DRAFT RULES ON REFUND-QUICK ANALYSIS

GST Update 01.10.2016

GST DAILY DOSE OF UPDATION:-

DRAFT RULES ON REFUND-QUICK ANALYSIS:- This update covers a bird eye view of the Draft Rules on Refund released by the government as follows:-

1.     The language of proviso to section 38(2) raises doubt as regards admissibility of refund claim on unutilised tax credit due to inverted duty structure, i.e. in situations where tax rate on inputs is higher than tax rate on output. However, the doubt has been clarified by the Draft Rules wherein it is specifically mentioned in Rule 2(g) that refund will be admissible on unutilised input tax credit due to inverted duty structure.

2.     The bar of unjust enrichment may be passed on self declaration basis where refund amount is less than Rs. 5 Lakhs. However, no self declaration is required in case of refund for export of goods/services, refund of unutilized input tax credit and such class of persons as government may specify. In case of refund claims of amount greater than Rs. 5 Lakhs, a certificate from Chartered Accountant stating that burden of duty has not been passed on to another person will serve the purpose. However, it is provided that refund will be granted only after the proper officer is satisfied and so it appears that claiming refund may not be so easy as it appears.

3.     As regards refund of unutilised input tax credit is concerned, there is restriction that no refund of input tax credit shall be allowed if the supplier of goods/services avails drawback or rebate of tax paid. This will revive the dispute as regards simultaneous availment of customs portion drawback along with refund of input tax credit.

4.     It has been provided that the date of filing of refund claim shall be the date mentioned in acknowledgment generated in FORM GST RFD-2 which will be the date when refund application is found complete in all respects. This is harsh provision in the sense that in case of deficiencies found in the refund claim, the date of filing shall be the date when all the deficiencies have been removed. This will have adverse impact on the interest amount receivable for delay in sanction of refund.

5.     There is express provision as regards sanction of refund amount in the bank account. This is welcome step as presently, refund is being granted vide issuance of cheques in many parts of the country. This will definitely speed up the sanction of refund.

6.     The provisions as regards order sanctioning interest on delayed refund mentions that the proper officer shall calculate the interest payable to assessee and electronically credit to the bank account of assessee. This indicates that refund of interest on delayed sanction of refund is automatic and assessee need not claim it separately. This is appreciable provision.

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GST Update 01.10.2016

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