MARCH 22, 2018

By Nipun Arora

INTRODUCTION of GST in India brought several fundamental changes in the system and procedures covering the levy and administration of indirect taxes on goods and services. The government is working round-the-clock to resolve the issues faced by the industry. However, organisations such as specialised agencies (referred as SSOs) of the United Nations Organisation and Multilateral Financial Institution and Organisations notified under the United Nations (Privileges and Immunities) Act, 1947 ('specified entities') remained unaddressed for a longer period as they were not required to obtain GSTIN number being a non-taxpayer, but a unique identity number for notified purposes and claiming refund of taxes paid on procurement of supplies by reason of Section 25(9) of CGST Act.

The specified entities enjoying special privileges remained confused regarding various issues such as where to make an application for registration as no facilities areavailable on online portal, are they required to obtain separate registration for making outward taxable supplies, are they required to make payment of tax under reverse charge against procurement of supplies which require payment of tax under reverse charge, how will they be required to make a refund application in the absence of online facility for making refund application and many more similar issues.

Finally, bringing a little relief to such entities, CBEC has issued Circular No.36/10/2018 dated 13th March 2018 addressing some of the problems faced by such specified entities and providing the window for obtaining registration and refund.

The Key highlights of the circular are as under:

1. If any entity specified under Section 25(9) is making supply of goods or services or both in the course or furtherance of business, then such entity will need to apply for GSTIN as per the provisions contained in the CGST Act read with the rules made thereunder.

2. Entities covered under clause (a) of sub-section (9) of Section 25 of the CGST Act may approach the Protocol Division, Ministry of External Affairs in this regard, who will facilitate grant of UINs in coordination with the Central Board of Excise and Customs (CBEC) and GSTN.

3. It is clarified that the facility of single UIN is optional and an entity may seek more than one UIN.

4. FORM GSTR-11 is required to be filed only for those tax periods for which refund is being claimed. In other words, if an UIN entity is not claiming refund for a particular period, it need not file return in FORM GSTR-11 for that period.

5. All the entities who have been issued UINs and are notified under Section 55 of the CGST Act will be eligible for refund of inward supply of goods or services in terms of Notification No. 16/2017-Central Tax (Rate) dated 28th June 2017 as amended.

6. FORM GSTR-11 along with FORM GST RFD-10 has to be filed separately for each of those quarters for which refund claim is being filed.

7. Entities claiming refund shall submit the duly filled in print out of FORM RFD-10 to the jurisdictional Central Tax Commissionerate. All refund claims shall be processed and sanctioned by respective Central Tax offices. In order to facilitate processing of refund claims of UIN entities, a nodal officer has been designated in each State. Application for refund claim may be submitted before the designated Central Tax nodal officers in the State in which the UIN has been obtained.

The circular contains list of nodal officers and other information which might be useful for the specified entities.

Byway of the above circular, it has been clarified that specified entities making outward taxable supplies shall be required to obtain separate registration for discharging output tax liability. Therefore, a person not having separate business vertical will be required to obtain two registrations in case of specified entities i.e. one UIN and one GSTIN for making taxable supplies thereby creating an exception to general rule.

Although the above circular is issued to provide relief to the specified entities, certain issues still need to be addressed:

1. Are specified entities required to discharge GST on reverse charge on notified supplies or situations which require payment of tax on reverse charge basis?

2. If answer to above is affirmative, how to make payment of tax in respect of such supplies using UIN?

3. The invoices issued by the suppliers require mentioning UIN for claiming refund. However, no UIN will be available in respect of supplies procured till date in the absence of registration facility. As this circular is being issued after 8 months of implementation of GST, how refund can be claimed in respect of procurements made in the past?

4. What is the recourse available for the specified entities who have outward supplies without discharging applicable GST?

5. In case the supplies are procured for official use but the same are utilised for official use as well as taxable supplies and GST is paid on taxable supplies, in such case will the entire refund of taxes paid will be available?

6. In case of reversal is required in above cases, what is computation mechanism for reversal?.

7. In case supplies are procured using UIN number, but the same is utilised for provision of outward taxable supplies, how to transfer such credit to GSTIN number for availing credit for discharging output tax liability?

The above questions / issues require to be addressed for providing relief to specified entities and for smooth implementation of GST in respect of specified entities. Obtaining separate GSTIN is set to bring additional compliance burden and may also raise disputes regarding refunds due to allocation of credit between supplies utilised in office and supplies utilised for making outward taxable supplies by such specified entities.

(The author is an Associate with Lakshmikumaran & Sridharan, New Delhi and the views expressed are strictly personal.)