Refund of erstwhile duties and taxes (excise duty, service tax / CVD / SAD) paid after advent of GST

by | Mar 4, 2019

This update intends to apprise you about the possibility of seeking refund of erstwhile taxes such as excise duty, service tax, countervailing duty (CVD) / special additional duty (SAD) under customs laws that are paid post-implementation of GST.

Background:

There are several cases where liabilities of taxes applicable under erstwhile tax regime arises post- implementation of GST and the taxpayer pays such taxes now. For example:

  • Excise duty short paid for any reason on goods manufactured and cleared
  • Service tax on services under reverse charge like import of services, GTA etc.
  • CVD and SAD on account of unfulfilled export obligation under Advance Authorisation / EPCG scheme

In all such cases, the recipient could claim cenvat credit of such duties and taxes if the same were paid before July 1, 2017.

While the transitional provisions under GST law allow closing balance of cenvat credit to be carried forward, however, there is no specific provision that permits a taxpayer to claim credit of such duties and taxes paid in post-GST era.

Way Forward:

Section 142(3) of the Central Goods and Services Tax Act, 2017 (‘CGST Act’) provides that claim of refund of cenvat credit shall be disposed of in accordance with existing laws and refundable amount shall be paid in cash.

Rule 3 of the Cenvat Credit Rules, 2004 included excise duty, service tax and CVD / SAD under ambit of cenvat credit. Hence, Section 142(3) will be applicable for refund of such amounts paid by taxpayer. 

It is useful to note that in the case of Sudarshan Chemical Industries Limited v. ACGST, the Commissioner (Appeals) held that the right of a taxpayer to avail cenvat credit under repealed Act will not be affected post advent of GST. The Commissioner (Appeals) further held that as per Section 142(3) of CGST Act, 2017, every refund claim under existing law shall be disposed of in accordance with existing law and same shall be paid in cash (this information is source based).

Basis above, the taxpayers can file for cash refund of excise duty, service tax or CVD / SAD paid post July 1, 2017.

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