India Eases GST Refund Processing Norms For Exporters
Refund claims of unutilised input tax credit are getting rejected because invoices weren’t uploaded by sellers in GSTR-2A forms.
The government has said pending goods and service tax refunds for exporters will be processed for the supplies that they import, as authorities were rejecting such claims based on an incorrect interpretation of an earlier circular.
Tax authorities are rejecting refund claims of unutilised input tax credit as the invoices for them weren’t uploaded by their sellers in GSTR-2A forms. These forms are used to file purchase-related details that’s automatically generated by filing details in the sales return GSTR-1.
If an Indian exporter makes a purchase from a supplier in China, the supplier won’t upload an invoice for the exporter, Rajat Mohan, partner at AMRG & Associates, told BloombergQuint. Thus, exporters’ refund claims were rejected by tax authorities, he said.
This led to an accumulation of input tax credit on import of goods and services, and supplies on which GST is levied through reverse-charge mechanism, Mohan said. Such details of the invoices weren’t reflected in GSTR-2A of the applicant, he said.
Under the reverse-charge mechanism, liability to pay GST is on the recipient instead of the supplier of goods and services.
This was based on interpretation of an earlier government circular that mandated taxpayers to file GSTR-2A to claim refund, Mohan said.
Agreed Abhishek Jain, partner at EY India. The issue of rejection by lower level officers was significantly prevalent in certain jurisdictions where officers had taken a literal interpretation of the earlier circular without considering practical applicability of the same in certain scenarios, he said.
“This would help provide significant relief to exporters who were facing serious challenges on ground to avail their refunds.”
Directors’ Remuneration
The Department of Revenue has also clarified that GST will be levied on the remuneration paid to independent directors and those directors who aren’t employees of a company. The tax will have to be paid by the company, on a reverse-charge basis.
Some directors who work in dual capacity, as an employee and a consultant, will be liable to pay GST on their consultation fee, which isn’t a part of their salary, Mohan said, adding that this would end several interpretations due to contrary advance rulings.