This circular provides clarification on the manner of re-crediting amounts to the electronic credit ledger where a taxpayer has repaid an excess or erroneous refund along with applicable interest and penalty.

It explains that difficulties were being faced by taxpayers in restoring input tax credit after returning refunds that were either wrongly sanctioned or later found to be ineligible. To address this issue, a new functionality, FORM GST PMT-03A, has been introduced on the GST portal, supported by insertion of sub-rule (4B) in rule 86 of the CGST Rules.

The circular specifies the categories of refunds where re-credit through FORM GST PMT-03A is permitted. These include erroneous refunds of IGST on exports made in contravention of rule 96(10), refunds of unutilised ITC on account of exports without payment of tax, zero-rated supplies to SEZ developers or units without payment of tax, and refunds arising due to inverted duty structure.

It prescribes the procedure to be followed, whereby the taxpayer must first deposit the erroneous refund amount, along with interest and penalty wherever applicable, through FORM GST DRC-03 by debiting the electronic cash ledger. Thereafter, the taxpayer is required to submit a written request to the jurisdictional proper officer. Upon verification of payment, the proper officer shall re-credit an equivalent amount to the electronic credit ledger by issuing an order in FORM GST PMT-03A, preferably within 30 days.

The circular aims to ensure uniform and timely restoration of eligible credit and remove procedural hardship for taxpayers who have repaid erroneous refunds.