Single Authority For Sanctioning, Processing GST Refunds Likely By August

A single authority for sanctioning and processing goods and services tax refunds is in the offing as the Finance Ministry looks to speed up and simplify the process for exporters, an official said.

The current mechanism entails a twin refund sanctioning authority of the central and state tax officers but that could well change by August when the proposed new structure involving a single authority comes in place.

As per the system being worked out by the Revenue Department, the taxpayer will get full refund from his jurisdictional officer once the claim is sanctioned, while at the back-end the central government and states will apportion the amount to be paid to each other.

Currently, once a taxpayer files refund claim with the jurisdictional tax authority, say the central tax officer, then he would clear 50 percent of the claims, and the remaining is cleared by the state tax officers after further scrutiny.

A similar system is followed when a taxpayer approaches the state tax officers for GST refunds. Thus, the time taken to clear the entire refund amount gets longer, leading to liquidity crunch for exporters — an issue that the proposed single mechanism for refund clearing intends to fix.

Under the proposed “single authority mechanism”, once a refund claim is filed with a tax officer, whether centre or state, the officer will check, assess and sanction full tax refund (both Central GST and State GST), thereby removing difficulties faced by the taxpayers. This will later get adjusted/settled among the two tax authorities through internal account adjustments.

Currently, the two authorities settling the same refund claims add to unnecessary complexities and inconvenience for the taxpayers. It has been seen that even after sanction/payment of refund by the jurisdictional tax officer, the counterpart tax authority at times tends to delay the GST refund.

As per the formula for division of GST assessees decided by the GST Council, state tax officials administer and control 90 percent of the assessees below Rs 1.5 crore annual turnover, and the remaining 10 percent is with the central tax officers.

The centre and states share control of those assessees with annual turnover of over Rs 1.5 crore in 50:50 ratio.

“A single window tax refund in a federal, democratic economy would be a massive jump in ease of doing business,” AMRG & Associates Partner Rajat Mohan said. “Inter-government tax adjustments have to be done month-on-month to avert any possibility of temporary revenue deficit to a particular government.”