Transfer of Input Tax Credit and Refunds under Revised Model GST Law

The Revised Model GST (Goods and Services Tax) Law has made provisions for the transfer of Input Tax Credit (ITC) and refunds. As per the GST Law, Input Tax Credit refers to the credit of GST paid on purchase of goods and services that can be set off against the output GST liability. The transfer of ITC and refunds is important for businesses to ensure that they do not end up paying more GST than they are liable to pay.

Transfer of Input Tax Credit

As per the Revised Model GST Law, the transfer of Input Tax Credit is allowed in the following situations:

Transfer of business – When a registered person transfers his business to another person, the unutilized ITC can be transferred to the transferee.
Merger or amalgamation of companies – In case of merger or amalgamation of companies, the unutilized ITC can be transferred to the merged or amalgamated company.
Death of sole proprietorship – In case of death of a sole proprietor, the unutilized ITC can be transferred to his legal heir.

The transfer of ITC can be done only if the transferee or acquirer has a valid GST registration. The transferee or acquirer can claim the transferred ITC in his GSTR-3B return for the month in which the transfer has been declared in FORM GST ITC-02.

Refunds

Refunds under the Revised Model GST Law can be claimed in the following situations:

Excess payment of tax – When a registered person has paid tax in excess of the liability, he can claim the excess amount paid as refund.
Refund of ITC – When the input tax credit is higher than the output tax liability, the excess amount of ITC can be claimed as refund.
Refund of tax paid on export of goods or services – When goods or services are exported outside India, the tax paid on such goods or services can be claimed as refund.
Refund of tax paid on supply of goods or services to SEZ unit or SEZ developer – When a registered person supplies goods or services to a Special Economic Zone (SEZ) unit or SEZ developer, the tax paid on such supply can be claimed as refund.

The refund application can be made in FORM GST RFD-01A. The refund amount will be credited to the bank account of the registered person. If the refund is not granted within 60 days from the date of application, interest at the rate of 6% per annum is payable to the registered person from the expiry of 60 days.

Conclusion

The transfer of ITC and refunds are important provisions under the Revised Model GST Law that enable businesses to maintain their financial health by ensuring that they do not pay more GST than they are liable to pay. Businesses need to be aware of these provisions to take advantage of them and ensure compliance with the GST Law.