Non-filers of monthly GST returns would be prevented from filing GSTR-1 from next year.

Non-filers of monthly GST returns would be prevented from filing GSTR-1 from next year.

Businesses that fail to file a summary return or pay monthly GST will be unable to file a GSTR-1 sales return for the following month beginning January 1 of the following year. The GST Council met in Lucknow on September 17 and resolved on a slew of steps to simplify compliance, including requiring firms to use Aadhaar authentication when filing refund claims.

These steps will aid in preventing revenue leakage from the Goods and Services Tax (GST), which was implemented on July 1, 2017.

With effect from January 1, 2022, the Council agreed to alter Rule 59(6) of the Central GST Rules to specify that a registered person will not be allowed to file Form GSTR-1 if he has not filed the previous month’s return in Form GSTR-3B.

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Currently, the legislation prohibits businesses from filing a report for outward supplies, or GSTR-1, if they have not filed a GSTR-3B for the previous two months.

Businesses file GSTR-1 for a given month by the 11th day of the following month, but GSTR-3B, which is used to pay taxes, is filed in a staggered fashion between the 20th and the 24th day of the following month.

The GST Council has also made the Aadhaar authentication of GST registration essential for filing refund claims and applications for registration revocation or cancellation.

New GST registration denial have a serious impact on our economy 

With effect from August 21, 2020, the Central Board of Indirect Taxes and Customs (CBIC) has notified Aadhaar authentication for GST registration.

The announcement also stated that if a business does not give an Aadhaar number, GST registration will only be approved after a physical inspection of the business location.

Businesses will now be required to link their GST registration with biometric Aadhaar in order to claim tax refunds and apply for revocation or cancellation of registration, according to the Council.

In its 45th meeting, the Council, which consists of central and state finance ministers, also determined that GST refunds will be paid into the same bank account as the PAN used to get GST registration.

Refund under Inverted Duty Structure (IDS)

Refund under Inverted Duty  Structure (IDS)

Introduction:-Goods and Services Tax (GST) is tax regime focused on destinations where taxes are discharged by credit and cash at multiple phases. Tax is paid to the manufacturer on the purchase of goods and/or services available as payment to the retailer and when the dealer purchases those items, after using the credit available on the purchase of goods, the seller pays tax on the sale. Tax is therefore issued in two forms at the time of purchase and at the time of sale.

About GST Refund: GST refund can be of two types –

Type 1: Refund of excessive GST paid in cash Type 2: Refund of unused GST credit While Type 1 Refund is available under all conditions but Type 2 Refund is only available in the following scenarios-

Scenario 1- On zero-rated goods, made without payment of tax (considering that the products are not subject to export duty and that no tariff downside is claimed)

Scenario 2- Because the tax rate on input suppliers is higher than the tax rate on production products (Input supplies are inputs, input services, and capital goods).

Using an example, let’s consider scenario no. where the rate of on-input supplies is higher than the rate of on-output supplies. To obtain lime, raw materials such as coal, limestone, petro coke, and other packaging material must be obtained. Petro coke and packaging material can now be taxed at 18%, while finished product duty is 5%.In such situations, each month the credit is carried forward leading to constant working capital blockage.

Who is not entitled under IDS to Claim Refund?

While this may seem like refunding accrued tax credit, this may not always be the case. For example, a super stockist with an excessive credit balance at all times is not eligible to claim compensation under IDS just because of excessive credit. In this case, therefore, the dealers involved in merely trading goods are not eligible to claim the refund. This is the case with the parallel duty structure (PDS), and not the reversed obligation structure (IDS), where the input rate is equal to the production tax rate.

Legal provision: The reimbursement of unused ITC under IDS shall be governed by Section 54(3) of the CGST Act, read in accordance with Rule 89 of the CGST Rules. Further Rule 89(5) of the CGST Rules stipulates the Refund formula, which states:

Maximum Refund Amount = Turnover of Inverted Supply/ Adjusted Total Turnover* Net ITC – Tax payable on such Inverted Supply

“Net ITC” means input tax credit availed on inputs and input services during the relevant period. (This is up till 17th April

However, ITC on Input Services was specifically excluded from Net ITC after Notification No. 21/2018 dated April 18, 2018, while determining Refund under IDS. This exclusion of ITC on input services leaves one point open for discussion that whether ITC on input services, which are ancillary and secondary to the main transaction, is also covered by the scope of the above notification, the refund of which is intended to be prohibited. To explain this in detail, let us take an example to illustrate how ITC can be affected on Input Services, which is a part of the main transaction.

Say Mr. A of Delhi directed Mr. B of Mumbai to order goods.Mr. A would naturally like to collect the product at his place of business. To order to carry out this commercial transaction, goods must be reached to Mr. A’s location. Thus, Mr. B receives shipping costs and freight above and beyond the standard product value and retains tax on the whole amount, i.e. purchase value u / s 15 of the CGST as the value on which tax is payable.

The question to be discussed, however, is whether ITC on Input Services, which is being sought to be excluded by Notification No. 21/2018 of 18 April 2018, even includes certain input services that are merely a part of the dominant activity.

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Goods and Services Tax (GST) Refunds on Export

In India, the export of goods and/or services has reduced as interstate supply and thus is subject to Integrated GST. However, as per the rules made under the IGST law, the exported goods and services are considered as zero-rated supplies, hence allowing the exporter to claim GST refunds on their export.

On the other hand, even though the supply of goods and services beyond national borders attract 0% GST, it is compulsory for an exporter to register under GST if his aggregate turnover exceeds GST threshold of 40 lakhs (20 lakhs for Special category states), as mentioned in notification number 10/2017- Integrated Tax.

Nevertheless, the mentioned provision has been included under IGST law to promote and facilitate the growth of export in India. But, for an exporter to be able to get these benefits, the benefits are subject to conditions as given below

Required Eligibility To Claim GST Refunds On Export

Any registered taxable individual, except Input Service Distributor (ISD), Compounding Taxpayer, TDS Deductor and TCS Collector, can claim a refund for the taxes paid on exports, if the supplied goods and/or services fulfills the following conditions:

  • Supplier is located in India.
  • Recipient and the place of supply are located outside India.
  • Payment for this service has been received by the supplier in convertible foreign exchange.
  • Supplier of service and the recipient of service are not merely establishments of a different person.

Exporting Goods And Services Under GST

In order to get the option of export without payment of IGST, the registered exporter is required to give a bond or Letter of Undertaking (LUT) before the export. The issuance of LUT validates the export process, establishing the export of goods within three months 15 days from the invoice date, when the payment for the same (in foreign currency) will be received within one year 15 days of the invoice date.

The exporter need to submit the bond, supported by a bank guarantee of an amount not exceeding 15 per cent of the bond amount on a non-judicial stamp paper for each and every export. The validity of a LUT is for one year and is to be submitted on the company letterhead.

GST Refund Process For Exporters

An exporter can claim IGST refund for export as per one of the two options mentioned below:

  • The supply goods and/or services is done under bond or LUT, without payment of IGST. In such case, the exporter can claim a GST refunds on export of the not utilized ITC available for CGST, SGST and IGST
  • The supply goods and/or services is done as per the given process, along with the IGST payment. In such case, the exporter can claim a refund for the IGST paid on the supply.

Also, the exporters monthly GST returns should show export details, as given below:

  • Form GSTR 1: Export details in Table 6A of GSTR-1, along with “shipping bill” details of the IGST paid.
  • Form GSTR-3B: Valid details, relevant to the export period.

By successful filing of these forms, the GSTN portal shares the received export details with the ICEGATE. For which, the details given in attached documents and GSTR 1 is validated by the ICEGate system and the refund process is started.

As per the IGST Act, 90% of refund processing is completed within 7 days of filing refund application. The acknowledgement of the same is shared with refund payment is directly done to exporters the refund payment is credited to the account of the taxpayers, the ICEGATE system will give the payment information with the GST Portal will send the details through SMS and e-mail with the taxpayers.

Documents Need To Attach For GST Refunds On Export

Shipping Bill:
For IGST refund claim, there is no need for the exporter to file any other refund application as the Shipping Bill (along with Export Manifest) is considered as a refund application.

Bank Realisation Certificate (BRC)/ Foreign Inward Remittance Certificate (FIRC):
The BRC or FIRC are very crucial documents that are required to support the refund claimed for the export of service. The exporter can get their BRC issued by their authorized bank on each invoice, while the FIRC is issued on any inward remittance received against an export. There is no need of any different application for refund of IGST paid on export of Goods.

Export General Manifest (EGM):
As per Instruction No. 15/2017-Customs, dated 09-10- 17, filing of an export manifest is must for treating shipping bill or bill of export as refund claim. The export report is filed in case of export by land and Export manifest is filed in case of export by air or sea. Export manifest is need to be filed u/s 41 and 42 of the Customs Act, prior to the departure of the conveyance carrying the goods. Commissioners have to ensure that export report/EGM is filed in given time limits.

Correction Made In Form GSTR -1

For any incomplete or erroneous filing of form GSTR 1, the exporter can file Table 9A – Amended Export Invoices in their subsequent GSTR 1 filing. In case of any missing invoice (in current GSTR 1), the exporter can report the same in Table 6A of Form GSTR -1 of the subsequent period.

Correction Made In Form GSTR -3B

As per the circular number 26/26/2017 issued by CBEC, corrections in Form GSTR-3B for a given tax period can be reported in subsequent GSTR-3B filing, as below:

  • The tax paid on exports, which are mentioned in table 3.1(a) or table 3.1(c) instead of table 3.1(b), in such case the needed corrections can be done in the coming month to the extent permitted.
  • The tax paid on exports has been mentioned as zero in table 3.1(b), the correct amount can be declared and offset during GSTR -3B filing of the subsequent month.
  • The tax paid on exports declared in table 3.1(b) is less than the return specified in the invoices filed under Table 6A, and Table 6B, of Form GSTR 1, differential amount of tax can be declared and offset during GSTR 3B filing of the subsequent month.

Contact us or email us at [email protected] for any further queries on GST filing and registration.