GST Refund Claim for Any Period and for the one which spread through two financial years can be filled

gst refund claim

Hon’ble Delhi High Court permitted the claim of GST Refund for two financial years in case of exports

In the matter of M/s Pitambra Books Private Limited vs Union of India

Wide W.P. (C) No. 627/2020 

GST Refund for two financial years decision of the high court

On the 21st of January 2020, the Hon’ble Justice of Delhi High Court gave a remarkable verdict in the case of M/s Pitambra Books Private Limited where petitioner was in the manufacturing and export of books where the procurement of raw material and export was spread across the financial year. 

Filing of GST refund claim across the financial year is restricted by Para 8 of Circular 125/44/2029-GST dated 18th November 2019 and also by online portal of GST. Hon’ble High Court held that the department has cognizant the issue of the spread of refund applications across months/quarters, related to GST Refund for two financial years. 

Then restriction on spread across the financial year is completely arbitrary. Further, circulars and instructions merely represent an understanding of statutory provisions and circular contrary to statutory provisions that have no existence in law. Accordingly, the petitioner was allowed to file a refund application across the financial year.

1. Facts of the Case Related to claim on GST Refund for two financial years

  • The petitioner, Pitambra Books Private Limited, is a manufacturer and exporter of Books. Its export has qualified as “Zero Rated Supply” under IGST Act, 2017.
  • Production process of Petitioner was spread over the months where purchase of raw materials carried out from November 2017 to June 2018 and manufacturing finally completed in month June 2018 and accordingly, petitoner exported goods in FY 2018-19.
  • After export in June 2018, the petitioner tried to file a refund application through Common Portal, but couldn’t complete it Due to the restrictions imposed by Circular No. 37/11/2018 and Circular No. 125/44/2019-GST which state that refund application can’t spread over a different period. Therefore, the petitioner couldn’t file the refund claim for the period of November 2017- June 2018. 
  • Therefore, the petitioner moved a writ petition in Delhi High court challenging the validity of provisions of circular.

2. Legal provisions involved in GST Refund for two financial years:

  • Section 54(1) of CGST Act, 2017 has imposed time limit of 2 years for filing application of refund from relevant date.
  • Para 8 of Circular No. 125/44/19-GST dated 18.11.2019 provides that application for refund can be filed for any tax period by clubbing successive tax periods. However, the period of refund cannot spread across different financial years. Further, Registered persons having an aggregate turnover of up to Rs. 1.5 crore in the preceding financial year or the current financial year opting to file FORM GSTR-1 on a quarterly basis, can only apply for a refund on a quarterly basis or clubbing successive quarters as aforesaid.
  • Rule 89(4) of CGST Rules, 2017 provides a formula for calculation of refund in case of export of goods without payment of IGST.

3. Arguments of Petitioner:

  • Para 8, which restricts claims of refund, is in violation of Article No. 286(1) of the constitution of India as it states that no law shall impose or authorize the imposition of tax on export of goods.
  • As per Section 54(1) read with Rule 89(4)(f) of CGST Rules, the exporter is eligible to claim the refund within 2 years from the relevant date.
  • Circular No. 17/17/2017 earlier provided that refund application can spread over tax period. However, after considering representations, the government becomes cognizant of such an issue. And accordingly, permitted the filing of refund applications after clubbing more than one tax period. However, still, the government failed to consider the cases with refund spread across the financial year.

4. Arguments of Respondent:

  • Respondent argued that the petitioner does not have an unfettered right for claiming a refund.
  • Section 16(3) of the IGST Act clearly states that the grant of refund is subject to conditions and therefore, the government has the authority to impose conditions for granting a refund.
  • The tax period is the period in which taxpayers filed the return. The return under the Act has to be filed on a month-to-month basis and, therefore, the petitioner does not have any right to claim a refund for one financial year, in another.

5. Precedence of Hon’ble High Court of Delhi:

The high court gave the following precedence in the case of GST Refund for two financial years.

  • The Government has cognizant the difficulties faced by exporters and therefore, permitted the filing of refund claim for a month/quarter and subsequent month/quarter.
  • However, the restriction that refunds can’t be spread over a financial year is arbitrary in nature. There is no rationale for the same.
  • In exports, availability of the rotation of funds is essential for the business to thrive and businesses do not run according to the whims of the executive authorities
  • Merely because the petitioner made exports in the month of June 2018, there is no justification to deny the refund of the ITC which has accumulated in the previous financial years. 
  • Any limitation or restriction on refund against zero-rated supply would obliterate the petitioner’s right. As he has every right to claim a GST refund of all the taxes paid on the domestic purchases used for the purpose of zero-rated supplies.
  • The Respondents cannot deny any benefit, which the substantive provisions of the law confer on the taxpayers.
  • Further, clarifications/circulars issued by the Government merely represents the understanding of the statutory provisions. They are not binding upon the court. It is for the court to declare what the particular provision of the statute says. Furthermore, it is not for the executive.  (Supreme Court in the case of Commissioner of Central Excise, Bolpur vs. Ratan Melting & Wire Industries (2008) 13 SCC 1 = 2008-TIOL-194-SC-CX-CB)
  • Accordingly, stay granted for Para 8 of Circular No.  125/44/2019-GST dated 18.11.2019 and also directed the respondent to accept the application of petitioner electronically or manually.

6. Impact of the Order

After the judgment of Delhi High Court, the restriction on claiming refunds for the period, which spread across two financial years and claiming refunds in chronological order, is no longer maintainable. Hence, the taxpayer can file a GST refund claim for any period and for the one which spread through two financial years.

Read More: Standard Operating Procedure in case of alerts in IGST Refund

DISCLAIMER: The views expressed are strictly of the author and VJM & Associates LLP. The contents of this article are solely for informational purpose. It does not constitute professional advice or recommendation of firm. Neither the author nor firm and its affiliates accepts any liabilities for any loss or damage of any kind arising out of any information in this article nor for any actions taken in reliance thereon.

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