GST – States – 22T of 2018 – Dated:- 1-9-2018 – Office of the Commissioner of State Tax, (GST), 8th floor, GST Bhavan, Mazgaon, Mumbai-400010. TRADE CIRCULAR To, ………………………… ………………………… No. JC/HQ-I/GST/Refund/Trade Circular/01/2017-18 Mumbai, Date: 01/09/2018 Trade Cir. No. 22 T of 2018 To, ………………….. – Subject : Processing of final refund under the GST. Ref. (1) Trade Circular No. 49 of 2017 dated 28th Nov. 2017. (2) Internal Circular No. 24A of 2017 dated 11th Dec. 2017. (3) Internal Circular No. 27A of 2017 dated 30th Dec. 2017. (4) Trade Circular 1T of 2018 dated 1st Jan. 2018. (5) Trade Circular No. 8T of 2018 dated 21st Feb. 2018. (6) Trade Circular No. 17T of 2018 dated 2nd June 2018. (7) Internal Circular No. 19A of 2018 dated 18 July 2018 Sir/Gentlemen/Madam, 1. Background: 1.1. Your attention is invited towards the Trade and Internal Circulars cited at Ref. above, issued to explain procedur
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ed. 1.3. On this background, refund claimed or granted erroneously necessitates the initiation of proceedings for Demand and Recovery under appropriate provisions of GST law. 1.4. For aforesaid reasons an Internal Circular 19A of 2018 dated the 18th July 2018 was issued and certain instructions/guidelines were given so as to examine the availment and utilization of Input Tax Credit by the taxable person who has filed refund application. 1.5. In continuation of the said Internal Circular, it has, now, become imperative to issue certain instructions with regards to the procedure to be followed for verification of availment of input tax credit, rejection of refund, re-credit of rejected refund, initiation of Audit proceedings and subsequent actions for raising demands and recovery of the same. 1.6. As explained above, the Internal Circular 19A of 2018 dated the 18th July 2018 had outlined the procedure for verification input tax credit vis-à-vis its admissibility/non-admissibility
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Act and rules made thereunder 2. PART-B Quantification of eligible and in-eligible refund amount, and further process in this behalf. PART-A Legal aspects about the admissibility or in-admissibility of ITC under MGST Act and rules made thereunder: 1. Verification of refund claim and related documents: 1.1. It may be worth to note that the Refund application in FORM-GST RFD-1A, debit entry in the Electronic Credit Ledger/Cash Ledger (wherever required), GSTR-3B, GSTR-1, tax invoices and autodrafted invoice level inward supplies details in FROM-GSTR-2A are vital and primary documents that facilitates determination of the eligible amount of refund under SGST Act/CGST Act/IGST Act/Cess Act. 1.2. Among aforesaid documents, the applicant is required to submit along with refund application in FORM-GST-RFD-01A with requisite declarations and undertakings, the tax invoices, Statement in Proforma (in Excel) attached to Internal Circular 19A of 2018 dated 18th July 2018 and soft copy of latest GS
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It may be noted that the GSTR-2A has been made available on the SAP portal. For accessing said GSTR-2A and more details please refer USER MANUAL available on the SAP portal. 1.6. On this backdrop, to determine the refund amount correctly, the Nodal Officer shall adhere to the procedure given in earlier Circulars and verify the documents and GSTR-1, GSTR-2A, GSTR-3B and FORM-GST-RFD-1A and all the documents mentioned in those Circulars, carefully and collate all the information contained therein and apply the appropriate provisions contained under section 16 to section 21 as also the formula given in rule 89(4) or 89 (5) of the MGST Rules. On careful examination of aforesaid, the Nodal Officer shall determine ITC that is: (1) Admissible (2) In-admissible or in-eligible (3) Un-match or mis-match 2. Legal provisions relating to availment of Input Tax Credit: 2.1. In order to decide the admissibility or in-admissibility or ineligible ITC, the provisions of section(s) 16 to 21 shall be take
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be entitled to take ITC upon receipt of last lot or instalment. (6) in case the tax payer has failed to pay to the supplier of goods or services both (except the supplies where tax is payable on reverse charge basis), the amount towards the value pf supply along with tax payable thereon within a period of 180 days from the date of issue of invoice by the supplier then such input tax credit may be taken once said outstanding payment is made to the supplier. (7) In case, the registered person has claimed depreciation in respect of the tax component of the cost of the capital goods and plant and machinery, as per the Income Tax Act, 1961, then the ITC in respect of said component of tax shall not be allowed. So as to ascertain this, the Nodal Officer need to raise specific query to the tax payer and ask for the explanation in this behalf. The ITC claimed under this scenario is in-eligible/in-admissible. In other words, no refund is available in respect of such ITC; even in the cases where
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entitled to take the input tax credit in respect of the goods or services or both that are used for other than the business purposes or are used for making the exempt supplies. (c) On this basis, admissibility or in-admissibility of the input tax credit shall be determined proportionately. For this purpose, please visit the provisions given in rule 42 and 43 of the MGST Rules. (2) Banking company or a financial institution including a nonbanking financial company: (a) Banking company or a financial institution including a nonbanking financial company (for short Banking Company ) that is engaged in supplying services by way of accepting deposits, extending loans or advances. As the majority of the supply of Banking Company relates to accepting deposits, extending loans or advances, which is exempted from the GST (Notification No. 12/2017-Entry-27 Service Code9971). In order to facilitate better compliance, Banking Company, may exercise the options as given below: (i) either comply with
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are having the same PAN. The aforesaid restriction of 50% ITC is not applicable. (3) In addition to the aforesaid aspects, it may be noted that the registered taxable person shall not take credit of input tax in respect of the contingencies given in clause (A) to (I) below: – (A) motor vehicles and other conveyances except when they are used for making the following taxable supplies, – of such vehicles or conveyances; or of transportation of passengers; or for imparting training on driving, flying, navigating such vehicles or conveyances; (B) motor vehicles and other conveyances for transportation of goods; (C) the following supply of goods or services or both- (i) food and beverages, outdoor catering, beauty treatment, health services, cosmetic and plastic surgery except where an inward supply of goods or services or both of a particular category is used by a registered person for making an outward taxable supply of the same category of goods or services or both or as an element of a
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ch goods or services or both are used in the course or furtherance of business. • the expression construction includes re-construction, renovation, additions or alterations or repairs, to the extent of capitalization, to the said immovable property; (F) tax paid in respect of supplies received from the tax payer who opts to pay an amount in lieu of tax under composition as per section 10 of the MGST Act (G) goods or services or both received by a non-resident taxable person except on goods imported by him; (H) goods or services or both used for personal consumption; (I) goods that are lost, stolen, destroyed, written off or disposed of by way of gift or free samples; and 2.4. The availability of credit is also dependent on the conditions and restrictions given in section 18, the important provisions are discussed in the TABLE below, – Sr.No. Conditions and restrictions Availability of input tax credit Inputs in column (c) are held (a) (b) (c) (d) (1) taxable person has applied for
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h he becomes liable to pay tax at normal rate. input tax credit shall be available as determined under rule 44 of MGST Rules. (4) Where an exempt supply of goods or services or both by a registered person becomes a taxable supply. Section 18(1)(d)] in respect of inputs held, – (i) in stock and (ii) inputs contained in semi-finished or finished goods held in stock and on capital goods exclusively used for such exempt supply. on the day immediately preceding the date from which such supply becomes taxable the set-off on the Capital Goods is to be reduced as provided in rule 40(1(iv). (5) A registered person in respect of supply of goods or services or both to him after the expiry of ONE year from the date issuance of tax invoice relating to said supply shall not be entitled to claim ITC in aforesaid circumstances. [Section 18(2)] 2.5. In addition to the conditions and restrictions for availment of input tax credit, explained above, there are certain other contingencies given in section 1
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tronic credit ledger equivalent to the credit of input tax held, – in stock and inputs contained in semi-finished or finished goods held in stock and on capital goods on the day immediately before the day on which option is exercised. the credit in respect of capital goods shall be reduced as given in rule 44(3) of the MGST Rules. it may be noted that any balance remaining in the electronic credit ledger after payment as aforesaid shall lapse. (3) (a) In case of supply of capital goods or plant and machinery, on which input tax credit has been taken, (b) where refractory bricks, moulds and dies, jigs and fixtures are supplied as scrap, [Section 18(6)] shall pay on transaction value as determined under section 15, an amount equal to the input tax credit taken on the said capital goods or plant and machinery the credit in respect of capital goods shall be reduced as given in rule 44(3) of the MGST Rules. 2.6. To determine the admissibility of ITC the provisions of section 19 relating to
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also been explained vide Trade Circular 17 T of 2018 issued on 2nd June 2018. Therefore, when the applicant files application for refund of accumulated ITC then the Nodal Officer shall not allow the refund on account of Transitional ITC taken into Electronic Credit Ledger under the GST. PART-B Quantification of eligible and in-eligible refund amount, and further process in this behalf. 1. The documents or information related to input tax credit that need to be verified and kept on record: For quantification of eligible or in-eligible refund the Nodal Officer shall verify the following documents or information: 1.1. Physical copies of the inward supply tax invoices submitted by the refund applicant; 1.2. As explained in Internal Circular 19A of 2018 dated 18th July, 2018, an auto-drafted GSTR-2A for the period corresponding such claim and containing the details of the invoices for inputs or input services or, as the case may be the capital goods, shall be made available by the tax paye
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r shall also be taken into account while determining the match, un-match or mis-match in the input credit availed by the refund applicant and that is passed on by the supplier. Example: (a) Recipient M/s ABC has filed the refund application for ₹ 1,00,000/- for the month of December-2017 having monthly periodicity of filing GSTR-1. (b) M/s ABC has received the inward supply from the supplier, – M/s XYZ whose frequency of filing return is monthly. He has supplied the goods through 4 invoices. However, while filing GSTR-1 he has missed one invoice and for one invoice ITC passed on is wrongly stated i.e. instead of say Rs, 500 of SGST and CGST credit each it has shown ₹ 300 each. M/s XYZ has amended the one invoice in the month of February-2018 and shown the correct credit passed on at ₹ 500/- CGST and SGST each. M/s XYZ has added the missed invoice in the month of April-2018. (c) In this case, the Nodal Officer is required first to confirm the mismatch or the un-match q
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the 18th July 2018. 1.7. Further, in case the input tax credit claim pertains to the IGST on account of import of goods then the tax payer may be asked to produce the information in following format with the copies of the Bill of Entries filed while clearing the goods for home consumption: Sr. No. B.E. No. Date of B. E. C.I.F. Value Basic Custom Duty paid Integrated tax paid 1.8. In case the input tax credit claim pertains to the IGST on account of import of services then the tax payer may be asked to produce the information in following format: Sr. No. Country of Import Invoice No. Invoice Date Tax rate (%) Total Invoice Value Total Taxable Value IGST CESS 2. Verification of tax invoices for inward supply, details of GST paid on reverse charge mechanism and other relevant documents: 2.1. Scrutiny of refund application, ARN receipt, Statement under rule 89 and Tax invoice etc. (1) Upon receipt of the Refund Application in FORM-GST-RFD-01A, ARN receipt and relevant Statement depending
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nput tax credit in relation to these non-filers shall not be allowed. (5) In case of refund is on account of availment of IGST credit from the supplier who is located in other State and who has not filed the GSTR-3B or GSTR-1 or both, then recipient may be asked to pursue the supplier to make this default good. (6) The Nodal Officer shall ensure that the tax invoices submitted by the tax payer meets all the requirements given in rule 46 and rule 48 of the MGST Rules. Verification of inward supply tax invoices shall be carried out properly, (7) The verification of the outward supplies including confirmation of export from ICEGATE shall be done before grant of 90% refund. 3. Claim of refund and cross-checking of the Input Tax Credit availed or utilized: 3.1. Verification of GSTR-RFD-01A, GSTR-3B and GSTR-2A: (1) As explained above, the verification of aforesaid application/returns shall be carried out with appropriate reconciliation. (2) It is necessary to compare the ITC claimed in GSTR
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ces with or without payment of IGST need to be verified and confirmed on the basis of the export/supply related documents including the Foreign inward remittance Certificate/Bank Reconciliation Certificate etc. The aspects of verification of outward supply i.e. the deemed exports, supplies having inverted tax structure including supplies made to merchant exporters with 0.05% SGST/CGST or 0.1% IGST had been elaborately explained in the Circular(s) issued from time to time, in this behalf. (2) In short, this Circular refers to the outward supply in the limited context of determination of the output liability or, as the case may be, confirming the nature of outward supply more particularly exports, inverted tax structure or the deemed exports. (3) On carrying out the verification as above, the eligible amount of refund need to be determined on the basis of the nature of refund viz. refund on account of IGST paid on export of services, refund of accumulated credit on account of export of g
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amended. The effect of 1st July 2017 to the said subrule was given vide notification No. 26/2018 State Tax dated 21-06-21018. (c) The new formula made applicable retrospectively with effect from 1st July 2017, is as under: Maximum Refund Amount = {(Turnover of inverted rated supply of goods and services) x Net ITC ÷ Adjusted Total Turnover} – tax payable on such inverted rated supply of goods and services. • Net ITC shall mean input tax credit availed on inputs during the relevant period other than the input tax credit availed for which refund is claimed under sub-rules (4A) or (4B) or both; and • Adjusted Total turnover shall have the same meaning as assigned to it in sub-rule (4).] (d) As appears from the aforesaid formula now the turn-over of supply of goods and services is required to be taken into account for determination of maximum amount of refund. Further, the term Net ITC after amendment includes ITC on account of inputs [as defined under 2(59)] i.e. inputs
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this showcause in FORM-GST-RFD-08 need to issued. On receipt of reply in FORM-GST-RFD-09 which in case, in the opinion of the Nodal Officer is deficient in compliance, then such balance refund shall be rejected and refund rejection order in FORM-GST-RFD-06 shall be issued. (4) However, in the cases where the refund relating to the inverted duty structure, on account of supplies made to SEZ developer or unit or refund on account of deemed export is pending as on the date of issuance of this Trade Circular then is all such cases the refund shall be granted only after undertaking the Audit as contemplated under section 65 of the MGST Act. (5) The refund rejected as above shall be re-credited and for this the order in FORM-GST-1B shall be issued along with issuance of FORM-GST-PMT-03. 4. Initiation of Audit proceedings as per section 65 of the MGST Act: 4.1. Circumstances under which the Audit proceedings need to be issued: (1) Audit as per provisions of section shall be initiated in all t
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tion of Audit proceedings: (1) The section 65 of the MGST Act empowers the tax authorities to undertake the Audit. In order to conduct the Audit under this section the Commissioner of State tax, Maharashtra State, is empowered to provide the criteria for selection of the cases for Audit under section 65 of the MVAT Act. (2) For initiation of Audit proceedings, the Nodal Officer shall issue a notice in FOR-GST-ADT-01. The Nodal Officer, depending upon the record to be verified may decide as to whether the Audit to be carried out at the business premises of the tax payer or at the office of the concerned Nodal Officer. The place at which the Audit is to be carried out shall be expressly marked in the said Notice. (3) The Nodal Officer while fixing the date on which the Audit is to be carried out shall give clear15 days time period. The Audit Notice shall also mention the record to be verified. Notice for Audit may be given in respect of all the refund application for a financial year. 4.
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to be considered while issuing the Show-cause Notice for Demand and recovery of the refund granted erroneously or ITC availed/utilized wrongly etc. : 5.1. Legal provisions: Section 73 of MGST Act, provides for determination of tax not paid or short paid or erroneously refunded, input tax credit wrongly availed or utilized for any reason other than fraud or any willful mis-statement or suppression of facts. 5.2. Whereas, the section 74 provides for determination of tax not paid or short paid or erroneously refunded input tax credit wrongly availed or utilized by reason of fraud or any willful misstatement or suppression of facts. 5.3. Thus depending upon the nature of demand and recovery the provisions of section 73 or section 74 need to be used. 5.4. Issuance of Show-cause notice: (1) Show Cause Notice (for short SCN ) is the starting point of legal proceedings against the tax payer. It lays down the entire framework for the proceedings that are intended to be undertaken and therefore
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(d) Discussion, facts and legal frame work relating thereto (e) Discussion on Limitation period (f) Calculation of additional tax and other amounts due such as interest, penalty etc. (g) Statement of charges-exact nature of violation of law, rules or safeguards etc. (h) Service of Show Cause Notice and documents and evidences relied upon. (i) Filing of Written submissions by the Tax payer and evidences supported. (j) Personal hearing (k) Record of personal hearing: (l) Analysis of issues: (m) Body of the order: (n) Quantification of demand and issuance of Demand Notice in FORM-GST-DRC-07. (2) The show cause notice under section 73(1) or the section 74(1) shall be in FORM-GST-DRC 01. (3) The statement under 73(3) or the section 74(3), a summary thereof be issued in FORM-GST-DRC-02, specifying the details of the amount payable (4) In case before the service of notice (i.e. FORM-GST-DRC-01) or statement (FORM-GST-DRC-02) the person chargeable with tax discharges the liability voluntarily
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nal tax liability during the course of verification or thereafter, the taxpayer shall reply to the show cause notice in FORM-GST-DRC-06. [Please see per rule 142 (4)]. (7) The Nodal Officer/Proper Officer, after considering the representation made by the taxpayer, shall upload electronically the order in FORM-GST-DRC-07 [as given in rule 142 (5)], specifying the amount of tax, interest and penalty payable so that liability ledger of the taxpayer gets updated accordingly. (8) The proper officer may for the purposes given in section 161 of the MGST Act, pass rectification order in FORM-GST-DRC-08 [as per rule 142 3. This Trade Circular is clarificatory in nature and hence cannot be made use of for interpretation of provisions of the law. Difficulty if any, in the implementation of this Circular may be brought to the notice of the office of the Commissioner of State Tax, Maharashtra. Yours faithfully, (Raji JaIota) Commissioner of State Tax (GST) Maharashtra State, Mumbai. No. JC/HQ-1/GST
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