SANCTION OF REFUND WILL BE MORE TEDIOUS IN GST REGIME

GST Update 19.09.2016

GST DAILY DOSE OF UPDATION:-

SANCTION OF REFUND WILL BE MORE TEDIOUS IN GST REGIME:- Section 38(8) provides that where refund of unutilized input tax credit is due to a registered taxable person who has defaulted in furnishing any return or who is required to pay tax, interest or penalty which has not been stayed by any Court, Tribunal or Appellate Authority by the specified date, the proper officer may withhold the refund due until such person has submitted return or paid tax, interest or penalty as the case may be. The proper officer may also deduct from the refund due, any tax, interest or penalty which the taxable person is liable to pay but which remains unpaid.

The meaning of specified date is last date for filing an appeal in case where no appeal has been filed. In case where appeal has been filed, thirty days after the last date for filing appeal. It is pertinent to note that there is no provision of stay in the proposed GST regime and the concept of mandatory pre-deposit has been introduced. As such, the provision that the order has not been stayed by court, tribunal or appellate authority by specified date is absurd and illogical.

Moreover, sub-section (9) of section 38 states that where order of refund is appealed and Commissioner/Board is of the opinion that grant of refund is likely to adversely affect the revenue, he may withhold the refund till such time as he may determine, after giving opportunity of personal hearing to claimant. Practically, every refund order is appealed and withholding refund claim merely because the refund order is sub-judicious is improper in light of Supreme Court decision in case of Kamalakshi Finance [1991 (55) E.L.T. 433 (S.C.)] which has held that orders passed are to be implemented and mere filing of appeal against such orders cannot be ground for not following it.

The above provisions are extremely harsh, specially, when it is known that taking refund from the revenue department is a tedious task. The option of withholding refund claim without any time limit is extremely dangerous for assessees. Moreover, the power to deduct from refund due, any tax, interest or penalty which taxable person is liable to pay is also very irrational as it has been observed in past that adjustments are being made even if there is no order confirming demands against assessees. Not only this, the above provisions are also against sub-section (5) and makes it redundant which states that proper officer shall issue order within ninety days from date of receipt of application. The provision of issuance of order within ninety days has been incorporated for speedy disposal of refund claims but above provisions seek to delay refund claims inspite of favourable orders passed for refund claims.

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GST Update 19.09.2016

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