GST UPDATE ON LACK OF STATUTORY BACKING FOR DENIAL OF REFUND FOR NON-REFLECTION IN GSTR-2A 51/2020-21

GST UPDATE ON LACK OF STATUTORY BACKING FOR DENIAL OF REFUND FOR NON-REFLECTION IN GSTR-2A
The GST law as envisaged by the law makers was to introduce the matching concept for allowing input tax credit by the recipient. However, due to absence of sufficient technological infrastructure, the matching concept could not be implemented in GST regime till date. However, time and again, the government is emphasising on reflection of input tax credit in GSTR-2A in order to legalise the availment of input tax credit by the recipient. The ad-hoc requirement of reflection of invoice in GSTR-2A in order to avail input tax credit when it is clear that mere filing of GSTR-1 by the supplier does not indicate payment of taxes to the government is totally irrational. Nevertheless, in the present update, we wish to discuss the sanction of refund on account of accumulated input tax credit vis a vis requirement of reflection of input tax credit in GSTR-2A.
The clarification issued vide Circular No. 125/44/2019-GST, dated 18.11.2019 provided that while claiming refund of accumulated input tax credit, the assessees would be eligible to claim refund of invoices not reflected in GSTR-2A by uploading/furnishing hard copies to the refund sanctioning authority. However, recently, this circular has been modified vide Circular No. 135/05/2020 dated 31.03.2020 to provide that the refund of accumulated ITC shall be restricted to the ITC as per those invoices, the details of which are uploaded by the supplier in FORM GSTR-1 and are reflected in the FORM GSTR-2A of the applicant which is very harsh and unreasonable as the refund claim would be denied inspite of the fact that all the conditions for availing input tax credit under section 16(2) of the CGST Act, 2017 have been satisfied.
The above guideline in the circular restricts refund only to the extent of invoices available in GSTR-2A. This guideline is in complete violation of Rule 36(4) recently introduced which allows input tax credit upto 110% of the eligible ITC reflected in GSTR-2A. When Rule allows additional 10% ITC, then the refund claim cannot be denied for the invoices which are not reflected in GSTR-2A.

Restricting refund of ITC to the invoices uploaded by supplier in 2A is again in violation of Rule 89 which takes into account full ITC for a period. The Rule 89 of CGST Rules, 2017 prescribing formula also defines the meaning of “Net ITC” as input tax credit availed on inputs during the relevant period and does not distinguishes the input tax credit not reflected in GSTR-2A. Therefore, the moot question is that can clarification provided by circular ignore the provisions contained in respective Rule 89 of the CGST Rules, 2017?

It is pertinent to mention that the refund mechanism does not allow filing of refund claim for particular period again in subsequent month. Furthermore, the “Net ITC” means ITC during relevant period for which refund is claimed. If the refund claim is being denied of certain invoices which were not reflected in GSTR-2A, the question arises is that how will the assessee claim refund of such invoices subsequently when such invoices are reflected in their GSTR-2A at future point of time. There is no answer for this inbuilt hardship faced by the assessee on implementing the clarification issued by the circular.

At present, there is no mechanism to file revised refund or file a supplementary refund application for any month. Moreover, Circular No. 110/29/2019 – GST dated 03.10.2019 has been issued clarifying that if the person filed Nil refund mistakenly and no refund has been filed for the subsequent period , then he can file the refund claim under “Any Other” category”. Therefore, only nil return filers have been provided with the option to file refund claim again under “any other” category in subsequent month.

Another problem that arises is the date of application of the clarification of this circular. Whether the clarification can be used to recover the refund claim already sanctioned to the assessees even when input tax credit was not reflected in their GSTR-2A on the basis of invoices uploaded by them according to prior clarification? Clarifications issued by circulars are treated as having retrospective effect and so can department use this adverse clarification for recovering the refund sanctioned to the assessees even when input tax credit were not being reflected in their GSTR-2A?

We all know that the data reflected in GSTR-2A is dynamic and changes on real time basis. The moot question is that the circular is silent on the procedure to claim refund of input tax credit in cases where the invoices not reflected in GSTR-2A have been subsequently uploaded by the supplier at future point of time. In our opinion, the circular cannot take away the right of assessee to claim refund merely for non-reflection of invoices in GSTR-2A.

This circular has created havoc among assessees as already the refund sanction process takes considerable time and such restrictions will block their working capital for indefinite period. When the Rule 36(4) allows 10% extra credit then how can refund of invoices not reflected in GSTR-2A be denied entirely, that too by a circular without any statutory backing. We request government to re-consider their decision to deny refund of input tax credit pertaining to invoices not reflected in GSTR-2A as the same is arbitrary and unreasonable, that too, no supported by provisions of GST Law.

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GST UPDATE ON LACK OF STATUTORY BACKING FOR DENIAL OF REFUND FOR NON-REFLECTION IN GSTR-2A 51/2020-21

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