QUESTION

Exporter had applied for refund of ITC for Feb `18 by debiting I-C-S GST heads proportionately. In the refund order, the Assistant Commissioner. disagreed with manner of debit of electronic credit ledger in respective head vis-a-vis I-C-S GST by citing para 3 of circular 59/33/2018-GST dt. 04.09.18 and has granted refund only as per the circular and has re-credited the wrongfully debited heads. Now, how to claim the refund of ITC re-credited? Also, in a consolidated manner, there is minor excess refund claim but rejection is only due to priority set as per circular.

Answer

Facts of the case: Exporter had applied for refund of ITC for Feb 18 by debiting I-C-S GST heads proportionately. The Asst. Comm. disagreed with manner of debit of electronic credit ledger in respective head vis-a-vis I-C-S GST by citing para 3 of cir. 59/33/2018-GST dtd 04.09.18 and has granted refund only as per the cir and has re-credited the wrongfully debited heads. Now, how to claim the refund of ITC re-credited?

Law applicable: Circular No. 59/33/2018-GST
3. System validations in calculating refund amount

3.1. Currently, in case of refund of unutilized input tax credit (ITC for short), the common portal calculates the refundable amount as the least of the following amounts:

a) The maximum refund amount as per the formula in rule 89(4) or rule 89(5) of the Central Goods and Services Tax Rules, 2017 (hereinafter referred to as the 'CGST Rules') [formula is applied on the consolidated amount of ITC, i.e. Central tax + State tax/Union Territory tax +Integrated tax + Cess (wherever applicable)];
b) The balance in the electronic credit ledger of the claimant at the end of the tax period for which the refund claim is being filed after the return for the said period has been filed; and
c) The balance in the electronic credit ledger of the claimant at the time of filing the refund application.

3.2. After calculating the least of the three amounts, as detailed above, the equivalent amount is to be debited from the electronic credit ledger of the claimant in the following order:

a) Integrated tax, to the extent of balance available;
b) Central tax and State tax/Union Territory tax, equally to the extent of balance available and in the event of a shortfall in the balance available in a particular electronic
credit ledger (say, Central tax), the differential amount is to be debited from the other electronic credit ledger (i.e., State tax/Union Territory tax, in this case).

Interpretation: Circular No. 59/33/2018-GST dtd 04.09.18 has provided the calculation of refundable amount. Assistant Commissioner has granted refund as per the Formula provided in the Circular and has recredited the excess amount in ECL.

In your case if the recredited amount can be used for payment of tax then no problem, it is a matter of time you will convert it in cash by making payment against outward supply.

However Circular cannot override Law, so if you are not convinced with the Circular then you should file an appeal with Commissioner Appeal against the order of Assistant Commissioner with prayer to refund the amount in cash instead of recredit of it.

Conclusion: You can use the recredited amount for payment of tax on outward supply or file an appeal with Commissioner Appeal against the order of Assistant Commissioner with prayer to refund the amount in cash instead of recredit of it.(Reply dt.22-07-2020)