Refund On Exports: Now Easy

Exporters of goods and services as well as suppliers to SEZ units are now get GST refunds automatically from the department to have ease scrutiny of refunds and fast settlement of claims. Under GSTN as per section 16(3) of the IGST Act,2017, two options are available for refund on account of ‘Zero-rated’ supplies, either through letter of undertaking (LUT) or through claim Input Tax Credit (ITC) on exports, by way of IGST. Currently, the facility of automatic refund is available to those exporters paid Integrated Goods and Services Tax (IGST).

The major problem arises for refund is:-

Problem No.1 – “I filed my GST returns but not getting refund?”

Solution:

The IGST refund would not be processed if it fails any validation at the level of either GSTN or Customs system. Validations are:
(i) Both GSTR 1/Table 6A and GSTR 3B have not been filed for that supply or there are missing invoices in GSTR 1 for that supply.
(ii) Invoices provided in Table 6A of GSTR 1/1E are incomplete, e.g., details of shipping bill and port number/code are not mentioned.
(iii) IGST paid under Table 3.1(b) of GSTR 3B being less than total IGST claimed in Table 6A of GSTR 1/1E of the same period. The claim cannot be more than that of the amount of IGST paid

Correction: –

Correction of errors need to be done in the GST return filed. Table 9A has been provided to carry out those corrections. If the exporter finds that even after the correct filing of return, their shipping bills do not reflect in Customs system (reflected in ICEGATE login of exporter), they may write to GSTN helpdesk.

Problem No.2 – “I have filed correct information in GST return but still my refund is
not sanctioned?

Solution: The matching of data by GSTN with Customs systems , tracked out following errors:

SB001	Invalid SB details

This occurs due to clerical error made by exporter, mentioning of wrong shipping bill number furnished in GSTR 1/Table 6A, which can be rectified by making amendments in GSTR 1 by using Form 9A.

SB002	EGM not filed

Exporter has to approach their shipping line/airline/carrier to file Export General Manifest
(EGM) immediately.

SB003	GSTIN Mismatch

This error occurs when GSTIN declared in the shipping bill does not match with the GSTIN mentioned in the corresponding GST return. In this case too, the exporter has to make necessary changes in GSTR I by use of amendment Form 9A. Exporters should note that there is no provision of amendment in the shipping bill once the EGM is filed.

SB004	Record already received and validated

This error occurs due to duplicate/repeat transmission of shipping bill – invoice record from GSTN. The previous transmission would have already been validated for IGST refund by ICES.

SB005	Invalid invoice number

This one is the most common and repeated error committed by the exporters, occurs due to mismatch of invoice number as mentioned in the invoice table of the shipping bill and that of mentioned in the GSTR 1 for the same supply. This happens due to:
(i) The typographical mistake while entering data in GSTR 1 or the SB.
(ii) The exporter uses two sets of invoices, one invoice for GST and another invoice for exports resulting in mismatch of invoice numbers.
As per the GST Law, the invoice number shall be matched with GSTN to validate exports and IGST payment. There should not be any difference between commercial invoice and GST invoice. IGST is to be paid on the actual transaction value of the supply between the exporter and the consignee, which should be the same as the one declared in the commercial invoice.
If the error SB005, is due to a data entry (typographical) mistake in GSTR 1, it can be amended in Form 9A. But once EGM filed, SB cannot be amended. Also, if the exporter has used a separate invoice in the Shipping Bill, he cannot include that in his GSTR 1 in lieu of his GST invoice. Thus, SB005 error, as of now, cannot be corrected by any amendment either in GSTR
1 or in the shipping bill. It is advised that the exporters should take care so as not to repeat such mistakes in future and ensure that the same GST compliant export invoice is declared at both ends For these cases, a mechanism is being considered by the Board to make the requisite corrections manually in line with the recent amendments in Rule 96 of the CGST Rules, 2017. The said mechanism is expected to be available shortly. It may, however, be noted that these interim workarounds shall only be available as a one-time measure for the past SBs.

SB006	Gateway EGM not available

This error occurs, in case of exports through Inland Container Depot (ICD), if the gateway EGM is not filed electronically or it contains some error. It is noticed that gateway EGM in case of many ICD shipping bills have been manually filed, leading to such refunds not being processed. While the Customs at gateway ports are pursuing this matter with the shipping lines, the exporters can also approach their shipping line to file the EGMs electronically.

ESB000	Successfully Validated, still refund not received

This error comes when all the constraints like GST1N, SB number, invoice number etc. match between GSTN and Customs databases. This code states that the SB is ready for inclusion in the IGST refund scroll. But it may happen in some cases that SB does not appear in the refund scroll. This could be due to:
(i). The exports might have been made under bond or LUT, hence not eligible for refund.
(ii). If a shipping bill covers multiple invoices, few of the invoices might have been successfully validated and other invoices might have some errors
(iii). Composite rate of drawback claimed for such shipping bill during transitional period between 01.07.2017 to 30.09.2017, thus making shipping bill ineligible for IGST refund.
(iv). Where the IGST claimed amount is less than Rs 1000/-.
When this type of error occurs approach to EDI section at gateway port customs with correct bank account number, bank name, bank address and IFSC code.

PFMS Validation Error	Bank Account details of the exporter not validated

 

CA RANJAN MEHTA
+91-9672372075
S-15, 16 Krishna Mall, Laxmi Mandir Tiraha,
Tonk Road, Jaipur (Raj) 302015
Email: rmaoffice.gst@gmail.com

Refund of Exports on Payment of IGST – Still the best method to get refunds?

Exporters of goods and services as well as suppliers to SEZ units are now getting GST refunds automatically from the department. Under GSTN as per section 16(3) of the IGST Act, 2017 two options are available for refund on account of ‘Zero-rated’ supplies, either through letter of undertaking (LUT) or through charging IGST in Exports Invoices. Currently, the facility of automatic refund is available for those exporters who paid Integrated Goods and Services Tax (IGST), through customs mechanism. However, this method is easy and fast, still the assessees are facing some problems due to unawareness about the procedure and carelessness while filing the GST returns and Shipping Bills. In this post we are discussing a few problems arising during such refunds and there probable solutions.
Problem No. 1 – “Earlier I was receiving the refunds but now they have stopped”
Earlier the exporters were getting regular refunds but recently various frauds were identified by the GST department in such IGST refunds where the exporters received these refund on the basis of fake Invoices’ ITC. Nationwide searches were conducted by the department of CGST and Customs and fraud of approx.. 1200 crore was unearthed. In this process the department marked more than 10000 exporters as risky exporters at various ports. Those exporters’ refund and Duty Draw Back were withheld by the GST systems.
Till now, there was no process of resolving this tag of risky exporter and the exporters were unaware what to do. Then a circular No. 22/2019 dated 24.07.2019 was issued by the department where the CGST field formations i.e. jurisdictional range in the city of registration of the exporter was to conduct an investigation into the ITC and exports of such exporter. Based on their report the hold will be removed by the customs department. However, the field formations were not receiving any such intimations in this regard and exporters were helpless due to this problem. But now the field formations have started receiving information from the customs and have started this process. After such Investigation by the department a report is being shared by them with the customs authorities who on receipt of a satisfactory report Customs department is now issuing refunds and drawbacks. Thus it is advised to all the exporters whose refunds are withheld by the department even after processed status to reach out to their field formations for getting such investigation done from them.

Problem No.2 – “I filed my GST returns but not getting refund?”

Solution: The IGST refund would not be processed if it fails any validation at the level of either GSTN or Customs system. Validations are:
i) Both GSTR 1/Table 6A and GSTR 3B have not been filed for that supply or there are missing invoices in GSTR 1 for that supply.
(ii) Invoices provided in Table 6A of GSTR 1/1E are incomplete, e.g., details of shipping bill and port number/code are not mentioned.
(iii) IGST paid under Table 3.1(b) of GSTR 3B being less than total IGST claimed in Table 6A of GSTR 1/1E of the same period. The claim cannot be more than that of the amount of IGST paid
Correction: – Correction of errors need to be done in the GST return filed. Table 9A has been provided to carry out those amendments in the Invoice.
In case if the refund is stuck due to incorrect filing of return (i.e. filing of turnover in para 3.1
(a) (i.e. Domestic sales instead of para 3.1 (b) (i.e. Zero rated sales)), then the assessee needs to approach the customs department in terms of Circular number 25/2019-Customs dated 27th August, 2019 r/w Circular No. 12/2018- Customs dated 29.05.2018. Once the tax paid amount matches in GSTR-1 and 3B then the GSTN transfers the data to the Customs ICEGATE portal for further verification. If the exporter finds that even after the correct filing of return and transmission of data to GSTN, there may be further errors in the shipping bills and Invoices due to which the refund might have been stopped by the Customs authorities.

Problem No.3 – “I have filed correct information in GST return but still my refund is not sanctioned?”

Solution: The matching of data by Customs systems can have following errors (These errors can only be viewed after creating a login at ICEGATE portal. The Customs department in the month of June, 2019 sent the automatic login credentials to all the exporters on the mobile number and email ID registered with them. However an assessee can also get himself registered separately if such details were not received to him.):

SB001	Invalid SB details

This occurs due to clerical error made by exporter, mentioning of wrong shipping bill number furnished in GSTR 1/Table 6A, which can be rectified by making amendments in GSTR 1 by using Form 9A.

SB002	EGM not filed

 

Exporter has to approach their shipping line/airline/carrier to file Export General Manifest (EGM) immediately.

SB003	GSTIN Mismatch

 

This error occurs when GSTIN declared in the shipping bill does not match with the GSTIN mentioned in the corresponding GST return. In this case too, the exporter has to make necessary changes in GSTR I by use of amendment Form 9A. Exporters should note that there is no provision of amendment in the shipping bill once the EGM is filed.

SB004	Record already received and validated

This error occurs due to duplicate/repeat transmission of shipping bill – invoice record from GSTN. The previous transmission would have already been validated for IGST refund by ICES. NO action is required here.

SB005	Invalid invoice number

This one is the most common and repeated error committed by the exporters, occurs due to mismatch of invoice number as mentioned in the invoice table of the shipping bill and that of mentioned in the GSTR 1 for the same supply. This happens due to:
(i) The typographical mistake while entering data in GSTR 1 or the SB.
(ii) The exporter uses two sets of invoices, one invoice for GST and another invoice for exports resulting in mismatch of invoice numbers.
As per the GST procedures, the invoice number shall be matched with GSTN to validate exports and IGST payment. There should not be any difference between commercial invoice and GST invoice. IGST is to be paid on the actual transaction value of the supply between the exporter and the consignee, which should be the same as the one declared in the commercial
invoice. If the error SB005, is due to a data entry (typographical) mistake in GSTR 1, it can be amended in Form 9A. But once EGM filed, SB cannot be amended. Also, if the exporter has used a separate invoice in the Shipping Bill, he cannot include that in his GSTR 1 in lieu of his GST invoice. Thus, SB005 error, as of now, cannot be corrected by any amendment either in GSTR 1 or in the shipping bill.
It is advised that the exporters should take care so as not to repeat such mistakes in future and ensure that the same GST compliant export invoice is declared at both ends For these cases, a mechanism is being considered by the Board to make the requisite corrections manually in line with the recent amendments in Rule 96 of the CGST Rules, 2017. The said mechanism is explained in Circular No 26/2019 – Customs dated 27.08.2019, for Shipping Bills filed upto 31.07.2019, where customs department can be reached to manually correct the errors and issue the refund. It may, however, be noted that these interim workarounds shall only be available as a one-time measure for the past SBs.

SB006	Gateway EGM not available

This error occurs, in case of exports through Inland Container Depot (ICD), if the gateway EGM is not filed electronically or it contains some error. It is noticed that gateway EGM in case of many ICD shipping bills have been manually filed, leading to such refunds not being processed. While the Customs at gateway ports are pursuing this matter with the shipping lines, the exporters can also approach their shipping line to file the EGMs electronically.

ESB000	Successfully Validated, still refund not received

This error comes when all the constraints like GST1N, SB number, invoice number etc. match between GSTN and Customs databases. This code states that the SB is ready for inclusion in the IGST refund scroll. But it may happen in some cases that SB does not appear in the refund scroll. This could be due to:
(i). The exports might have been made under bond or LUT, hence not eligible for refund.
(ii). If a shipping bill covers multiple invoices, few of the invoices might have been successfully validated and other invoices might have some errors
(iii). Composite rate of drawback claimed for such shipping bill during transitional period between 01.07.2017 to 30.09.2017, thus making shipping bill ineligible for IGST refund.
(iv). Where the IGST claimed amount is less than Rs 1000/-.

PFMS Validation Error	Bank Account details of the exporter not validated

When this type of error occurs approach to EDI section at gateway port customs with correct bank account number, bank name, bank address and IFSC code.

CA RANJAN MEHTA
+91-9672372075
S-15, 16 Krishna Mall, Laxmi Mandir Tiraha,
Tonk Road, Jaipur (Raj) 302015
Email: rmaoffice.gst@gmail.com

37th Meeting of the GST Council, Goa 20 September, 2019

PRESS RELEASE ON GST RATE ON SERVICES

GST Council in the 37th meeting held on 20th September, 2019 at Goa took following decisions relating to changes in GST rates, ITC eligibility criteria, exemptions and clarifications on connected issues.

(A) Exemptions/Changes in GST Rates/ ITC Edibility Criteria

 

Hospitality and tourism:

1. To reduce the rate of GST on hotel accommodation service as below: –

Transaction Value per Unit (Rs) per day	GST
Rs 1000 and less	Nil
Rs 1001 to Rs 7500	12%
Rs 7501 and more	18%

2. To reduce rate of GST on outdoor catering services other than in premises having daily tariff of unit of accommodation of Rs 7501 from present 18% with ITC to 5% without ITC. The rate shall be mandatory for all kinds of catering. Catering in premises with daily tariff of unit of accommodation is Rs 7501 and above shall remain at 18% with ITC.

Job work service:

1. To reduce rate of GST from 5% to 1.5% on supply of job work services in relation to diamonds.
2. To reduce rate of GST from 18% to 12% on supply of machine job work such as in engineering industry, except supply of job work in relation to bus body building which would remain at 18%.

Warehousing:

To exempt prospectively services by way of storage or warehousing of cereals, pulses, fruits, nuts and vegetables, spices, copra, sugarcane, jaggery, raw vegetable fibres such as cotton, flax, jute etc., indigo, unmanufactured tobacco, betel leaves, tendu leaves, rice, coffee and tea.

Transportation:

To increase the validity of conditional exemption of GST on export freight by air or sea by another year, i.e. till 30.09.2020.

Insurance:

1. To exempt “BANGLA SHASYA BIMA” (BSB) crop insurance scheme of West Bengal Government.

2. To exempt services of life insurance business provided or agreed to be provided by the Central Armed Paramilitary Forces (under Ministry of Home Affairs) Group Insurance Funds to their members under the respective Group Insurance Schemes of these Central Armed Paramilitary forces.

Export promotion:

1. To exempt services provided by an intermediary to a supplier of goods or recipient of goods when both the supplier and recipient are located outside the taxable territory.

2. To issue a notification under Section 13(13) of IGST Act notifying the place of supply of specified R&D services (such as Integrated discovery and development, Evaluation of the efficacy of new chemical/ biological entities in animal models of disease, Evaluation of biological activity of novel chemical/ biological entities in in-vitro assays, Drug metabolism and pharmacokinetics of new chemical entities, Safety Assessment/ Toxicology, Stability Studies, Bio Equivalence and Bio Availability Studies, Clinical trials, Bio analytical studies) provided by Indian Pharma companies to foreign service recipients, as the place of effective use and enjoyment of a service i.e. location of the service recipient.

3. To clarify that the place of supply of chip design software R&D services provided by Indian companies to foreign clients by using sample test kits in India is the location of the service recipient and section 13(3)(a) of IGST Act, 2017 is not applicable for determining the place of supply in such cases.

Miscellaneous

1. To allow the registered authors an option to pay GST on royalty charged from publishers under forward charge and observe regular GST compliance.

2. To notify grant of liquor licence by State Governments against payment of license fee as a “no supply” to remove implementation ambiguity on the subject.

(B) RATIONALIZATION/ TRADE FACILITATION MEASURES:

1. To allow payment of GST on securities lending service under reverse charge mechanism (RCM) at the merit rate of 18% and to clarify that GST on securities lending service for period prior to RCM period shall be paid on forward charge basis. IGST shall be payable on supply of these services and in cases where CGST/SGST/UTGST have been paid, such taxpayers will not be required to pay tax again.

2. To allow RCM to suppliers paying GST @ 5% on renting of vehicles, from registered person other than body corporate (LLP, proprietorship) when services provided to body corporate entities

3. To exempt services related to FIFA Under-17 Women’s World Cup 2020 similar to existing exemption given to FIFA U17 World Cup 2017.

(C) CLARIFICATIONS:

1. To clarify the scope of the entry ‘services of exploration, mining or drilling of petroleum crude or natural gas or both”.

2. To clarify taxability of Passenger Service Fee (PSF) and User Development Fee (UDF) levied by airport operators.

CA RANJAN MEHTA
+91-9672372075
S-15, 16 Krishna Mall, Laxmi Mandir Tiraha,
Tonk Road, Jaipur (Raj) 302015
Email: rmaoffice.gst@gmail.com

Note: It is proposed to issue notifications giving effect to these recommendations of the
Council on 1st October, 2019

THE GST COUNCIL 37TH MEETING (RECOMMENDATIONS)

THE GST COUNCIL 37TH MEETING (RECOMMENDATIONS)

THE GST COUNCIL 37TH MEETING (RECOMMENDATIONS)

EXEMPTIONS FROM GST/IGST

THE GST COUNCIL 37TH MEETING (RECOMMENDATIONS)

Entry Tax on Import of Goods

 

Entry Tax on Import of Goods – What you should know?

The Government have started flooding the dealers with series notices over Entry Tax liability where goods were brought into the states from out of India. What are the legal provisions behind these notices and what has changed just now, one should know. In this write up, we are trying to explain this issue in the light of Rajasthan Entry of Goods into Local Areas Act, 1999.

What is Entry tax?

It is a levy of tax in cases where the goods are brought into the local area (i.e. in the state) from outside the local area. It taxes the goods when they enter in the state. All goods which are brought into the local area from outside the local area for the purpose of consumption, use or sale within the state are being taxed under these provisions. It is essentially a tax levied on all the goods which are brought in the state from outside the state for the purpose of sale, consumption and use in the state.

What is the issue related to imports?

In case of imports, however the material is bought from outside the state into state, it was contended that it do not fulfil the following criteria:-

1. That material was not brought from any other state into the state, whereas the Entry tax law required hat movement should have occasioned from any other state, which is not the case.

2. That the import materialises directly in the state at the business premise of the person importing it, thus it is also not the case where the material is “brought into”. It was said that occasioned in the state only. Thus not a case of Entry Tax. However, the Hon’ble Supreme Court in a rejected the above contentions and upheld the view of the departments of various states that the Entry tax is leviable on all the goods imported into the local area for the purpose of sale, use or consumption within the state.

When they can be taxed?

It is not necessary always that the Entry tax will be levied in each case where the goods are imported. There are certain exemptions and situations where the goods can be taken out of this levy of Entry Tax. Such cases are:-

1. Goods are sold in the state as such and VAT is paid on those goods in the state
2. Goods are not sold within the state I.e. sold outside the state

3. Goods do not fall under the category of entry tax goods i.e. there are only 53 items in the state of Rajasthan on which the entry tax is levied. Rest all the items are out of this category. Dealer can fight for exclusion of his item from a particular category on case to case basis.

4. Goods are used in a works contract where the property in the goods have been transferred to the buyer.

The period for which the department can ask for Entry tax?

As on 31.03.2019, where the department had issued the notice of entry tax, the department had the right to issue notices for the financial year 2013-14 not before that (i.e. within 5 years from the end of the FY). Thus, all the periods could be opened from FY 2013-14 till 30.06.3017 (afterwards the entry tax was subsumed in GST).

What should a dealer do in case a notice of Entry tax is received?

1. See whether the notice is before FY 2013-14.
2. See whether the details asked correspond to his imports.
3. See whether his goods confirm to the list of goods on which Entry tax is leviable?
4. To see whether he falls to any of the exceptions or exemptions to entry tax law?

5. Finally file the reply to the department taking resort to the details and information available. In the end, we would conclude that though levy of Entry Tax has been upheld in case of imported goods by the Supreme Court, still the assessee has a lot of space to see and cast out his goods from such levy and save themselves. One need a cautious look at various imports made by him and there eligibility for Entry Tax.

CA RANJAN MEHTA
+91-9672372075
S-15, 16 Krishna Mall, Laxmi Mandir Tiraha,
Tonk Road, Jaipur (Raj) 302015
Email: rmaoffice.gst@gmail.com