Exporters allowed to get refund of accumulated ITC even for missing invoices

In an order to give relief to exporters, Finance Ministry has decided to do away with the condition of restricting refund of input tax credit (ITC) as per invoices uploaded by the supplier.

“It is hereby clarified that the treatment of refund of such ITC relating to imports, ISD (Input Service Distributor) invoices and the inward supplies liable to Reverse Charge (RCM supplies) will continue to be same as it was before the issuance of Circular No. 135/05/2020- GST dated 31st March, 2020,” Central Board of Indirect Taxes and Custom (CBIC) said in a circular. CBIC is policy making body for Central GST, Central Excise Duty and Custom Duty and part of Finance Ministry.

Commenting on the development, Abhishek Jain, Tax Partner at EY hoped this change to help in providing significant relief to India's foreign exchange earners who were facing serious on ground challenges on refund claims of unutilised input tax credit. “The issue of rejection by lower level officers was significantly prevalent in certain jurisdictions where officers had taken a literal interpretation of the earlier Circular without giving credence to the practical applicability of the same in certain scenarios," he said.

It is matter of basic principle that tax should not be exported. Keeping this in mind, exporters get refund on various taxes paid on manufacturing the goods. Post introduction of GST, a system was evolved to facilitate exporters to get the refund. As exporters use some import, transact with unregistered assessees and also get services, it is expected that Bill of Entry (BoE) for import, invoices from ISD and then invoices related with Reverse Charge Mechanism (A system when a registered asssessee is liable to discharge the applicable GST).

Technically speaking, invoices once uploaded by the supplier in FORM GSTR 1, these will be reflected in FORM 2A of the applicant exporter. However, many a times suppliers do not upload invoice in time which mean exporter’s claim of ITC do not find support with matching document from supplier. In tax parlance, it is called missing invoices. Before the issuance of Circular, dated March 31, 2020, refund was being granted even in respect of credit availed on the strength of missing invoices.

However, the said circular restricted the refund of accumulated ITC, the details of which are uploaded by the supplier in FORM GSTR-1 and are reflected in the FORM GSTR-2A of the applicant.

CBIC said it received many representations stating that in some cases, refund sanctioning authorities have rejected the refund of accumulated ITC is respect of ITC availed on Imports, ISD invoices, RCM etc. citing the March 31’s circular. Reason used to be that the details of the said invoices/ documents are not reflected in FORM GSTR-2A of the applicant.

Now with the restoration of pre-March 31 system, exporters unlikely to have problem in claiming refund for accumulated ITC.

COMMENT NOW