Refund of Unutilised ITC in case of Zero Rated Supplies
1. As per section 54(3), Refund of Unutilised Input Tax Credit (ITC) may be claimed by assessee at the end of tax period.
However, Refund of Unutilised ITC is allowed only in case of
• Zero rated supplies made without payment of tax.
• Inverted duty structures
2. Time limit for filing Refund application – As per section 54(1), Refund application may be filed within 2 years from the relevant date.
In case of Zero rated supplies, relevant date means the end of the financial year in which claim for Refund of unutilised input tax (section 54(3)) arises.
3. Filing frequency of refund
Refund claim may be filed for one calendar month/ Quarter /or clubbing successive calendar months, quarters. However, Refund claim can not spread over different financial years.
The GST Rules provide for processing of Refund application through GSTN portal. However, GSTN portal is not in a position to accept all the Refund Processing and cater it. Hence process of manual filing of refund application is introduced.
The procedure for claiming refund of unutilised ITC in respect of exports (Zero rated Supplies) without payment of GST is prescribed as under:
• File online Refund application in form GST- RFD-01A on the portal
• Balance of electronic credit ledger would be debited with amount of refund claimed
• Generate the proof of debit (ARN – Acknowledgment Receipt Number)
• Take Print out of RFD-01A and fill the details of ARN
• Submit the form GST-RFD-01A to the jurisdictional officer manually along with all necessary documents
• Application would be accepted by officer only if complete
• Acknowledgment in Form GST-RFD-02 would be available within 15 days of submission
• Where any deficiency in the application is noticed then proper officer shall communicate to claimant in Deficiency memo (RFD-03) within 15 days of filing.
• Rectified application is to be filed by claimant and it would be treated as fresh application. If no re-submission within 30 days of deficiency memo – amount to be re-credited to Electronic Credit Ledger.
• Officer will validate the GSTIN details on common portal – to check whether 3B has been filed or not.
• Processing for grant of provisional refund to be completed in 7 days (Section -54(5)). 90% of total Refund claim may be granted provisionally.
• Final processing of Refund order shall be made within 60 days. If refund approved then amount shall be credited in assessee bank account. Otherwise amount of rejected portion of refund (if any) to be re-credited in the credit ledger.
• No pre-audit required.
• All the Returns of prescribed period must be filed. (GSTR-1 & GSTR -3B)
5. Formula for calculating Refund of ITC
Rule 89 (4) of CGST rules prescribes the formula for calculation of refund of ITC in case of exports under bond/LUT as under:
Refund Amount = (Turnover of zero-rated supply of goods + Turnover of zero-rated supply of services) x Net ITC ÷Adjusted Total Turnover
Where, (A) “Refund amount” means the maximum refund that is admissible;
(B) “Net ITC” means input tax credit availed on inputs and input services during the relevant period other than the input tax credit availed for which refund is claimed under sub-rules (4A) or (4B) or both;
(C) “Turnover of zero-rated supply of goods” means the value of zero-rated supply of goods made during the relevant period without payment of tax under bond or letter of undertaking, other than the turnover of supplies in respect of which refund is claimed under sub-rules (4A) or (4B) or both;
(D) “Turnover of zero-rated supply of services” means the value of zero-rated supply of services made without payment of tax under bond or letter of undertaking, calculated in the following manner, namely:- Zero rated supply of services is the aggregate of the payments received during the relevant period for zero rated supply of services and zero-rated supply of services where supply has been completed for which payment had been received in advance in any period prior to the relevant period reduced by advances received for zero-rated supply of services for which the supply of services has not been completed during the relevant period;
(E) “Adjusted Total turnover” means the turnover in a State or a Union territory, as defined under clause (112) of section 2, excluding –
(a) the value of exempt supplies other than zero rated supplies and
(b) the turnover of supplies in respect of which refund is claimed under sub rules (4A) or (4B) or both, if any,
during the relevant period;
(F) “Relevant period” means the period for which the Refund claim has been filed.
6. Documents Required
• Copy of Form RFD-01A filed on common portal.
• Copy of Statement 3A of RFD-01A generated on common portal.
• Copy of Statement 3 Form RFD-01A
• Letter of Undertaking(LUT)
• Copy of GSTR 2A
• Bank Account details
• Details of ITC availed and proof thereto.
• Copy of GSTR 1 and GSTR 3B of prescribed period.
• Undertaking/Declaration in Form RFD-01A
• The above application shall be accompanied by any of the following documentary evidences in Annexure 1 in Form GST RFD-01, as applicable, to establish that a refund is due to the applicant, namely:-
(a) the reference number of the order and a copy of the order passed by the proper officer or an appellate authority or Appellate Tribunal or court resulting in such refund or reference number of the payment of the amount specified in sub-section (6) of section 107 and sub-section (8) of section 112 claimed as refund;
(b) a statement containing the number and date of shipping bills or bills of export and the number and the date of the relevant export invoices, in a case where the refund is on account of export of goods;
(c) a statement containing the number and date of invoices and the relevant Bank Realisation Certificates or Foreign Inward Remittance Certificates, as the case may be, in a case where the refund is on account of the export of services;
(d) a statement containing the number and date of invoices as provided in rule 46 along with the evidence regarding the endorsement specified in the second proviso to 58 sub-rule (1) in the case of the supply of goods made to a Special Economic Zone unit or a Special Economic Zone developer;
(e) a statement containing the number and date of invoices, the evidence regarding the endorsement specified in the second proviso to sub-rule (1) and the details of payment, along with the proof thereof, made by the recipient to the supplier for authorised operations as defined under the Special Economic Zone Act, 2005, in a case where the refund is on account of supply of services made to a Special Economic Zone unit or a Special Economic Zone developer;
(f) a declaration to the effect that the Special Economic Zone unit or the Special Economic Zone developer has not availed the input tax credit of the tax paid by the supplier of goods or services or both, in a case where the refund is on account of supply of goods or services made to a Special Economic Zone unit or a Special Economic Zone developer;
(g) a statement containing the number and date of invoices along with such other evidence as may be notified in this behalf, in a case where the refund is on account of deemed exports;
(h) a statement containing the number and the date of the invoices received and issued during a tax period in a case where the claim pertains to refund of any unutilised input tax credit under sub-section (3) of section 54 where the credit has accumulated on account of the rate of tax on the inputs being higher than the rate of tax on output supplies, other than nil-rated or fully exempt supplies;
(i) the reference number of the final assessment order and a copy of the said order in a case where the refund arises on account of the finalisation of provisional assessment;
(j) a statement showing the details of transactions considered as intra-State supply but which is subsequently held to be inter-State supply;
(k) a statement showing the details of the amount of claim on account of excess payment of tax;
(l) a declaration to the effect that the incidence of tax, interest or any other amount claimed as refund has not been passed on to any other person, in a case where the amount of refund claimed does not exceed two lakh rupees: Provided that a declaration is not required to be furnished in respect of the cases covered under clause (a) or clause (b) or clause (c) or clause (d) or clause (f) of sub-section (8) of section 54;
(m) a Certificate in Annexure 2 of FORM GST RFD-01 issued by a chartered accountant or a cost accountant to the effect that the incidence of tax, interest or any other amount claimed as refund has not been passed on to any other person, in a case where the amount of refund claimed exceeds two lakh rupees: Provided that a certificate is not required to be furnished in respect of cases covered under clause (a) or clause (b) or clause (c) or clause (d) or clause (f) of subsection (8) of section 54;
Explanation: For the purposes of this rule:
(i) in case of refunds referred to in clause (c) of sub-section (8) of section 54, the expression “invoice” means invoice conforming to the provisions contained in section 31;
(ii) where the amount of tax has been recovered from the recipient, it shall be deemed that the incidence of tax has been passed on to the ultimate consumer.
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Refund of Unutilised ITC in case of Zero Rated Supplies