JULY 20, 2020

By CA Ashish Kr Bansal

SINCE the advent of GST ecosystem in India, professionals, taxpayers and other stakeholders often complain about various technical glitches which does not make the experience of the still evolving system a great one. We also often hear that despite raising grievance on various forums including the GST portal, generally there is no response. However, I recently experienced a very friendly and accommodating side of GSTN, which I would like to present to the readers-

Grievance

The refund of accumulated Input tax credit due to inverted structure or export of goods without payment of duty is calculated as per formula given in Rule 89(4) and Rule 89(5) of CGST Rules, 2017. The Master Circular no. 125/44/2019-GST dated 18-11-2019 governing such refund prescribes one more check for calculation of refund as reproduced below -

"37.  In case of refunds pertaining to items listed at (a), (c) and (e) in  para 3  above, the common portal calculates the refundable amount as the least of the following amounts:

(a) The maximum refund amount as per the formula in rule 89(4) or rule 89(5) of the CGST Rules [formula is applied on the consolidated amount of ITC, i.e. Central tax + State tax/Union Territory tax + Integrated tax];

(b) The balance in the electronic credit ledger of the applicant at the end of the tax period for which the refund claim is being filed after the return in  FORM GSTR-3B  for the said period has been filed; and

(c) The balance in the electronic credit ledger of the applicant at the time of filing the refund application.

After calculating the least of the three amounts, as detailed above, the equivalent amount is to be debited from the electronic credit ledger of the applicant in the following order:

(a) Integrated tax, to the extent of balance available;

(b) Central tax and State tax/Union Territory tax, equally to the extent of balance available and in the event of a shortfall in the balance available in a particular electronic credit ledger (say, Central tax), the differential amount is to be debited from the other electronic credit ledger (i.e., State tax/Union Territory tax, in this case)."

Since it has been categorically mentioned in sub-para (a) that maximum refund amount as per formula given in Rule 89(4) or Rule 89(5) has to be calculated on consolidated ITC, therefore, it is implied that amounts mentioned at sub-para (b) and sub-para (c) refers to consolidated balance of electronic credit ledger. Hence,after finding least of three amounts on consolidated basis, the same has to be debited from electronic credit ledger in the following order -

(a) Integrated tax, to the extent of balance available;

(b) Central tax and State tax/Union Territory tax, equally to the extent of balance available and in the event of a shortfall in the balance available in a particular electronic credit ledger (say, Central tax), the differential amount is to be debited from the other electronic credit ledger (i.e., State tax/Union Territory tax, in this case).

The above practice adopted by GST portal leads to anomalies which can be understood through the below mentioned example -

Maximum Refund amount calculated as per Rule 89(5) is Rs 16,30,570/-

As is evident from above table, the portal is allowing the taxpayer to submit refund of only Rs 5,88,254/- as against Refund eligible to them of Rs 15,05,892/- (being least of Rs 16,30,570/-, Rs 15,05,892/- & Rs 40,28,548/-). This is due to the fact that after insertion of Sec 49A w.e.f from 01/02/2019 which requires that IGST credit has to be utilised fully before utilising the CGST credit and SGST credit, IGST credit has been utilised fully where as balance in CGST and SGST has not been utilised. The anomaly has created a situation where taxpayers are not able to file online refund application particularly in case of refund for Financial year 2018-19 being filed now. Since Section 49A was inserted w.e.f 1st Feb 2019, all IGST credit accumulated by taxpayers in 2018-19 due to inverted structure got utilised in subsequent months resulting in shifting of accumulated credit to CGST and SGST heads.

Grievance redressal Portal - a pleasant experience

A grievance was raised on grievance redressal portal https://selfservice.gstsystem.in/ in the first week of July 2020 after which GSTN team contacted the taxpayer on the email id given. After exchange of several emails over a span of 5 days, the anomalous situation was explained to GSTN team quoting the above circular.

The GSTN team finally responded as follows -

The above assurance by GSTN is pleasing to the ears of several hundred taxpayers whose refund applications have been stuck due the above anomaly. Such a response is the right step in fulfilling the mantra of - ease of doing business!

[The views expressed are strictly personal.]