November 2020 2
Refund of unutilised ITC in GST
According to Goods and Service Act 2017 section 54 say about refund of unutilized input tax credit ( ITC).
Who can claim refund of unutilized input tax credit ( ITC) ?
A Registered person can claim refund of unutilized input tax credit ( ITC)
When refund of unutilized input tax credit ( ITC) allow
Accumulation of Input Tax Credit happens when the tax paid on inputs is more than the output tax liability.
Such accumulation will have to be carried over to the next financial year till such time as it can be utilised
by the registered person for payment of output liability.
- if such credit accumulation is on account of zero rated supplies
2 On account of inverted duty structure, subject to certain exceptions.
As per Section 54(3) of the CGST Act, 2017, a registered person may claim refund of unutilised input tax credit
at the end of any tax period. A tax period is the period for which return is required to be furnished.
Thus, a taxpayer can claim refund of unutilised ITC on monthly basis.
Refund of unutilised input tax credit is allowed only in following two cases
a) Zero rated supplies made without payment of tax:
As per Section 16(3) of the IGST Act, 2017,
a registered person making zero rated supply is eligible to claim refund under either of the
following options, namely: –
• Supply of goods or services or both under bond or Letter of Undertaking, subject to such conditions,
safeguards and procedure as may be prescribed, without payment of integrated tax and claim
refund of unutilised input tax credit; or
Supply of goods or services or both, subject to such conditions, safeguards and procedure as may
be prescribed, on payment of integrated tax and claim refund of such tax paid on goods or services
or both supplied.
The first category pertains to refund of unutilised ITC for which the registered person has to supply
under Bond/LUT (as prescribed in Rule 96A of CGST Rules)and in the second category supply has been
made after payment of Tax (IGST). In both the cases, refund can be applied under Section 54 of
the CGST Act, 2017 read with Rule 89 or Rule 96 , as
the case may be, of the CGST Rules, 2017.
b) Inverted duty structure:
Where the credit has accumulated on account of rate of tax on inputs being higher than the rate of tax on output
supplies (other than nil rated or fully exempt supplies), except supplies of goods or services or both as may be notified by the Government on the recommendations of the Council. In such cases also, refund can be applied under Section 54 of the CGST Act, 2017 read with Rule 89 of the CGST
Rules, 2017. It should be noted that no refund of unutilised input
tax credit is allowed in cases where the goods exported out of India are subjected to export duty. Further, no
refund of input tax credit is allowed, if the supplier of goods or services or both avails of drawback in respect
of central tax or claims refund of the integrated tax paid on such supplies.
Mean refund of unutilized input tax credit ( ITC) can not be claimed in normal course of business
Compulsory audit of accounts (Section 44AB)
According to Income Tax Act 1961 compulsory audit of account need in case of annual turnover exceed Rs. 1 crore in any previous year ,the tax audit conducted by a Chartered Accountant. Tax Audit mean comprehensive audit of books accounts.
Who need to tax audit?
- In case of annual turnover exceed Rs. 1 Crore in any previous year
- In case of a person carrying on profession the gross receipts is exceed Rs.50,00,000 during the previous year.
- Where a assesse who is carrying on a procession under section 44ADA and the income from such profession is lower than 50% of gross receipts and income also exceeds the maximum amount which is not chargeable to income tax.
- Where a person covered under section 44AE, 44BB,44BBB and who want to claims lower than the deemed profit and gains.
- If a person covered under presumptive tax scheme section 44AD and his annual turnover does not exceed Rs. 2 Crore