47th GST Council meeting: All updates related to GST refunds

Jun 28, 2022 | Blog | 0 comments

47th GST Council meeting_Correction in inverted duty structure47th GST Council meeting, held in Chandigarh on 28th and 29th June 2022 has come up with the various amendments in relation to the GST refunds. Some of these may be very useful for the taxpayers, however certain taxpayers belonging to the edible oil and coal industry may feel disheartened as they are no longer eligible to avail the GST refund on account of inverted duty structure. Let us have an understanding of all the changes discussed during the meeting:

On 28th June, 2022, Rate rationalization has been discussed with an primary objective to remove the distortions on account of inverted duty structure on the following goods and services:

S.No. Description Earlier Rate Proposed Rate
1 Printing, writing or drawing ink 12% 18%
2 Knives with cutting blades, Paper knives, Pencil sharpeners and blades therefor, Spoons, forks, ladles, skimmers, cake-servers etc 12% 18%
3 Power driven pumps primarily designed for handling water such as centrifugal pumps, deep tube-well turbine pumps, submersible pumps, Bicycle pumps 12% 18%
4 Machines for cleaning, sorting or grading, seed, grain pulses; Machinery used in milling industry or for the working of cereals etc; Pawan Chakki that is Air Based Atta Chakki; Wet grinder 5% 18%
5 Machines for cleaning, sorting or grading eggs, fruit or other agricultural produce and its parts, Milking machines and dairy machinery 12% 18%
6 LED Lamps, lights and fixture, their metal printed circuits board 12% 18%
7 Drawing and marking out instruments 12% 18%
8 Solar Water Heater and system 5% 12%
9 Prepared/finished leather/chamois leather / composition leathers 5% 12%
10 Refund of accumulated ITC not to be allowed on flowing goods: (i) Edible oils (ii) Coal    
1 Services supplied by foreman to chit fund 12% 18%
2 Job work in relation to processing of hides, skins and leather 5% 12%
3 Job work in relation to manufacture of leather goods and footwear 5% 12%
4 Job work in relation to manufacture of clay bricks 5% 12%
5 Works contract for roads, bridges, railways, metro, effluent treatment plant, crematorium etc. 12% 18%
6 Works contract supplied to central and state governments, local authorities for historical monuments, canals, dams, pipelines, plants for water supply, educational institutions, hospitals etc. & sub-contractor thereof 12% 18%
7 Works contract supplied to central and state governments, union territories & local authorities involving predominantly earthwork and sub-contracts thereof 5% 12%

On the second day of the meeting, the following amendments have been proposed:

S.No. Amendment Detailed Amendment Proposed Benefit Impact
1 Inclusion of input services in the refund formula on account of inverted duty structure   In order to bring better harmony on the subject of refunds especially on account of inverted duty structure amendment in formula prescribed in sub-rule (5) of rule 89 of CGST Rules, 2017 has been proposed. This is expected to bring more ease in processing of Refund applications and expeditious sanction. Now, the change in formula for calculation of refund under rule 89(5) will take into account utilization of ITC on account of inputs and input services for payment of output tax on inverted rated supplies in the same ratio in which ITC has been availed on inputs and input services during the said tax period.   This would facilitate those taxpayers who are availing ITC on input services also.
2 Extension of Limitation Period for filing GST refund (due to COVID) The GST Council has proposed to exclude the time period from 01.03.2020 to 28.02.2022 from calculation of the limitation period for: ·       filing refund claim by an applicant under section 54 and 55 of CGST Act; ·       issuance of demand/ order (by proper officer) in respect of erroneous refunds under section 73 of CGST Act   Now, the taxpayers are eligible to claim the refund for the period beginning from April 2019 onwards as the limitation period for filing GST refund application has been extended
3 Rule 96A amended to provide faster disbursement of refund claims to exporters   An amendment in CGST Rules 2017 has been proposed for handling of pending IGST refund claims in respect of Zero-rated supplies on payment of Tax. In some cases where the exporter is identified as risky exporter requiring verification by GST officers, or where there is a violation of provisions of Customs Act, the refund claims in respect of export of goods are suspended/withheld Now with the proposed amendment in rule 96 of the CGST Rules 2017 it has been recommended to provide for transmission of such IGST refund claims on the portal in a system generated FORM GST RFD-01 to the jurisdictional GST authorities for processing.   This would result in expeditious disposal of such IGST refund claims, after due verification by GST officers, thus benefitting such exporters with faster disbursement of their due claims.  
4 Earlier proposal to introduce E-wallet for exporter not to be pursued further   The present exemption of IGST on import of goods under AA/EPCG/EOU scheme is to be continued and E-wallet scheme not to be pursued further. To recollect, earlier it was proposed by the GSTC to have an e-wallet for every exporter. The e-Wallet scheme is basically the creation of electronic Wallets, which would be credited with notional or virtual currency by the DGFT on the basis of the past record of exports. This notional/virtual currency would be used by the exporters to make the payment of GST / IGST on the goods imported/procured by them so their funds are not blocked. On submission of the proof for exports, the amount will be credited to the exporter’s account subsequently facilitating free credit flow. The restriction of this scheme is that the advance amount cannot be encashed thus limiting its usage only for the GST payment
5 Refund of unutilized ITC on account of Export of electricity Amendment in CGST Rules to provide for refund of unutilized Input Tax Credit on account of Export of Electricity Now the exporters of electricity shall also be eligible to claim the refund of unutilized ITC on account of export of Electricity This would facilitate the exporters of electricity in claiming refund of utilized ITC on zero rated supplies.
6 Supplies from Duty Free Shops to be treated as exports   Supplies from Duty Free Shops (DFS) at international terminal to outgoing international passengers to be treated as exports by DFS. Rule 95A of the CGST Rules, Circular No. 106/25/2019-GST dated 29.06.2019 and related notifications are to be rescinded accordingly Now the DFS shall also be eligible to apply for refund under GST as the supplies made by them to outgoing international passengers constitute as “exports” Consequential refund benefit to be available to DFS on account of supplies made to international passengers, thereby leading to less blockage of input tax credit and free flow of working capital  
7 Re credit of amount in electronic credit ledger Re-credit of amount in electronic credit ledger is to be provided in those cases where erroneous refund amount sanctioned to a taxpayer on account of accumulated ITC or on account of IGST paid on zero rated supply of goods or services, in contravention of rule 96(10) of the CGST Rules, is deposited by him along with interest and penalty, wherever applicable N.A. This will enable the taxpayers to get re-credit of the amount of erroneous refund, paid back by them, in their electronic credit ledger.
8 Clarification in respect of GST refund on account of supplies to SEZ In respect of refunds pertaining to supplies to SEZ Developer/Unit, an Explanation to be inserted in sub-rule (1) of rule 89 of CGST Rules to clarify that “specified officer” under the said sub-rule shall mean the “specified officer” or “authorized officer”, as defined under SEZ Rules, 2006 N.A. N.A.

Note: The following circulars shall be issued in order to remove ambiguity and legal disputes:

  1. Clarification on the issue of claiming refund under inverted duty structure where the supplier is supplying goods under some concessional notification
  2. Clarification on the issues pertaining to refund claimed by the recipients of supplies regarded as deemed export

Trust you find the above useful. Stay tuned for more updates!

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