ITC refund will be allowed for certain supplies even without invoice: CBIC

Refund of accumulated tax credit related to imports and inward supplies liable to reverse charge will be cleared by field offices even if the same is not reflected in purchase return Form GSTR-2A, the CBIC has said.

Issuing a clarification, the Central Board of Indirect Taxes and Customs (CBIC) said it has received various representations seeking clarification on the issue related to refund of accumulated ITC in respect of invoices whose details are not reflected in the Form GSTR-2A of the applicant.

GSTR-2A is a purchase return auto-generated by the GST system based on the transaction between a business and its supplier.

In March, the CBIC had said the refund of accumulated input tax credit (ITC) would be restricted to only those invoices, the details of which are uploaded by the supplier in Form GSTR-1 and are reflected in the Form GSTR-2A of the applicant.

Prior to this, refund was being granted even in respect of credit availed on the strength of missing invoices (not reflected in Form GSTR-2A) which were uploaded by the applicant along with the refund application on the common portal.

The CBIC in a clarification issued on Wednesday said it has received representations that in some cases, refund-sanctioning authorities have rejected the refund of accumulated ITC, citing the March circular on the basis that the details of invoices/ documents are not reflected in Form GSTR-2A of the applicant.

"The aforesaid circular does not in any way impact the refund of ITC availed on the invoices / documents relating to imports, ISD invoices and the inward supplies liable to reverse charge (RCM supplies) etc.

"It is hereby clarified that the treatment of refund of such ITC relating to imports, ISD (input service distributor) invoices and the inward supplies liable to reverse charge (RCM supplies) will continue to be same as it was before the issuance of Circular dated March 31, 2020," CBIC said.

AMRG & Associates Senior Partner Rajat Mohan said, "Select tax jurisdictions have taken hyper technical view of refund circular and initiated rejection of tax refunds on illegal and illogical grounds which has now been clarified by the board."

Nangia & Co LLP Director GST Tanushree Roy said this circular has clarified that refund would be granted in respect of relevant supplies (even if not reflected in FORM GSTR-2A) that were uploaded by the applicant along with the refund application on the GST common portal.

"This circular provides clarity to the GST authorities for processing of refund applications and would safeguard taxpayers from irrational/ frivolous rejection of eligible refund claims on account of accumulated ITC on relevant supplies," Roy said.

Abhishek Jain, tax partner, EY, said, "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 giving credence to the practical applicability of the same in certain scenarios.