Refund of unutilised Input Tax Credit (ITC)
GST Law and Procedure – GST Law and Procedure [January, 2019]
GST
Chapter Thirty Six
Refund of unutilised Input Tax Credit (ITC)
Accumulation of Input Tax Credit happens when the tax paid on inputs is more than the output tax liability. Such accumulation will have to be carried over to the next financial year till such time as it can be utilised by the registered person for payment of output tax liability. However, the GST Law permits refund of unutilised ITC in two scenarios, namely if such credit accumulation is on account of zero rated supplies or on account of inverted duty structure, subject to certain exceptions.
As per Section 54(3) of the CGST Act, 2017, a registered person may claim refund of unutilised input tax credit at the end of any tax period. A tax period is the period for which return is required to be furnished. Thus, a taxpayer can claim refund of unutilised ITC on monthly basis.
Refund of unutil
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ent of Tax (IGST). In both the cases,refund can be applied under Section 54 of the CGST Act, 2017 read with Rule 89 or Rule 96 , as the case may be, of the CGST Rules, 2017
b) Inverted duty structure: Where the credit has accumulated on account of rate of tax on inputs being higher than the rate of tax on output supplies (other than nil rated or fully exempt supplies), except supplies of goods or services or both as may be notified by the Government on the recommendations of the Council.
In such cases also, refund can be applied under Section 54 of the CGST Act, 2017 read with Rule 89 of the CGST Rules, 2017.
It should be noted that no refund of unutilised input tax credit is allowed in cases where the goods exported out of India are subjected to export duty. Further, no refund of input tax credit is allowed, if the supplier of goods or services or both avails of drawback in respect of central tax or cl
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tion 54(4) of the CGST Act, 2017, that where the amount claimed as refund is less than two lakh rupees, it shall not be necessary for the applicant to furnish any documentary and other evidences but he may file a declaration, based on the documentary or other evidences available with him, certifying that the incidence of such tax and interest had not been passed on to any other person.
It has also been provided under section 54(6) of the CGST Act, 2017, that in cases where the claim for refund on account of zero-rated supply of goods or services or both made by registered persons, other than such category of registered persons as maybe notified by the Government on the recommendations of the Council, refund on a provisional basis, ninety per cent. of the total amount so claimed, excluding the amount of input tax credit provisionally accepted; and the final order shall be issued within sixty days from the date of receipt of application complete in all respects
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services or both or on inputs or input services used in making such zero-rated supplies;
(b) Refund of unutilised input tax credit under section 54(3) of the CGST Act, 2017;
(c) Refund of tax paid on a supply which is not provided, either wholly or partially, and for which invoice has not been issued, or where a refund voucher has been issued;
(d) Refund of tax in pursuance of section 77;
(e) The tax and interest, if any, or any other amount paid by the applicant, if he had not passed on the incidence of such tax and interest to any other person; or
(f) The tax or interest borne by such other class of applicants as the Government may, on the recommendations of the Council, by notification, specify.
Formula for grant of refund in cases where the refund of accumulated Input Tax Credit is on account of zero rated supply is based on the following:
Refund Amount = (turnover of zero rated supply of goods + turnover of zero rated supply of services) x Net ITC /Adjus
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ring the relevant period;
(E) “Adjusted Total turnover” means the turnover in a State or a Union territory, as defined under sub-section (112) of section 2, excluding the value of exempt supplies other than zero-rated supplies, during the relevant period;
(F) “Relevant period” means the period for which the claim has been filed.
Refund of ITC on account of inverted duty structure.
As per Section 54(3), refund of accumulated ITC will be granted where the credit accumulation has taken place on account of inverted duty structure. However, the Government also has the power to notify supplies where refund of ITC will not be admissible even if such credit accumulation is on account of an inverted duty structure. In exercise of the powers conferred by this section, the government has issued Notification no.15/2017-Central Tax (Rate) dated 28th June 2017 wherein it has been notified that no refund of unutilised input tax credit shall be allowed under sub-section (3
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Knitted or crocheted fabrics [All goods]
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8601
Rail locomotives powered from an external source of electricity or by electric accumulators
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8602
Other rail locomotives; locomotive tenders; such as Diesel-electric locomotives, Steam locomotives and tenders thereof
10
8603
Self-propelled railway or tramway coaches, vans and trucks, other than those of heading 8604
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8604
Railway or tramway maintenance or service vehicles, whether or not self- propelled (for example, workshops, cranes, ballast tampers, track liners, testing coaches and track inspection vehicles)
12
8605
Railway or tramway passenger coaches, not self-propelled; luggage vans, post office coaches and other special purpose railway or tramway coaches, not self-propelled (excluding those of heading 8604)
13
8606
Railway or tramway goods vans and wagons, not self-propelled
14
8607
Parts of railway or tramway locomotives or rolling-stock; such as Bogies, Bissell-bogies, axles and wheels, and parts thereof
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und of input tax credit, the electronic credit ledger shall be debited by the applicant by an amount equal to the refund so claimed as per Rule 89(3) of CGST Rules, 2017.
Also, interest will be paid for any delay in sanctioning of Refund beyond the mandated period of 60 days (as per Rule 94 of CGST Rules, 2017).
The refund and/or interest sanctioned, if any, will be directly credited to the bank account of the applicant.
Conclusion
The GST Law provides for multiple options to the zero rated suppliers to claim refund of taxes paid on the input side. One of the options is export under bond or LUT and claim refund of unutilised ITC. The law also provides for refund of unutilised ITC where credit accumulation is on account of inverted duty structure, subject to certain riders. Time lines have been set for processing of refund claims and claims not settled within 60 days will be paid with interest @6%. Moreover, 90% of the claim would be paid within 7 days
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