Solution to problems in refund of IGST on export of goods

Executive Summary

Timely refund mechanism is most essential in tax administration. The provisions pertaining to refund contained in the GST law aim to streamline and standardize the refund procedures under GST regime. One of the major categories under which claim for refund may arise would be, on account of exports. All exports (whether of goods or services), as well as supplies to SEZs, have been categorized as Zero Rated Supplies in the IGST Act, 2017.

Refund of IGST paid on Export of Goods is the easiest and simplest form of Refund Application. However, refund of many exporters have struck. Mainly issue arise due to technicalities involved in the filing of GST returns, lack of knowledge in MSME exporters about manner of filing of Returns etc. Further, due to mismatch in data filed in Shipping bills & GST Invoices certain issues have arise. Exporters are unable to get them rectify due to distance involved to approach Custom Ports of Exports. Few of the difficulties faced have been discussed in the article.

Refund on account of Zero Rated Supply

'Zero-rated supply' under Section 16 of the IGST Act, 2017 means any of the following supplies of goods or services or both, namely:

(a) export of goods or services or both; or
(b) supply of goods or services or both to a Special Economic Zone developer or a Special Economic Zone unit.

On account of zero rating of supplies, the supplier will be entitled to claim input tax credit in respect of goods or services or both used for such supplies. Every person making claim of refund on account of zero rated supplies has two options.

1. Export under Bond/ LUT and claim refund of accumulated Input Tax Credit

2. Export on payment of integrated tax and claim refund thereof as per the provisions of Section 54 of CGST Act, 2017. {Section 54(8)(a) }

In this article, we will be discussing the Procedure of Refund of IGST Paid on Export of Goods &resolution to practical difficulties being faced.

Filing of Application for Refund of IGST Paid on Export of Goods

As per Rule 96(1), The shipping bill filed by an exporter shall be deemed to be an application for refund of integrated tax paid on the goods exported out of India and such application shall be deemed to have been filed only when:-

(a) the person in charge of the conveyance carrying the export goods duly files an export manifest or an export report covering the number and the date of shipping bills or bills of export; and

(b) Exporter has furnished a valid return in FORM GSTR-3 or FORM GSTR-3B, as the case may be. Since the system of filing of return in FORM GSTR-3 has not started so far, the refund of integrated tax on export of goods would be granted based on FORM GSTR-1 and FORM GSTR-3B for the time being.

No Requirement of RFD-01

As per Rule 89(1), General Application form for claiming refunds RFD-01 is not applicable for claiming refund of IGST paid on export of goods

Processing of Refund Application

As per Rule 96, the refund of IGST paid on export of goods is processed and disbursed by Customs. For processing such refund, GST system transmits invoice level data of Table 6A in GSTR 1 to the System designated by Customs subject to the following validations:

1. GSTR-3B is filed for the corresponding period, with admitted tax liability under Table 3.1(b);

2. Export invoices are submitted in GSTR-1/Table 6A thereof and have correct shipping bill number, shipping bill date and port code;

3. The admitted tax liability of IGST under table 3.1(b) of GSTR-3B, is equal to, or greater than, the IGST amount claimed to have been paid under Table 6A of GSTR-1 of the corresponding period.

The system designated by the Customs, after confirmation that the goods covered by the said invoices have been exported out of India, shall process the claim for refund and an amount equal to the integrated tax paid in respect of each shipping bill or bill of export shall be electronically credited to the bank account of the applicant mentioned in his registration particulars and as intimated to the Customs authorities.

Thus, Refund claim requires accurate filing of:-

1. GSTR - 1 by Exporter
2. GSTR - 3B by Exporter
3. Export General Manifesto by Shipping Company

IGST Refund not allowed in certain cases

Rule 96(9) has been inserted, w.e.f 23.10.2017, in CGST Rules, 2017 vide Notification no.75/2017-Central Tax dated 29.12.2017 so as to provide that the refund of integrated tax paid on export of goods or services is not permitted to such persons who have received supplies on which the supplier has availed the benefit of:

(a) Deemed Exports under Notification No. 48/2017 dated 18-10-2017 (i.e. Supply against advance authorization or EPCG license or supply to EOU/EHTP/STP/BTP)
(b) Concessional Tax @0.1/0.05% under Notification Nos.40/2017-Central Tax (rate) and 41/2017- Integrated Tax (Rate)
(c) Import without payment of IGST under advance authorization [Under Notification Nos. 78/2017-Customs and 79/2017-Customs]

Issue involved in Processing of Refund

Although, Refund of IGST paid on Export of Goods is the easiest and simplest form of Refund Application, still certain issues may arise as follows:

Case 1: Non Filing of GSTR-1 / Table 6A of GSTR-1 / GSTR 3B

Refund can't be processed unless GSTR-1/Table 6A of GSTR-1 and/or GSTR-3B are filed.

Resolution: Ensure Filing of GSTR -1 & GSTR 3-B.

Further, Exporters having turnover below 1.50 crores may voluntarily opt for Monthly Filing of GSTR-1 for getting Refund quicker.

Case 2: Incorrect Filing of GSTR-1

Detail of shipping bill and port code not mentioned in Table 6A/GSTR-1.

Further, some taxpayers who had filed GSTR 1E (Table 6A) with deficiencies, due to which their refund of IGST paid on export were not processed, subsequently, filed GSTR 1 with corrected data of Table 6A. However, such data was not allowed to be integrated again in Table 6A because the taxpayer had already filed his GSTR 1E (Table 6A).

Resolution: Amend Table 6A data through Table 9A of subsequent GSTR 1.

Exporters need to provide Complete and Correct Data while filing Table 6A of GSTR-1 as under:

1. Invoice No. and Date (Tax invoice and not commercial invoice).
2. Select from the drop-down list (WPAY- with payment of tax)/WOPAY-without payment of tax. (Invoices selected as WOPAY are not eligible for a refund from ICEGATE)
3. Shipping Bill No. & Date.
4. Six Digit Port Code should be mentioned correctly.

Port code is alphanumeric six characters code as prescribed by ICEGATE. Port codes are available at ICEGATE under https://www.icegate.gov.in/SMTPList.html. Invoices, which don't have these details, shall not be sent to ICEGATE for further processing, because such invoices are treated and export of services.

5. Invoice Value: It is the total value of export goods covered by the invoice including of tax and other charges, if any.

6. Taxable Value: It is the value of goods, on which tax is paid. (Value net of tax).

7. Tax Paid IGST, only in case, where the export is done on payment of IGST.

8. While using offline tool for GSTR 1, the date format is dd-mmm-yyyy e.g. 15th Jun 2019 will be written as 15-Jun-2019 and not like 15/06/2019.

Case 3: Incorrect Filing of GSTR 3B

a) IGST paid in Table 3.1(b) of GSTR 3B is lesser than total IGST claimed in Table 6A of GSTR-1 for the same period. It is one of validation check by GSTIN that aggregate IGST paid amount claimed in Table 6A of GSTR-1 is not higher than IGST paid amount indicated in Table under column 3.1(b) of GSTR-3B of corresponding month.

b) Total IGST, payable through export invoices specified under Table 6A of GSTR 1, is not specified correctly under Table 3.1(b) of GSTR3B and incorrectly mentioned under Table 3.1(a) [domestic supplies] i.e. While correct details of exports have been declared in Table 6A of GSTR-1, in GSTR-3B, export data has been disclosed as domestic supplies.

Resolution:

Exporter can quantify the difference in GSTR 1 & GSTR 3B by downloading 'Exports Ledger' available at GST Portal.

Login to www.gst.gov.in

Navigate to Services > Refunds > Status of invoice data to be shared with ICEGATE> View Export Ledger> Download CSV

GSTR-3B do not contain provisions for reporting of differential figures for past month(s), the said figures may be reported on net basis along with the values for current month itself in appropriate tables i.e. Table No. 3.1, 3.2, 4 and 5, as the case may be. Following adjustments may be required to be done:-

1. If IGST paid has been reported in GSTR-3B in 3.1(a)[domestic supplies] instead of 3.1(b)[exports] and IGST shown to have been paid under Table 6A of GSTR 1 of that tax period, appropriate adjustment may be done in subsequent month.

2. If IGST paid on exports has been declared as ZERO in Table 3.1(b), whereas, IGST shown to have been paid under Table 6A of GSTR 1 for that tax period, the correct amount can be declared and offset while filing GSTR 3B of subsequent tax period.

3. If IGST paid on exports declared in Table 3.1(b) is lesser that the total IGST shown to have been paid under Table 6A and Table 6B of GSTR 1, differential amount of IGST can be paid through GSTR 3B of subsequent tax period.

While making adjustment in the output tax liability or input tax credit, there can be no negative entries in the Form GSTR-3B. The amount remaining for adjustment, if any, may be adjusted in the return(s) in Form GSTR3B of subsequent month(s) and, in cases where such adjustment is not feasible, refund may be claimed.

Where adjustments have been made in Form GSTR-3B of multiple months, corresponding adjustments in Form GSTR-1 should also preferably be made in the corresponding months.

In all these cases, GST System shall aggregate the amount of IGST shown to have been paid under Table 6A/6B and 9A of GSTR 1 and the aggregate IGST amount actually paid through Table 3.1(b) and validation will be done on the basis of cumulative IGST amount of multiple tax period.

If such adjustment is not possible due to reason that Exporter don't have Domestic Inter-State sales for adjusting IGST Value or where it is not possible to compute the correct value of 3.1(b) using system logic, GST field officers deputed in Customs Houses to specifically scrutinize the returns and seek necessary clarifications from the exporter where ever necessary. The GST officers shall reconcile the data submitted by exporters in GSTR-1 and GSTR 3B so as to enable those cases to be processed further.

Case 4: Incorrect Filing of Shipping Bill

Taxpayer mentioned exports against LUT under Shipping Bills without tax, whereas declared such export as IGST paid, under GST System. [Exports declared 'NA' instead of 'P' in Shipping Bill]

Resolution:

Where in shipping bills, exporters have wrongly mentioned the status of IGST payment as 'NA' (without payment) instead of mentioning 'P' (with IGST payment), despite the fact that IGST has been paid and reflected in GSTR-3B/Table 6A of GSTR-1, manual interface by officer has been allowed after the officer is satisfied about actual payment of IGST based on GST return information forwarded by GSTN. DG(Sys) to open physical interface for the purpose.

Case 5: Non Updation of Courier Shipping Bill at Custom's System

Refund of many retail Exporters are still pending due to non updation of Courier Shipping Bills by Customs. Due to this, IGST validation fails& refund is not being paid. As informed by Customs Authorities, New Dedicated system is being implemented & soon all the refunds will be paid.

How to Check Refund Status at GST Portal

1. Login to www.gst.gov.in
2. Navigate to Services > Refunds > Status of invoice data to be shared with ICEGATE
3. Select Financial Year & Return Month
4. Following window will appear

*Invoices are not transmitted to ICEGATE due to missing SB/Port Details or incorrect Port code. You can view details by clicking on error 'count' and 'Download Failed Invoices' button to download details of failed invoices.

Recommended Action: Amend these errors in Table 9A of subsequent month GSTR-1 by making appropriate corrections and the record shall be revalidated in next execution cycle. No action is required if the invoices are for export of services.

**Invoices were transmitted to ICEGATE but were rejected by ICEGATE due to errors. You can view details by clicking on error count and 'Download Failed Invoices' button to download failed invoices details.

Recommended Action: Amend these errors in Table 9A of subsequent month GSTR-1 by making appropriate corrections and the record shall be revalidated in next execution cycle.

How to Check Status of IGST Validation at ICE Gate

Exporter has to register on https://www.icegate.gov.in for checking IGST Validation at ICE Gate

Registration to be done by using digital signatures (Class 3 specifically for ICE Gate i.e. Different from Class 2 DSC for MCA/Income Tax/GST website/DSC meant for DGFT ) after uploading self-attested scanned copy of authorization letter on the letter head of company, self-attested scanned copy of license, photo ID proof.

Login to https://www.icegate.gov.in

Navigate to: IGST Validation Details > Enter GSTN & Port Code > Click on Validate Port Code > Select Return Month > Enter Captcha& Submit

Detail of Shipping Bills Transmitted from GSTN Portal will appear with following response code

SB001 & SB005 can be rectified by Amending Table 6A data through Table 9A of subsequent GSTR 1.

SB002, SB003 & SB006 can be rectified at Customs in co-ordination with Shipping Company/CHA

SB004There may be duplicate/ repeat transmission of Invoice by GSTN resulting in Error Code SB004. The previous transmission would have already been validated for IGST refund by ICES

Exactly Correct Details of Shipping Bill can be obtained/verified from following menu:

Login to https://www.icegate.gov.in

Navigate to: GSTN Enquiry > Enter IEC & GSTN > Select Shipping Bill Month > Enter Captcha & Submit

Exporter may verify these details every month before filing of GSTR 1 & GSTR 3B to ensure correct details are filed in GST Returns & will result into timely processing of GST Refunds.

Once Refund application is processed, IGST Scroll number is allotted to each Shipping Bill. Thus, one can check disbursement status from following link:-

Login to https://www.icegate.gov.in

Navigate to: IGST Scroll Sanctioned Status > Enter IEC & PAN> Select Location of Port> Select Period > Enter Captcha & Click on IGST Scroll Sanctioned Status

Thus, it can be concluded a complete IT driven system, with minimum human intervention & minimum paper documentation, has been made for processing of Refunds by GSTN. Although many difficulties are being faced by exporters, but resolution is under process to ensure time bound payment of Refund to exporters.

Reference:
1. Circulars/Notifications issued by GST authorities
2. Publications issued by IDTC of ICAI