Dear Readers,
As per Sec. 54(3) of the CGST Act, 2017 a registered person can claim refund of unutilized input tax credit at the end of any tax period in following cases:
a. zero rated supplies (direct exports or supplies to SEZ) made without payment of tax (in cases where zero rated supplies are made with payment of IGST, refund form GSTR – 1E for period after July is already made available online for which you may refer our earlier communication)
b. 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
From today facility for claiming such refund of unutilized credit on account of zero-rated supplies is made available on the GST portal. Refund of unutilized credit on account of inverted rate structure is not yet available. Step-by-step guidance is attached with this mail. Following points may however be noted:
1. Maximum refund amount which can be claimed is to be derived as per the formula specified under Rule 89 of the CGST Rules, 2017. In a nutshell, maximum amount which can be claimed is proportionate credit attributable to the ratio of zero-rated supplies.
2. The portal auto-drafts the current balances of the electronic credit ledger and restricts the refund amount to said balance. Consider a scenario wherein as per July filing of GSTR – 3B, there is no balance of unutilized credit despite zero-rated supplies without payment of tax. This is because the excess credit must have been utilized against liability on account of domestic supplies. However when portal auto-drafts the balance of electronic credit ledger, it picks up only current balance. Hence the portal will calculate the amount of refund even though in July there was no closing balance in credit ledger. Balance was generated post July month. In our opinion one should not claim such refund for July because as per Sec. 54(3) only the balance of unutilized credit at the end of a particular tax period (in our case it is July) can be claimed. This is clear also from reading Sec. 54(6) which provides that credit provisionally accepted shall not be taken into consideration while granting provisional refund. Hence only credits of a given period remaining unutilized can be claimed as refund. In such case it is advisable to claim refund in the month when the credit got accumulated.