Clarifications in respect of Budgetary Support Scheme

S. No.

Issue

Clarification

1.

Whether benefit of budgetary support scheme is available to units which were otherwise exempt under erstwhile regime but are required to pay tax under GST regime?

No, since the scheme seeks to provide benefit only to eligible units set up during erstwhile regime, for the residual period.

NITYA Comments: Let us understand the clarification with the help of an example. A manufacturer was engaged in the manufacture of otherwise exempted goods and was not availing area-based excise duty exemption. If the exempted goods were taxable under excise duty regime, the manufacturer could have availed area based exemption and would have been granted Budgetary Support as well. However, since area-based exemption was not claimed under excise regime, Budgetary Support will not be available.

The Circular is in line with the language of the Notification though the same results in hardship to the manufacturer.

2.

Whether benefit would be available on supply of kit consisting some in-house manufactured items and some items manufactured by third parties?

As long as the goods procured from third party are in the nature of inputs for the kit, the kit would be eligible for the benefit of scheme.

3.

Remedy in case of multiple units under single GSTIN where the credit of one unit gets offset against another unit and refund under budgetary support is reduced

The Circular has suggested following solutions:

– The manufacturer can submit CA certificate certifying the set-off of credit between units; or

– The manufacturer can take separate GST registrations for ineligible units post amendment in the Central Goods and Services Tax Act, 2017 (‘CGST Act’).

(The benefit of separate registration should be available from 1^st day of commencement of a quarter as per Budgetary Support Scheme)

NITYA Comments: The Government has suggested that manufacturers can furnish CA certificate to certify that excess credit of one unit is indeed being adjusted against other units. In our view, both these points have no linkage.

Further, the Circular provides that separate registration for ineligible units can be sought from April 1, 2019 since Budgetary Support Scheme works out on quarterly basis. In our view, this clarification is incorrect and Budgetary Support can be computed even if separate registration is taken w.e.f. February 1, 2019 (date of amendment in CGST Act coming into force). Accordingly, taxpayer can prepare for seeking separate registration from February 1, 2019 (if single registration impacts the Budgetary Support amount).

4.

Whose views will prevail – sanctioning authority or inspection team?

The inspection team decides the eligibility of the unit and the sanctioning authority verifies and quantifies the refund claim.

The Circular has clarified that in case sanctioning authority sanctions refund and inspection team later disallows it, the same shall be recovered from the taxpayer.

5.

Issues in verification of refund claims due to monthly returns vis-à-vis quarterly refund claims

The taxpayer can enclose a table containing necessary month-wise details in the refund application.

6.

Time limit for disposal of claims

The Circular provides that claims shall be disposed off within a period of 2 weeks which can be extended to maximum period of 1 month.

NITYA Comments: This is a welcome step since, presently, there is a huge time lag in submission of budgetary support claims and their disposals.