Guidelines to implement hassle free IGST refund mechanism
IGST refund- an introduction
Exports under GST regime has been made as Zero rated as per the IGST Act, 2017. Moreover, exports has been defined as an inter-state supply, thus it is leviable to IGST1&2 .To keep a parity with the earlier regime and with a vision for boosting exports without imposing tax burden on exporters the Government has provided two refund alternatives to exporters. The first alternative, requires Exports to supply goods under LUT/Bond i.e. Exports without payment of IGST and claim refund of accumulated Input Tax Credit (ITC) for making such zero rated supply. The second alternative requires exporter to make payment of IGST and claim refund of such IGST amount on export of goods from India.
The second alternative of making payment of IGST and refund thereof is an automated process, which makes shipping filed by exporters as refund application and once all details are properly filed, after automated processing, the refund amount of IGST paid hits bank account of the exporters within 15 to 20 days of export. This article deals with various parameters, process and useful tips by virtue of which hassle free IGST refund can be obtained. The article would basically highlight on the following aspects:
- The Refund procedure involved.
- Transfer of data from GSTIN to ICEGATE.
- Errors generated and the Rectification methods.
- Bank Account to be PFMS Validated.
- ICEGATE Registration.
Before going into the detailed refund procedure, it is imperative to understand the enabling provisions and Rules under the IGST Act granting Refund of IGST:
Enabling provisions and rules
Section 16(3)(b) of the IGST Act, 2017 allows refund of IGST. Moreover, in cases where exports have been made on payment of IGST, the shipping bill filed by an exporter shall be deemed to be an application for refund of integrated tax paid on the goods exported out of India. Moreover, such an application shall only be deemed to be filed only when both the export general manifest (EGM) and valid return in Form GSTR- 3B/GSTR-3(as the case may be) has been filed2.
Refund procedure involved
The refund procedure has been designed in such a manner that IGST Refunds get automatically transferred to the bank account of the exporters with least of departmental intervention. The refund procedure is streamlined to such an extent that majority of refund claims get processed and sanctioned within 5 days of filing of GSTR-1 and GSTR-3B.
After filing the Shipping bill as stated above, the details of relevant export invoices as contained in Form GSTR-1 shall be transmitted electronically by the GSTIN to ICEGATE and a confirmation will be resend by the ICEGATE that the goods covered under the aforesaid export invoices has been exported.
Transfer of data from gstn to ICEGATE
Sometimes it so happens that the data is not being transferred from GSTIN to ICEGATE and this happens only after the IGST validation procedure is run in a Shipping Bill (SBs) on which Refund is to be paid, it may be noted that the validation procedure for IGST refund is run only for those SBs where EGM has been filed and for which the GSTN has transmitted the GSTR 1 returns data to Customs.
Therefore, one has to take note of the following conditions so that the data is transferred from GSTIN to ICEGATE in the process of obtaining refund, which is mentioned herein below:
- Both, GSTR1/6A and GSTR3B should have been filed for that supply.
- The IGST paid on exports declared in GSTR 3B should not be less than that declared in GSTR1/6A.
- There are no missing invoices in GSTR1 for that supply If the exporter finds that even after the correct filing of returns as above, their SBs do not reflect in this report, they may be advised to write to GSTN helpdesk.
Non matching of supply of zero rated details between GSTR 1 and GSTR 3B filed by exporter, will hold back transfer of date from GSTN to ICEGATE. In case of wrong information filed for the a particular month, can also be rectified by making amendment entries in respective tables in the returns of subsequent month. As this is an automated process, hence unless such numbers specified in GSTR returns are not matched, the date transmission shall not take place.
Errors generated and the rectification methods:
After the data has been transmitted from the GSTN to ICEGATE, the IGST refund module shall automatically grant refund after validating the Shipping Bill data with available in ICES against the GST Returns data transmitted by GSTN. The matching between the two data sources is done at Invoice level and any mis-match of the laid down parameters returns following error/response codes:
||Invalid SB details
||Invalid SB details EGM not filed
||Record already received and validated
||Invalid Invoice Number
||Gateway EGM not available
This response code comes when all the parameters like GSTIN, SB number, Invoice Number etc. match between GSTN and Customs databases. This code implies that SB is ready for inclusion in the IGST refund scroll. However, it may happen that even with SB000, the SB does not appear in the refund scroll. This could be due to the following reasons:
- The exports might have been made under bond/ LUT, hence no refund.
- If a shipping bill covers multiple invoices, few of the invoices might have been successfully validated with code SB000 whereas other
invoices might be stuck with any other errors.
- Higher rate of Drawback has been claimed for that SB, thus making the SB ineligible for IGST refund.
- Where the IGST claim amount is less than Rs. 1000/-.
There are two more reasons where the SBs will figure in the Temporary IGST Scroll but not in the Final Scroll. This could happen if there is an alert/suspension on the IEC in ICES or if the account of the IEC is not validated by PFMS.
- SB001: Invalid Shipping Bill Number
Reason: This may occur due to a mismatch between the SB No. furnished in GSTR-1/6A and the SB No. with customs. The possible reason for such mismatch could be a clerical error made by the exporter at the time of filling of GSTR-1/6A.
Rectification Method: Making amendment in Form GSTR-1 by using Table 9. After the same is done, the information is validated by GSTN and forwarded to customs for further processing of Refund.
- SB002: EGM not filed.
Rectification: Exporter may approach the Shipping Lines to file the EGM immediately.
- SB003: GSTIN mismatch
Reason: This error occurs when GSTIN declared in the SB does not match with the GSTIN used to fill the corresponding GST Returns.
Rectification: Exporter may be asked to make necessary adjustments in GSTR-1 by use of table 9.
- SB004: Record already received.
Reason: This error code occurs due to duplicate/repeat transmission of SB-Invoice record from GSTN. The previous transmission would have already been validated for IGST refund by ICES.
- SB005: Invalid Invoice Number.
Reason: Occurs due to mismatch of invoice number as declared in the Invoice Table in the SB and that declared in the GSTR 1 for the same supply. This can happen due to- a) Typographical mistake while entering data in GSTR 1 or the SB. b) The exporter uses two sets of invoices, one invoice for GST and another invoice for exports resulting in mismatch of invoice numbers.
Rectification: Exporter can rectify such errors by filing of concordance table for shipping bills filed upto 15.11.2018.3&4
- SB006: EGM Error.
Reason: In case of ICDs, if the Gateway EGM is not filed electronically or is stuck in some error, response code SB006 shall appear.
Rectification: Export of goods out of India is an essential condition for grant of IGST refund as provided in Rule 96 of CGST Rules, 2017. It therefore warrants verification whether the goods were indeed exported out of India where the IGST refund claims have been long pending with EGM error. In case of pending Gateway EGMs, Shipping Lines may be approached at gateway ports to file supplementary EGMs expeditiously. 5
Shipping bills scrolled up with less than eligible amount
The Government has also granted relief for those shipping bills which have been scrolled up with a lesser amount than that eligible for, like IGST paid of Rs. 100, but scroll generated only of Rs. 75. In such a case an Annexure as prescribed in the circular may be filled up for claiming the difference amount.4 Such, a scenario occurs under the following situations:
- Error made by the exporter/CHA in declaring the IGST paid amount in SB or,
- Compensation Cess paid amount was not entered by the exporter in the SB along with the IGST paid amount or the same details were not transmitted by GSTN, and the scroll consequently got generated only for the IGST amount or,
- Typographical mistake by the customs officer while sanctioning the refund through officer interface.
It may also be noted that such a facility would be available only for shipping bills filed upto 15.11.2018.
All IGST Refunds are credited electronically through the PFMS system and therefore it becomes vital that the bank accounts are successfully PFMS validated so that refunds are not struck up. For obtaining hassle free refund it is also pertinent to note that the Bank A/c details as mentioned in Customs EDI / ICES should be the same as mentioned in GSTN. In order to facilitate easy updating of bank account in the Customs EDI system the exporter should approach the customs drawback section and furnish requisite documents as required for updating their bank accounts details.4
Having discussed all the aforesaid aspects involved in obtaining hassle free refund it is also important to talk about ICE GATE Registration which helps the users/exporters to identify and keep track as to the reason for not obtaining their IGST refunds and the error codes generated in the shipping bill if any. Therefore, on registration on ICEGATE website, information is being made available to exporters on a real-time basis with regard to the error status. It is also to be noted that only those records will be displayed which have been received from GSTN and processed by Customs Automated System.7
1Section 16 and Section 7(5)(a) of the IGST Act, 2017.
2Rule 96 of the CGST Rules 2017.
3Circular No. 05/2018-cus dated 23.02.18.
4Circular No. 40/2018-cus dated 24.10.18.
5Circular No. 01/2019-Cus dated 02.01.2019