In a latest amendment, the Government has resolved the long-litigated issue in calculation of time limitation of 2 years for filing of refund application in accordance with Section 54(1) of the CGST Act and the issuance of deficiency memo in accordance with Rule 90(3) of the CGST Rules.
The Government has brought the latest amendment to CGST Rules, vide Notification No. 15/2021 dated 18.05.2021, wherein it added a proviso to Rule 90(3) by which the Government has excluded the time period between the filing of the refund application in Form GST RFD-01 and the issuance of Deficiency Memo in Form GST RFD-03, for the calculation of 2 years for the purpose of limitation as per Section 54(1) of the CGST Act.
Unamended Rule 90(3) of the CGST Rules prescribed for filing of fresh refund application once the deficiency memo has been issued to the assessee. Without the newly added proviso, in many cases, once the deficiency memo has been issued to the assessee and the assessee has rectified the same, the date of said rectification is treated as the date of fresh refund application. In certain cases, this fresh refund application is filed beyond the prescribed period of 2 years as per Section 54(1), then the Department would treat it as time barred refund application, despite fact that the original refund application against which the deficiency memo has been issued, have been filed within the period of 2 years as per Section 54(1) of the CGST Act.
Though this amendment has been carried out but this is a prospective amendment and not retrospective amendment. The newly added proviso would substantiate the arguments in favour of assessee in the ongoing litigation on Rule 90(3) of the CGST Rules. In one of such cases, the Hon’ble Delhi High Court has been pleased to issue notice in Insitel Services Pvt. Ltd. V. Union of India W.P. (C) 6486/2020, where the illegality of Rule 90(3) of the CGST Rules have been challenged. More can be read at https://gstlawindia.in/notice-issued-by-the-honble-high-court-of-delhi-in-a-matter-challenging-rule-903-of-the-cgst-rules/.
Read the Notification No. 15/2021 at: Notification No. 15-2021 CT