goods and Services Tax Act, 2017
(hereinafter referred to as the “CGST Act”), hereby clarifies
the issues as detailed hereunder:

2) Status of refund claim after issuance of deficiency memo and
re-credit of electronic credit ledger:

2.1 Para 7.1 of circular No. 59/33/2018-GST dated the 4th
September, 2018 clarifies the intent of law in cases where a
deficiency memo is issued in respect of a refund claim. In para
7.2 of the said circular, the practise being followed in the
field formations was elaborated and it was clarified that show
cause notices are not required to be issued (and consequently
no orders are required to be issued in FORM GST RFD-04/06) in
cases where refund application is not resubmitted after the
issuance of a deficiency memo (in FORM GST RFD-03). It was also
clarified that once a deficiency memo has been issued against
an application for refund, the amount of Input Tax Credit
debited under sub-rule (3) of rule 89 of the Central Goods and
Services Tax Rules, 2017 (hereinafter referred to as the “CGST
Rules”) is required to be recredited to the electronic credit
ledger of the applicant by using FORM GST RFD-01B and the
taxpayer is expected to file a fresh application for refund.

2.2 The issue has been re-examined and it has been observed
that presently the common portal does not allow a taxpayer to
file a fresh application for refund once a deficiency memo has
been issued against an earlier refund application for the same
period. Therefore, it is clarified that till the time such
facility is developed, taxpayers would be required to submit
the rectified refund application under the earlier Application
Reference Number (ARN) only. Thus, it is reiterated that when
a deficiency memo in FORM GST RFD-03 is issued to taxpayers,
re-credit in the electronic credit ledger (using FORM GST
RFD-01B) is not required to be carried out and the rectified
refund application would be accepted by the jurisdictional tax
authorities with the earlier ARN itself. It is further
clarified that a suitable clarification would be issued
separately for cases in which such re-credit has already been
carried out.

3) Allowing exporters who have received capital goods under
EPCG to claim refund of IGST paid on exports:

3.1 Sub-rule (10) of Rule 96 of the Central Goods and Services
Tax Rules, 2017 (hereinafter referred to as “said sub-rule”),
restricts exporters from availing the facility of claiming
refund of IGST paid on exports in certain scenarios. It was
intended that exporters availing benefit of certain
notifications would not be eligible to avail the facility of
such refund. However, representations have been received
requesting that exporters who have received capital goods under
the Export Promotion Capital Goods Scheme (hereinafter referred
to as “EPCG Scheme”), should be allowed to avail the facility
of claiming refund of the IGST paid on exports. GST Council, in
its 30th meeting held in New Delhi on 28th September, 2018, had
accorded approval to the proposal of suitably amending the said
sub-rule along with sub-rule (4B) of rule 89 of the CGST Rules
prospectively in order to enable such exporters to avail the
said facility notification No. 54/2018 – Central Tax dated the
9th October, 2018 has been issued to carry out the changes
recommended by the GST Council. Alongside the amendment carried
out in the said sub-rule through the notification No. 39/2018-
Central Tax dated 4th September, 2018 has been rescinded vide
notification No. 53/2018 – Central Tax dated the 9th October,
2018.

3.2 For removal of doubts, it is clarified that the net effect
of these changes would be that any exporter who himself/herself
imported any inputs/capital goods in terms of notification Nos.
78/2017-Customs and 79/2017-Customs both dated 13th October,
2017 shall be eligible to claim refund of the IGST paid on
exports till the date of the issuance of the notification No.
54/2018 – Central Tax dated the 9th October, 2018 referred to
above.

3.3 Further, after the issuance of notification No. 54/2018 –
Central Tax dated the 9th October, 2018 , exporters who are
importing goods in terms of notification Nos. 78/2017- Customs
and 79/2017-Customs both dated 13th October, 2017 would not be
eligible for refund of IGST paid on exports as provided in the
said sub-rule. However, exporters who are receiving capital
goods under the EPCG scheme, either through import in terms of
notification No. 79/2017-Customs dated 13th October, 2017 or
through domestic procurement in terms of notification No.
48/2017-Central Tax, dated 18th October, 2017, shall continue
to be eligible to claim refund of IGST paid on exports and
would not be hit by the restrictions provided in the said
sub-rule. All clarifications issued in this regard vide any
Circular issued earlier are hereby superseded.

4) It is requested that suitable trade notices may be issued to
publicize the contents of this Circular.

5) Difficulty, if any, in implementation of this Circular may
please be brought to the notice of the Board. Hindi version
would follow.