Circular No. 147/03/2021-GST: Key Clarifications on GST Refund Issues

02March

Circular No. 147/03/2021-GST: Key Clarifications on GST Refund Issues

<h4>Introduction</h4>The Central Board of Indirect Taxes and Customs (CBIC) issued Circular No. 147/03/2021-GST on March 12, 2021, addressing key issues related to GST refunds. The clarifications aim to streamline the refund process for deemed exports, zero-rated supplies, and the calculation of adjusted total turnover. Here’s a breakdown of the major highlights from this circular.<hr><h3>Key Highlights of the Circular</h3><h4>1. Refund Claim by Recipients of Deemed Export Supplies</h4><ul><li>The recipients of deemed export supplies faced issues in claiming refunds of tax paid because the system required debiting the refund amount from the electronic credit ledger.</li><li>Clarification:<ul><li>Earlier, Circular No. 125/44/2019-GST required recipients to not avail Input Tax Credit (ITC) on invoices for which they were claiming refunds.</li><li>However, the 3rd proviso to Rule 89(1) of the CGST Rules, 2017 does not prohibit claiming ITC when the recipient files for a refund.</li><li>Revision: The restriction of non-availment of ITC has been removed. Recipients can now claim a refund while availing ITC, ensuring they do not receive dual benefits.</li></ul></li></ul><h4>2. Extension of Relaxation for Refunds on Zero-Rated Supplies</h4><ul><li>Earlier, taxpayers who mistakenly declared export supplies under Table 3.1(a) instead of Table 3.1(b) in FORM GSTR-3B faced difficulties in claiming refunds.</li><li>Clarification:<ul><li>The earlier relaxation under Circular No. 125/44/2019-GST (which was valid from July 1, 2017, to June 30, 2019) has now been extended till March 31, 2021.</li><li>Taxpayers can file refund applications even if they had wrongly entered zero-rated supplies under Table 3.1(a).</li></ul></li></ul><h4>3. Calculation of Adjusted Total Turnover for Refunds</h4><ul><li>The definition of “Turnover of Zero-Rated Supply of Goods” was amended in Notification No. 16/2020-Central Tax.</li><li>Clarification:<ul><li>The adjusted total turnover must now consider the amended definition, where the turnover of zero-rated supply of goods is restricted to 1.5 times the value of similar goods supplied domestically.</li><li>This ensures fair refund calculations and prevents inflated claims.</li></ul></li></ul><hr><h3>Illustration of Refund Calculation</h3>Suppose a supplier manufactures and sells a product both locally and internationally:<ul><li>Local sales: ₹200 per unit, 5 units sold → Total = ₹1,000</li><li>Export sales: ₹350 per unit, 5 units sold → Total = ₹1,750</li><li>However, under the new rule, the export turnover is capped at 1.5 times the local turnover, so it is revised to ₹1,500 instead of ₹1,750.</li></ul><h4>Refund Calculation:</h4>Refund Amount=(Zero-rated supply turnover×Net ITCAdjusted Total Turnover)\text{Refund Amount} = \left(\frac{\text{Zero-rated supply turnover} \times \text{Net ITC}}{\text{Adjusted Total Turnover}}\right)Refund Amount = ( Adjusted Total TurnoverZero-rated supply turnover × Net ITC ) =(1500×2702500)=₹162= \left(\frac{1500 \times 270}{2500}\right) = ₹162 = ( 25001500 × 270 ) = ₹162Thus, the maximum refund claimable in this case would be ₹162 instead of a higher amount based on the incorrect turnover.<a href="https://cms.plasament.com/storage/nisha/circular-refund-147.pdf">circular_refund_147</a>

Circular No. 147/03/2021-GST: Key Clarifications on GST Refund Issues

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