Circular No. 147/03//2021-GST
CBEC-20/23/03/2020-GST
Government of India
Ministry of Finance
Department of Revenue
Central Board of Indirect Taxes and Customs
GST Policy Wing
New Delhi, Dated the 12th March, 2021
To,
The Principal Chief Commissioners/ Chief Commissioners/ Principal Commissioners/
Commissioners of Central Tax (All)
The Principal Director Generals/ Director Generals (All)
Madam/Sir,
Subject: Clarification on refund related issues – Reg.
Various representations have been received seeking clarification on some of the issues relating to GST refunds. The issues have been examined and to ensure uniformity in the implementation of the provisions of law across the field formations, the Board, in exercise of
its powers conferred by section 168 (1) of the Central Goods and Services Tax Act, 2017 (hereinafter referred to as “CGST Act”), hereby clarifies the issues detailed hereunder:
2. Clarification in respect of refund claim by recipient of Deemed Export Supply
2.1 Representations have been received in respect of difficulties being faced by the recipients of the deemed export supplies in claiming refund of tax paid in respect of such supplies since the system is not allowing them to file refund claim under the aforesaid category
unless the claimed amount is debited in the electronic credit ledger.
2.2 Para 41 of Circular No. 125/44/2019 – GST dated 18/11/2019 has placed a condition
that the recipient of deemed export supplies for obtaining the refund of tax paid on such
supplies shall submit an undertaking that he has not availed ITC on invoices for which refund
has been claimed. Thus, in terms of the above circular, the recipient of deemed export supplies
cannot avail ITC on such supplies but when they proceed to file refund on the portal, the system
requires them to debit the amount so claimed from their electronic credit ledger.
2.3 The 3rd proviso to Rule 89(1) of CGST Rules, 2017 allows for refund of tax paid in case
of a deemed export supply to the recipient or the supplier of deemed export supplies. The
said proviso is reproduced as under:
“Provided also that in respect of supplies regarded as deemed exports, the application
may be filed by,
(a) the recipient of deemed export supplies; or
(b) the supplier of deemed export supplies in cases where the recipient does not avail of input tax credit on such supplies and furnishes an undertaking to the effect that the supplier may claim the refund”
From the above, it can be seen that there is no restriction on recipient of deemed export
supplies in availing ITC of the tax paid on such supplies when the recipient files for refund
claim. The said restriction has been placed by the Circular No. 125/44/2019-GST dated
18.11.2019.
2.4 In this regard, it is submitted that in order to ensure that there is no dual benefit to the
claimant, the portal allows refund of only Input Tax Credit (ITC) to the recipients which is
required to be debited by the claimant while filing application for refund claim. Therefore,
whenever the recipient of deemed export supplies files an application for refund, the portal
requires debit of the equivalent amount from the electronic credit ledger of the claimant.
2.5 As stated above, there is no restriction under 3rd proviso to Rule 89(1) of CGST Rules,
2017 on recipient of deemed export supply, claiming refund of tax paid on such deemed export
supply, on availment of ITC on the tax paid on such supply. Therefore, the para 41 of Circular
No. 125/44/2019-GST dated 18.11.2019 is modified to remove the restriction of non-availment
of ITC by the recipient of deemed export supplies on the invoices, for which refund has been
claimed by such recipient. The amended para 41 of Circular no. 125/44/2.019-GST dated
18.11.2019 would read as under:
“41. Certain supplies of goods have been notified as deemed exports vide notification
No. 48/2017-Central Tax dated 18.10.2017 under section 147 of the CGST Act. Further,
the third proviso to rule 89(1) of the CGST Rules allows either the recipient or the
supplier to apply for refund of tax paid on such deemed export supplies. In case such
refund is sought by the supplier of deemed export supplies, the documentary evidences
as specified in notification No. 49/2017- Central Tax dated 18.10.2017 are also required
to be furnished which includes an undertaking that the recipient of deemed export
supplies shall not claim the refund in respect of such supplies and shall not avail any
input tax credit on such supplies. Similarly, in case the refund is filed by the recipient of
deemed export supplies, an undertaking shall have to be furnished by him stating that
refund has been claimed only for those invoices which have been detailed in statement
5B for the tax period for which refund is being claimed and the amount does not exceed
the amount of input tax credit availed in the valid return filed for the said tax period.
The recipient shall also be required to declare that the supplier has not claimed refund
with respect to the said supplies. The procedure regarding procurement of supplies of
goods from DTA by Export Oriented Unit (EOU) / Electronic Hardware Technology
Park (EHTP) Unit / Software Technology Park (STP) Unit / Bio-Technology Parks (BTP)
Unit under deemed export as laid down in Circular No. 14/14/2017-GST dated
06.11.2017 needs to be complied with.”
3. Extension of relaxation for filing refund claim in cases where zero-rated supplies has
been wrongly declared in Table 3.1(a).
3.1 Para 26 of Circular No. 125/44/2019-GST dated 18th November 2019 gave a
clarification in relation to cases where taxpayers had inadvertently entered the details of export
of services or zero-rated supplies to a Special Economic Zone Unit/Developer in table 3.1(a)
instead of table 3.1(b) of FORM GSTR-3B of the relevant period and were unable to claim
refund of the integrated tax paid on the same through FORM GST RFD-01A. This was
because of a validation check placed on the common portal which prevented the value of refund
of integrated tax/cess in FORM GST RFD-01A from being more than the amount of integrated
tax/cess declared in table 3.1(b) of FORM GSTR-3B. The said Circular clarified that for the
tax periods from 01.07.2017 to 30.06.2019, such registered persons shall be allowed to file the
refund application in FORM GST RFD-01A on the common portal subject to the condition
that the amount of refund of integrated tax/cess claimed shall not be more than the aggregate
amount of integrated tax/cess mentioned in the tables 3.1(a), 3.1(b) and 3.1(c) of FORM
GSTR-3B filed for the corresponding tax period.
3.2 Since the clarification issued vide the above Circular was valid only from 01.07.2017
to 30.06.2019, taxpayers who committed these errors in subsequent periods were not able to
file the refund applications in FORM GST RFD-01A/ FORM GST RFD-01.
3.3 The issue has been examined and it has been decided to extend the relaxation provided
for filing refund claims where the taxpayer inadvertently entered the details of export of
services or zero-rated supplies to a Special Economic Zone Unit/Developer in table 3.1(a)
instead of table 3.1(b) of FORM GSTR-3B till 31.03.2021. Accordingly, para 26 of Circular
No. 125/44/2019-GST dated 18.11.2019 stands modified as under:
“26. In this regard, it is clarified that for the tax periods commencing from
01.07.2017 to 31.03.2021, such registered persons shall be allowed to file the refund
application in FORM GST RFD-01 on the common portal subject to the condition that
the amount of refund of integrated tax/cess claimed shall not be more than the aggregate
amount of integrated tax/cess mentioned in the Table under columns 3.1(a), 3.1(b) and
3.1(c) of FORM GSTR-3B filed for the corresponding tax period.”
4. The manner of calculation of Adjusted Total Turnover under sub-rule (4) of Rule
89 of CGST Rules, 2017.
4.1 Doubts have been raised as to whether the restriction on turnover of zero-rated supply
of goods to 1.5 times the value of like goods domestically supplied by the same or, similarly
placed, supplier, as declared by the supplier, imposed by amendment in definition of the
“Turnover of zero-rated supply of goods” vide Notification No. 16/2020-Central Tax dated
23.03.2020, would also apply for computation of “Adjusted Total Turnover” in the formula
given under Rule 89 (4) of CGST Rules, 2017 for calculation of admissible refund amount.
4.2 Sub-rule (4) of Rule 89 prescribes the formula for computing the refund of unutilised
ITC payable on account of zero-rated supplies made without payment of tax. The formula
prescribed under Rule 89 (4) is reproduced below, as under:
“Refund Amount = (Turnover of zero-rated supply of goods + Turnover of zero-rated
supply of services) x Net ITC ÷Adjusted Total Turnover”
4.3 Adjusted Total Turnover has been defined in clause (E) of sub-rule (4) of Rule 89 as
under:
“Adjusted Total Turnover” means the sum total of the value of-
(a) the turnover in a State or a Union territory, as defined under clause
(112) of section 2, excluding the turnover of services; and
(b) the turnover of zero-rated supply of services determined in terms of
clause (D) above and non-zero-rated supply of services,
excluding-
(i) the value of exempt supplies other than zero-rated supplies; and
(ii) the turnover of supplies in respect of which refund is claimed under
sub-rule (4A) or sub-rule (4B) or both, if any,
during the relevant period.
4.4 “Turnover in state or turnover in Union territory” as referred to in the definition of
“Adjusted Total Turnover” in Rule 89 (4) has been defined under sub-section (112) of Section
2 of CGST Act 2017, as:
“Turnover in State or turnover in Union territory” means the aggregate value of all
taxable supplies (excluding the value of inward supplies on which tax is payable by a
person on reverse charge basis) and exempt supplies made within a State or Union
territory by a taxable person, exports of goods or services or both and inter State
supplies of goods or services or both made from the State or Union territory by the said
taxable person but excludes central tax, State tax, Union territory tax, integrated tax
and cess”
4.5 From the examination of the above provisions, it is noticed that “Adjusted Total
Turnover” includes “Turnover in a State or Union Territory”, as defined in Section 2(112) of
CGST Act. As per Section 2(112), “Turnover in a State or Union Territory” includes turnover/
value of export/ zero-rated supplies of goods. The definition of “Turnover of zero-rated supply
of goods” has been amended vide Notification No.16/2020-Central Tax dated 23.03.2020, as
detailed above. In view of the above, it can be stated that the same value of zero-rated/ export
supply of goods, as calculated as per amended definition of “Turnover of zero-rated supply of
goods”, need to be taken into consideration while calculating “turnover in a state or a union
territory”, and accordingly, in “adjusted total turnover” for the purpose of sub-rule (4) of Rule
89. Thus, the restriction of 150% of the value of like goods domestically supplied, as applied
in “turnover of zero-rated supply of goods”, would also apply to the value of “Adjusted Total
Turnover” in Rule 89 (4) of the CGST Rules, 2017.
4.6 Accordingly, it is clarified that for the purpose of Rule 89(4), the value of export/ zerorated supply of goods to be included while calculating “adjusted total turnover” will be same
as being determined as per the amended definition of “Turnover of zero-rated supply of goods”
in the said sub-rule. The same can explained by the following illustration where actual value per unit of goods exported is more than 1.5 times the value of same/ similar goods in domestic market, as declared by the supplier:
Illustration: Suppose a supplier is manufacturing only one type of goods and is supplying the
same goods in both domestic market and overseas. During the relevant period of refund, the
details of his inward supply and outward supply details are shown in the table below:
Net admissible ITC = Rs. 270
All values in Rs.
The formula for calculation of refund as per Rule 89(4) is :
Refund Amount = (Turnover of zero-rated supply of goods + Turnover of zero-rated supply of
services) x Net ITC ÷Adjusted Total Turnover
Turnover of Zero-rated supply of goods (as per amended definition) = Rs. 1500
Adjusted Total Turnover= Rs. 1000 + Rs. 1500 = Rs. 2500 [and not Rs. 1000 + Rs. 1750]
Net ITC = Rs. 270
Refund Amount = Rs. 1500*270 = Rs. 162
2500
Thus, the admissible refund amount in the instant case is Rs. 162.
5. It is requested that suitable trade notices may be issued to publicize the contents of this
Circular.
6. Difficulty, if any, in implementation of this Circular may please be brought to the notice
of the Board. Hindi version would follow.
(Sanjay Mangal)
Commissioner (GST
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