The Circulars are primary issued with the intent to bring into picture clarification pertaining to issues about which people are dubious. However, at times, an unintentional consequence may be such circulars resulting into imposition of harsh provisions on the taxpayers. Such are the times when the Courts are compelled to step in.
Lately, similar situation has been witnessed in relation to Circular No. 125/44/2019-GST dated 18/11/2019. Para 8 thereof has come to gain plenty of limelight owing to the adverse times that it brings for the exporters.
Para 8 of the aforementioned Circular read as-
“The applicant, at his option, may file a refund claim for a tax period or by clubbing successive tax periods. The period for which refund claim has been filed, however, cannot spread across different financial years. Registered persons having 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 quarterly basis, can only apply for refund on a quarterly basis or clubbing successive quarters as aforesaid. However, refund claims under categories listed at (a), (c) and (e) in para 3 above must be filed by the applicant chronologically. This means that an applicant, after submitting a refund application under any of these categories for a certain period, shall not be subsequently allowed to file a refund claim under the same category for any previous period. This principle / limitation, however, shall not apply in cases where a fresh application is being filed pursuant to a deficiency memo having been issued earlier.“
In brief the para 8 purported chronological filing of refund application for tax periods in case more than one financial years were involved in the following cases-
1) Refund of unutilised ITC where export of goods/services made without tax payment
2) Refund of unutilised ITC in case of supplies to Sez unit/developer without tax payment
The filing of refund application for tax periods in a chronological manner has come to be seen as a deterrent in the smooth running of businesses in addition to the fact that it bars the applicant from availing refund of unutilised ITC to which he/she is rightfully entitled to under the Law.
Owing to it’s harsh implications, Uttarakhand High Court has stayed the operation of Para 8 of the Circular. The next hearing in the said matter is posted for 10/3/2022.
