JULY 22, 2019

By Debasish Bandyopadhyay

SECTION 54(3) of the CGST Act, 2017 provides for a refund in case of an inverted duty structure in the GST regime. The said arrangement for refund arising out of inverted duty structure resulting into accumulation of ITC and subsequent blockage of working capital, have widely been appreciated by the trade and industry, however, the process for filing the said refund claim electronically in the GST portal is proving to be nothing short of a harrowing experience for the related stakeholders.

At the outset, let us have a look at, how the Finance Minister started her Union Budget - 2019-20 proposals on Indirect Taxes;

"Now coming to Indirect Tax, we are aware that the landscape has changed significantly with implementation of GST. In every sense, this has been a monumental reform. Centre and States coming together and agreeing to pool in their sovereign power of taxation for common good of the country was unprecedented. 17 taxes and 13 cesses became one tax. Multitude of rates instantly became four. Almost all commodities saw rate reduction. Tens of returns were replaced by one. Taxpayer's interface with tax departments got reduced. Border checks got eliminated. Goods started moving freely across states, which saved time and energy. A truck started doing two trips in the same time in which it was doing one. Thus, dream of one nation, one tax, one market was realised. The GST Council deserves all the credit for this."

It may appear from the above that lives of thousands of Indians had been meaningfully changed and the long cherished dream of 'one nation, one tax' was realised through the implementation of GST in the country. The GST Council was deservedly credited for the same. However, there is a different story altogether smouldering in the hearts of thousands of taxpayers who are to seek legitimate refunds from the department on account of inverted duty structure or otherwise as prescribed under the law.

In terms of the relevant provisions under the GST laws, the application for filing of refund claim is required to be made in Form GST RFD-01A along with invoice wise details of inward and outward supplies which are to be furnished electronically in Statement 01A. The said Statement 01A uploaded by the taxpayer is to be validated by the system from the invoice data available with the GSTN database. The details of outward supplies are validated from the data furnished in the GSTR-1 by the taxpayer and the details of inward supplies are validated from the GSTR-1 furnished by the persons from whom the taxpayer has procured the inward supplies or their vendors.

It is pertinent to note that there is no provision under the law for filing of such refund claim manually. In many cases, the taxpayers are facing huge difficulty in uploading the Statement-01A in the GSTN portal at the time of filing of refund application due to technical glitches at the GSTN portal. It is important to highlight that the Statement-01A is required to be uploaded by the applicant in json file format which is accepted by the GSTN portal with each file having a maximum capacity of 10,000 entries. However, in some cases, while filing the refund application for a whole year, especially for the manufacturer-retailers having huge data, there may be many json files to be generated for uploading at the portal. However, at the time of uploading the same in the GSTN portal, the portal is accepting upto a maximum of 20-25 json files after which it is automatically logging the applicant out from the registered portal. The portal is not allowing to upload further json files after this limit. The said technical issue has been persistent for a long time and has resulted into non-filing of legitimate refund claims in many cases.

Now, coming to the process for resolution of the said technical glitches, here it is important to note that one such applicant had approached the jurisdictional authority many times to get a solution in this regard. Further, the applicant had also visited the local GST IT Cell, GST Seva Kendra and raised the issue at GSTN Helpdesk multiple times. Unfortunately, the GSTN Helpdesk has left the assessee helpless by delivering a simple message that the issue has been identified and the team is working on it, the solution for the same is still a far cry even after the considerable period of time from the issue being raised by the assessee. Owing to the aforesaid glitches, the manufacturers with inverted duty structure in production and having voluminous data against their inward and outward supplies are facing unjustifiable difficulty in filing refund claim in the GSTN Portal due to such unwarranted and impractical restrictions. It is also important to note that since there is no sight of solution for such glitches, the refund claim for the month July-2017 is under the spell of uncertainty, since the time limitation for filing refund claim under the GST law is inching closer. It is unfortunate that even after completion of two years of GST implementation in the country, taxpayers have been made to run from pillar to post in order to resolve a basic technical problem like this.

In pursuance to the discussion made above, some significant questions may arise considering the aforesaid impasse, whether the assessee is allowed to file refund claim manually at this point? Can the refund claim be filed without uploading the Statement-01A electronically? Is the jurisdictional officer empowered to accept Statement-01A and related documents manually after filing the claim through portal without uploading the said Statement? In case, the issue is not resolved within the stipulated timeline, does the assessee have to file a writ petition before the jurisdictional High Court for accepting the refund claim manually?

The answer to the aforesaid questions are predictably unpredictable. The most enduring takeaway from the above discussion on the architecture of GSTN Portal is that there is a deep-seated uncertainty which can throw surprising shocks to the aspirations of the taxpayers at any point of time. Here, it is pertinent to recall that t he FM has pointed out in her budget speech that Centre and States proactively worked to resolve many issues. The larger point is whether the said issues are resolved proactively or reactively! In the event of any glitches or technical issues, many a times it has been observed that GSTN IT Cell has become unresponsive and clueless. However, it is undeniable fact and a matter of glory for the tax administration of the country that top echelons of the Central and State Governments have been proactive all along in their response to the apprehensions and difficulties voiced by the trade and industry. Further, most of the time, genuine efforts are being made to alleviate the pain of stakeholders in order to ensure that GST becomes a real success and the driver of growth for the Indian economy.

It appears from the above that technical issues in GSTN Portal have been a huge spoilsport in the entire GST eco-system impacting all aspects of the business including the working capital blockage on account of accumulation of ITC due to inverted duty structure and holding up of related refund claims. It is high time that the GST Council takes necessary steps in order to make GSTN Portal more robust and trustworthy before implementing fully automated GST refund module as promised by the FM in her budget speech. Meanwhile, the issues as discussed supra in respect of uploading Statement-01A for filing refund claim under inverted duty structure and related json file restrictions in the GSTN Portal, must be resolved on an urgent basis. It is hoped that the GST Council shall intervene in time to end the uncertainty and unnecessary disruptions in the trade so as to take such revolutionary tax reform on the path of real glory.

(The views expressed are strictly personal.)