- Earlier old GST Law, the limitation of two years for filing refund claim was not applicable for amount paid under protest. This provision has been deleted in the revised GST Law thereby meaning that there will be no mechanism for paying tax under protest.
- A new provision for refund of tax by specialised agency of United Nations Organisation or any Multilateral Financial Institution or Embassy of foreign countries has been inserted which provides that such persons shall be entitled to refund of tax paid by them on inward supplies of goods and or services by making an application before expiry of six months from the last day of the month in which supply was made in prescribed form and manner. If the provision is compared with the present scenario, it is found that presently there is exemption prevalent to provision of services to United Nations Organisation which is comparatively easy than claiming refund.
- There is change in provision regarding refund of unutilised input tax credit. Earlier, proviso specified that refund of unutilised input tax credit shall be allowed only in cases of exports and in cases of inverted duty structure. Inverted duty structure means situation where rate of tax on input is higher than rate of tax on output. But, in revised GST Law, refund of unutilised input tax credit shall be allowed in cases of exports including zero rated supplies, in case of inverted duty structure but not in case of nil rated of fully exempt supplies. A new proviso has also been inserted to clarify that the refund of unutilised input tax credit shall not be allowed if the supplier of goods or services claims refund of output tax paid under IGST Act, 2016. This implies that the refund of unutilised credit will be allowed only in cases where the export is done under bond. If the export is done under rebate claim then the refund of unutilised credit will not be allowed.
- There is also change in provision regarding grant of refund claim on provisional basis. As per old GST Law, provisional refund of 80% of the total amount so claimed was required to be given but as per the revised GST Law, the provisional refund of 90% of the total amount so claimed is required to be given. The increased amount of provisional refund will solve the liquidity constraints of the exporter.
- The time limit for passing order under earlier GST law was ninety days from the date of receipt of application. Now, under revised GST Law, this time limit for passing order has been reduced to sixty days from the date of receipt of application. The reduction in time limit for passing refund order is a welcome step.
- There is also change in provisions regarding applicability of unjust enrichment. The refund amount shall be given to the claimant if it is proved that the incidence of duty has not been passed on to other person. The concept of unjust enrichment is not applicable in certain situations like refund of tax on goods or services exported, refund of unutilised input tax credit etc. Now, a new clause has been added wherein refund of tax paid on a supply which is not provided, either wholly or partially and for which invoice has not been issued will also be sanctioned to the supplier and the principle of unjust enrichment would not apply in such cases. This provision is also beneficial to the assessees claiming refund of tax paid on supply which is cancelled or partially provided.
We will discuss some other amendments made in the provisions relating to refund of tax in revised GST law in our next update.
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