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Refund of GST to Specific Category of Persons

Refund is an important term in the GST regime. Generally, when the GST paid is more than the GST liability a situation of claiming a GST refund arises. Under GST the process of claiming a refund is standardized to avoid confusion. The process is online and time limits have also been set for the same.

Here in this editorial, we will discuss the provisions and rules related to refund of GST to the specific category of persons.

Statutory Provision

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Section 54: Refund of tax

A specialized agency of the United Nations Organization or any Multilateral Financial Institution and Organization notified under the United Nations (Privileges and Immunities) Act, 1947 (46 of 1947), Consulate or Embassy of foreign countries or any other person or class of persons, as notified under section 55, entitled to a refund of tax paid by it on inward supplies of goods or services or both, may make an application for such refund, in such form and manner as may be prescribed, before the expiry of six months from the last day of the quarter in which such supply was received.

Section 55: Refund in certain cases

The Government may, on the recommendations of the Council, by notification, specify any specialized agency of the United Nations Organization or any Multilateral Financial Institution and Organization notified under the United Nations (Privileges and Immunities) Act, 1947, Consulate or Embassy of foreign countries and any other person or class of persons as may be specified in this behalf, who shall, subject to such conditions and restrictions as may be prescribed, be entitled to claim a refund of taxes paid on the notified supplies of goods or services or both received by them.

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Extract from the CGST Rules, 2017

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Rule 95. Refund of tax to certain persons

  1. Any person eligible to claim a refund of tax paid by him on his inward supplies as per notification issued section 55 shall apply for a refund in FORM GST RFD-10 once in every quarter, electronically on the common portal [or otherwise], either directly or through a Facilitation Centre notified by the Commissioner, along with a statement of the inward supplies of goods or services or both in FORM GSTR-11.
  2. An acknowledgment for the receipt of the application for a refund shall be issued in FORM GST RFD-02.
  3. The refund of tax paid by the applicant shall be available if-
  4. the inward supplies of goods or services or both were received from a registered person against a tax invoice.
  5. name and Goods and Services Tax Identification Number or Unique Identity Number of the applicant is mentioned in the tax invoice, and
  6. such other restrictions or conditions as may be specified in the notification are satisfied.
  7. The provisions of rule 92 shall, mutatis mutandis, apply for the sanction and payment of refund under this rule.
  8. Where an express provision in a treaty or other international agreement, to which the President of the Government of India is a party, is inconsistent with the provisions of this Chapter, such treaty or international agreement shall prevail.

95A. Refund of taxes to the retail outlets established in the departure area of an international Airport beyond immigration counters making a tax-free supply to an outgoing international tourist. –

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(1) Retail outlet established in the departure area of an international airport, beyond the immigration counters, supplying indigenous goods to an outgoing international tourist who is leaving India shall be eligible to claim a refund of tax paid by it on inward supply of such goods.

(2) Retail outlet claiming refund of the taxes paid on his inward supplies, shall furnish the application for refund claim in FORM GST RFD- 10B on a monthly or quarterly basis through the common portal either directly or through a Facilitation Centre notified by the Commissioner.

(3) The self-certified compiled information of invoices issued for the supply made during the month or the quarter along with the concerned purchase invoice shall be submitted along with the refund application.

(4) The refund of tax paid by the said retail outlet shall be available if-

(a) the inward supplies of goods were received by the said retail outlet from a registered person against a tax invoice.

(b) the said goods were supplied by the said retail outlet to an outgoing international tourist against foreign exchange without charging any tax.

(c) name and Goods and Services Tax Identification Number of the retail outlet is mentioned in the tax invoice for the inward supply; and

(d) such other restrictions or conditions, as may be specified, are satisfied.

(5) The provisions of rule 92 shall, mutatis mutandis, apply for the sanction and payment of refund under this rule.

Explanation. – For the purposes of this rule, the expression “outgoing international tourist” shall mean a person not normally resident in India, who enters India for a stay of not more than six months for legitimate non-immigrant purposes.]

Section 55 of the CGST Act has empowered the Central Government to notify any specialized agency of the United Nations Organization or any Multilateral Financial Institution and Organization notified under the United Nations (Privileges and Immunities) Act, 1947, Consulate or Embassy of foreign countries or any other person or class of persons as may be specified in this behalf, who shall be entitled to claim a refund IGST/CGST/SGST paid by it on the inward supplies of goods or services or both. Hence, the Government has issued the following notification in this connection:

  • Notification No. 6/2017-Central Tax (Rate), New Delhi, dated 28.6.2017/ Notification No. 6/2017-Integrated Tax (Rate), dated 28.6.2017]:

the Central Government has specified the Canteen Stores Department (hereinafter referred to as “CSD”), under the Ministry of Defence, as a person who shall be entitled to claim a refund of fifty percent. of the applicable tax paid by the CSD on all inward supplies of goods received by the CSD for the purposes of the subsequent supply of such goods to the Unit Run Canteens of the CSD or to the authorized customers of the CSD.

  • Notification No. 16/2017-Central Tax (Rate) dated 28.6.2017/ Notification No. 13/2017-Integrated Tax (Rate), dated 28.6.2017:

the Central Government has specified United Nations or a specified international organization and Foreign diplomatic mission or consular post in India, or diplomatic agents or career consular officers posted therein to claim a refund of the tax paid on inward supplies.

  • Notifications No. 11/2019 – C.T. (Rate) dated 29.06. 2019/ Notification No. 10/2019- Integrated Tax (Rate), dated 29.6.2019]:

With effect from 01-07-2019, the Central Government has specified retail outlets established in the departure area of an international airport, beyond the immigration counters, making tax free supply of goods to outgoing international tourists, as the class of persons who shall be entitled to claim a refund of the applicable tax paid on inward supply of such goods, subject to the conditions specified in Rule 95A of the CGST Rules.

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Any person eligible to claim a refund of tax paid by him on his inward supplies as per notification issued under Section 55 shall apply for a refund in FORM GST RFD-10 once in every quarter, electronically on the common portal or otherwise, along with a statement of the inward supplies of goods or services or both in FORM GSTR-11.

Section 54(2) of the CGST Act provides a time limit of six months for filing the refund claim. However, the CBIC vide Notification No. 20/2018 – C.T. dated 28-03-2018, extended the time limit, and now the refund claim can be filed within 18 months from the last date of the quarter in which the supply was received. The notification failed to specify the period of application of such extension.

REFUND BY CANTEEN STORES DEPARTMENT

Circular No.60/34/2018-GST dated 4-09-2018:

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Filing Application for Refund:

  • the refund under section 55 is not with respect to the accumulated ITC but it is based on the invoices of the inward supplies of goods received by the Canteen Stores Department.

As per Rule 95, the application for a refund under Section 55 must be filed on a quarterly basis. Till the time the online utility for filing the refund claim is made available on the common portal, the applicants were requested to apply for a refund by filing an application in FORM GST RFD-10A manually to the jurisdictional tax office along with the following documents:

  • An undertaking stating that the goods on which refund is being claimed have been received by the CSD.
  • A declaration stating that no refund has been claimed earlier against the invoices on which the refund is being claimed.
  • Copies of the valid return filed in FORM GSTR-3B by the CSD for the period covered in the refund claim.
  • Copies of FORM GSTR- 2A of the CSD for the period covered in the refund claim along with the attested hard copies of the invoices on which refund is claimed but which are not reflected in FORM GSTR 2A.
  • Details of the bank account in which the refund amount is to be credited.

Processing and sanction of the refund claim:

Upon receipt of the complete application in FORM GST RFD-10A, an acknowledgment shall be issued manually within 15 days of the receipt of the application in FORM GST RFD-02 by the proper officer.

In case of any deficiencies in the requisite documentary evidence to be submitted, the same shall be communicated to the applicant by issuing a deficiency memo manually in FORM GST RFD-03 by the proper officer within 15 days of the receipt of the refund application.

Only one deficiency memo should be issued, and this should be complete in all respects.

The proper officer shall validate the GSTIN details on the common portal to ascertain whether the return in FORM GSTR- 3B has been filed by the applicant. The proper officer may scrutinize the details contained in FORM RFD-10A, FORM GSTR-3B and FORM GSTR-2A.

The proper officer may rely upon FORM GSTR-2A as evidence of the accounting of the supply made by the corresponding suppliers to the applicant in relation to which the refund has been claimed.

The proper officer should ensure that the amount of refund sanctioned is 50 % of the CGST/SGST/IGST paid on the supplies received by the applicant. The proper officer shall issue the refund sanction/rejection order manually in FORM GST RFD-06 along with the payment advice manually in FORM GST RFD-05 for each tax head separately.

REFUND BY DUTY-FREE SHOPS AND DUTY-PAID SHOPS:

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Circular No. 106/25/2019 – GST dated 29.06.2019:

There are two types of retail outlets in international airports.

  • ‘Duty-Free Shops’ (hereinafter referred to as “DFS“) are Point of Sale for goods sourced from a warehouse licensed under Section 58A of the Customs Act, 1962.
  • ‘Duty Paid Shops’ (hereinafter referred to as “DPS“) retailing duty paid indigenous goods.

The procedure for procurement of imported/warehoused goods is governed by the provisions contained in the Customs Act. The procedure and applicable rules as specified under the Customs Act are required to be followed for the procurement and supply of such goods by DFS. Under the GST regime, there is no special procedure for the procurement of indigenous goods for sale by DFS or DPS. Therefore, all indigenous goods must be procured by DFS or DPS on payment of applicable tax when procured from the domestic market.

Supply of indigenous goods by DFS or DPS established at the departure area of the international airport beyond immigration counters (hereinafter referred to as “the retail outlets”) to eligible passengers.

The sale of indigenous goods procured from the domestic market by retail outlets to an eligible passenger is a “supply” under the GST law and is subject to levy of Integrated tax but the same has been exempted vide Notification No. 11/2019-Integrated Tax (Rate) and 01/2019-Compensation Cess (Rate) both dated 29-06-2019.

Therefore, retail outlets will supply such indigenous goods without collecting any taxes from the eligible passenger and may apply for a refund.

The retail outlets applying for refund shall be registered under Section 22 of the CGST Act read with the Rules made thereunder and shall have a valid GSTIN.

Such retail outlets shall be established at the departure area of the international airport beyond immigration counters and shall be entitled to claim a refund of all applicable CGST/SGST/IGST and Compensation cess paid by them on all inward supplies of indigenous goods received for the purposes of the subsequent supply of such goods to the eligible passengers.

Procedure for applying for refunds:

1. Maintenance of Records:

The records with respect to duty-paid indigenous goods being brought to the retail outlets and their supplies to eligible passengers shall be maintained in electronic form. The data shall be kept updated, accurate and complete always by such retail outlets and shall be available for inspection/verification of the proper officer of central tax at any time.

The electronic records must incorporate the feature of an audit trail, which means a secure, computer-generated, time-stamped record that allows for reconstruction of the course of events relating to the creation, modification, or deletion of an electronic record and includes actions at the record or system level, such as, attempts to access the system or delete or modify a record.

2. Invoice-based refund:

The refund to be granted to retail outlets is not on account of their accumulated ITC but is based on the invoices of the inward supplies of indigenous goods received by them. Since the supply made by such retail outlets to eligible passengers has been exempted vide Notification No. 11/2019-Integrated Tax (Rate) and 01/2019-Compensation Cess (Rate) both dated 29.06.2019, such retail outlets will not be eligible for ITC of taxes paid on such inward supplies and the same will have to be reversed in accordance with the provisions of the CGST Act, 2017 read with the Rules made thereunder.

No refund of tax paid on input services, if any, will be granted to the retail outlets.

3. Documents required for the claim:

Any supply made to an eligible passenger by the retail outlets without payment of taxes by such retail outlets shall require the following documents/ declarations:

  • Details of the Passport (via Passport Reading Machine).
  • Details of the Boarding Pass (via a barcode scanning reading device).
  • A passenger declaration as per Annexure B.
  • A copy of the invoice clearly evidencing that no tax was charged from the eligible passenger by the retail outlet.

The retail outlets will be required to prominently display a notice that international tourists are eligible for the purchase of goods without payment of domestic taxes.

4. Manual filing of refund claims:

As per Rule 95A of the CGST Rules, 2017 the retail outlets are required to apply for a refund on a monthly or quarterly basis depending upon the frequency of furnishing of return in FORM GSTR-3B.

Till the time the online utility for filing the refund claim is made available on the common portal, these retail outlets shall apply for a refund by filing an application in FORM GST RFD-10B, as inserted vide Notification No. 31/2019 – C.T. dated 28.06.2019 manually to the jurisdictional proper officer.

The refund application shall be accompanied by the following documents:

  • An undertaking by the retail outlets stating that the indigenous goods on which refund is being claimed have been received by such retail outlets.
  • An undertaking by the retail outlets stating that the indigenous goods on which refund is being claimed have been sold to eligible passengers.
  • Copies of the valid return furnished in FORM GSTR- 3B by the retail outlets for the period covered in the refund claim.
  • Copies of FORM GSTR- 2A for the period covered in the refund claim; and
  • Copies of the attested hard copies of the invoices on which refund is claimed but are not reflected in FORM GSTR-2A.

5. Processing and sanction of the refund claim:

Upon receipt of the complete application in FORM GST RFD-10B, an acknowledgment shall be issued manually by the proper officer within 15 days of the receipt of the application in FORM GST RFD-02. In case of any deficiencies or need for any additional information, the same shall be communicated to the retail outlets by issuing a deficiency memo manually in FORM GST RFD-03 by the proper officer within 15 days of the receipt of the refund application.

Only one deficiency memo should be issued against one refund application which is complete in all respects. The proper officer shall validate the GSTIN details on the common portal to ascertain whether the return in FORM GSTR-3B has been filed by the retail outlets. The proper officer may scrutinize the details contained in FORM RFD-10B, FORM GSTR-3B and FORM GSTR-2A. The proper officer may rely upon FORM GSTR-2A as evidence of the account of the supply received by the retail outlets in relation to which the refund has been claimed.

Normally, officers are advised not to call for hard copies of invoices reflected in FORM GSTR-2A However, they are required to submit hard copies of only those invoices of inward supplies that have not been reflected in the FORM GSTR-2A.

The proper officer shall issue the refund order manually in FORM GST RFD-06 along with the manual payment advice in FORM GST RFD-05 for each head, i.e., CGST/SGST/IGST/ Compensation Cess. Where any refund has been made in respect of an invoice without the tax having been paid to the Government or where the supply of such goods was not made to an eligible passenger, such amount refunded shall be recovered along with interest as per Section 73 or Section 74 of the CGST Act, as the case may be.

The scheme shall be effective from 01.07.2019 and applicable in respect of all supplies made to eligible passengers after the said date. In other words, retail outlets would be eligible to claim a refund of taxes paid on inward supplies of indigenous goods received by them even prior to 01.07.2019 if all the conditions laid down in Rule 95A of the CGST Rules and this circular [Circular No. 106/25/2019 – GST dated 29.06.2019] are fulfilled.

REFUND BY UIN AGENCIES

GST

Notification No. 16/2017- Central Tax (Rate), dated 28.6.2017– Circular No. 36/10/2018 – GST dated 13.03.2018, Circular No. 43/17/2018 – GST dated 13.04.2018, Circular No. 63/37/2018 – GST dated 14.09.2018 (“CIR GST 63/37/2018”) and Circular No. 68/42/2018 – GST dated 05.10.2018.

All the entities who have been issued UINs will be eligible for a refund of the inward supply of goods or services in terms of Notification No. 16/2017 – Central Tax (Rate), dated 28.06.2017. It may be noted that the conditions specified under the said notification need to be complied with while applying for the refund.

Applying for the claim: The procedure for filing a refund application has been outlined under Rule 95 of the CGST Rules which provides for filing of refund on a quarterly basis in FORM RFD- 10 along with a statement of inward invoices in FORM GSTR- 11. It is hereby clarified that FORM GSTR-11 along with FORM GST RFD-10 must be filed separately for each of those quarters for which a refund claim is being filed.

Circular No. 36/10/2018 – GST dated 13.03.2018 interalia provides that all the entities claiming refund shall submit the duly filled physical copy of FORM RFD-10 to the jurisdictional Central Tax Commissionerate. All refund claims shall be processed and sanctioned by respective Central Tax offices. To facilitate the processing of refund claims of UIN entities, a nodal officer has been designated in each State. Application for refund claim is to be submitted before the designated Central Tax nodal officers in the State in which the UIN has been obtained.

There may be cases where multiple UINs existed for the same entity but were later merged into one single UIN. In such cases, field formations were requested to process refund claims for earlier unmerged UINs also. Hence, the refund application will be made with the single UIN only but invoices of old UINs may be declared in the refund claim, which may be accepted and considered while processing the refund claim.

After issuance of Circular No. 36/10/2018 – GST dated 13.03.2018 wherein the Board, clarified and specified the detailed procedure for UIN refunds. Circular No. 43/17/2018-GST, dated 13.4.2018 provides clarification on issues and representations that have been received regarding the processing of the refund to agencies that have been allotted UINs which are as under:

  • Providing a statement of invoices while submitting the refund application: The procedure for filing a refund application has been outlined under Rule 95 of the CGST Rules which provides for filing of refund on a quarterly basis in FORM RFD-10 along with a statement of inward invoices in FORM GSTR-11. Since the print version of FORM GSTR-11 generated by the system does not have invoice-wise details. Therefore, the Board clarified that till the system generated FORM GSTR-11 does not have invoice-level details, UIN agencies are requested to manually furnish a statement containing the details of all the invoices on which refund has been claimed, along with the refund application. Further, the officers are advised not to ask for an original or hard copy of the invoices, unless necessary.
  • No mention of UINs on Invoices: It was represented that many suppliers did not record the UINs on the invoices of supplies of goods or services to UIN agencies. The Board clarified that the recording of UIN on the invoice is a necessary condition under Rule 46 of the CGST Rules. If suppliers/vendors do not record the UINs, action will be initiated against them under the provisions of the CGST Act.
  • Further, in cases where, UIN has not been recorded on the invoices pertaining to refund claim for the quarter of July-September,2017, October-December,2017 and January -March 2018** a one-time waiver is being given by the Government, subject to the condition that copies of such invoices will be submitted to the jurisdictional officers and will be attested by the authorized representative of the UIN agency.

NOTE- ** Such waiver of non-recording of UIN on the invoices issued by the suppliers pertaining to the refund claims filed for the quarters from April 2018 to March 2020 has been provided subject to the same condition vide CIR GST 63/37/2018 read with Corrigendum F.No. 20/16/04/18-GST, dated 6.9.2019.

Thereafter CIR GST 63/37/2018 provided clarification regarding processing of refund claims filed by UIN entities as:

  • Non-compliance with letter of reciprocity: The GST Act provides for examination of the refund claims in accordance with the letter of reciprocity issued by the Ministry of External Affairs (“MEA”). Generally, these letters of reciprocity include certain specific conditions based on which refunds must be processed and sanctioned. For example, letters may specify the minimum value of goods or services or the end use of such goods or services (for official or personal purposes).

However, it has been observed that delay in processing the UIN refunds is primarily due to the non-furnishing of the hard copy of the invoices by the UIN entities and the statement of invoices as specified above. It may be noted that these are needed to determine the eligibility for a grant of refund in accordance with the reciprocity letter issued by the MEA.

  • To expedite the processing of the refund applications filed by the UIN entities, the applications should also contain Refund Checklist, Certificate, Undertaking, and Statement of Invoices in the format prescribed in CIR GST 63/37/2018.
  • Prior Permission letter for GST refund for the purchase of vehicles: The MEA vide letter F.No. D_II/451/12(5)/2017 dated 21.06.2018 states that it is mandatory to enclose the copy of the ‘Prior Permission Letter’ issued by the Protocol Special Section of the MEA at the time of submission of the GST refund for the purchase of the vehicle by the foreign representatives. Accordingly, it is advised that to avoid delay in the processing of refunds, the UIN entities must submit a copy of the ‘Prior Permission letter’ and mention the same in the covering letter while applying for a refund on the purchase of vehicles.

Circular No. 68/42/2018 – GST dated 05.10.2018Refund of Compensation Cess payable on intra-State and inter-State supply of goods or services or both received- Section 55 of the CGST Act provides that UIN agencies are entitled to claim a refund of the taxes paid on the notified supplies of goods and services, subject to such conditions and restrictions as are prescribed in Notification No. 16/2017 – Central Tax (Rate), dated 28.06.2017.

Section 11 of the GST (Compensation to States) Act, 2017, provides that provisions of the CGST Act, 2017 and IGST Act, 2017 apply in relation to levy and collection of Compensation Cess. Further, Section 9(2) of the GST (Compensation to States) Act, 2017 provides that for all the purposes of claiming refunds, except the form to be filed, the provisions of the CGST Act and the Rules made thereunder, shall apply in relation to the levy and collection of Compensation Cess. Therefore, notifications issued under the CGST Act except those prescribing rates or granting exemptions, are applicable for the purpose of this Act.

Accordingly, Notification No. 16/2017 – Central Tax (Rate) dated 28.06.2017 shall be applicable for the purposes of refund of Compensation Cess to UIN agencies.

Passing of refund order and settlement of funds: The facility of centralized UIN ensures that irrespective of the type of tax (CGST, SGST, IGST or Cess) and the State where such inward supply of goods or services have been procured, all refunds would be processed by Central authorities only. A monthly report as prescribed in CIR GST 63/37/2018. is required to be furnished to the Director-General of Goods and Services Tax by the 30th of the succeeding month. Field officers shall send a copy of the order passed for such refunds to their State counterparts for information.

Circular No. 23/2019-Customs [F.No. 450/119/2017-Cus-IV], dated 01.08.2019–  Refund of IGST paid on imported goods.

The specialized agencies were paying IGST on import of goods but no refund of same was processed by Customs formations. To address this, issue the Board operationalizes a refund mechanism of IGST paid on imports by the specialized agencies as under:

(i) Section 55 of the CGST Act provides a refund of taxes paid on the notified supplies of goods or services or both received by them. In pursuance of this provision, NN 16/2017-CTR has been issued which inter-alia provides that United Nations or a specified international organization shall be entitled to claim a refund of central tax paid on the supplies of goods or services or both received by them subject to a certificate from United Nations or that specified international organization that the goods and services have been used or are intended to be used for official use of the United Nations or the specified international organization. A similar refund mechanism has been provided in respect of integrated tax vide notification No.13/2017-Central Tax (Rate) and Union Territory tax vide Notification No.16/2017-Union Territory Tax (Rate) respectively.

(ii) Section 3 (7) of the Customs Tariff Act, 1975, provides for parity between the integrated tax rate attracted on imported goods and the integrated tax applicable on the domestic supplies of goods. In the case of the UN and specialized agencies, the above referred to notifications envisage payment and then refund of taxes paid. Therefore, on this principle of parity, specialized agencies ought to get a refund of the IGST paid on imported goods.

Vikas Sharma

A writer by passion. Reading and traveling in my free time enhances my creativity in work. I enjoy exploring my creative side, and so I keep myself engaged in learning new skills.

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