Understanding GST Forms PMT-03 and PMT-03A for Re-Crediting Rejected Refunds

Taxpayers are eligible to claim refunds for excess Goods and Services Tax (GST) or interest paid by submitting an application via GST RFD-01 within two years from the designated date. Upon filing, the electronic cash or credit ledger is immediately debited for the claimed refund amount. However, if the refund request is denied, the Input Tax Credit (ITC) or cash equivalent should be returned to the taxpayer's respective electronic ledger. Before the introduction of Form GST PMT-03, tax officials lacked a mechanism to re-credit rejected refund claims to taxpayers. This form addresses that gap by enabling the re-crediting of such amounts.

GST Form PMT-03 is an official directive issued for re-crediting cash or ITC amounts following the rejection of a refund claim. When a refund amount is denied, either entirely or partially, in accordance with Rule 92 of the CGST Rules, the rejected sum is re-credited to the electronic credit ledger. This action is carried out by the proper officer through an order issued in Form PMT-03, utilizing Form GST RFD-01B.

Form GST PMT-03 is applicable exclusively to refunds where a debit was initially made to the taxpayer's electronic cash or credit ledger when the refund claim was submitted. Below are the specific categories of refunds that involve an initial debit to the taxpayer's electronic cash/credit ledger:

Once the Application Reference Number (ARN) for any of these refund types is successfully generated, the process automatically advances to the 'Pending for Provisional Refund' stage. At this point, the tax officer can proceed with verification and sanctioning the provisional refund.

If a tax officer determines that a refund application is deficient, they may issue a Deficiency Memo. In such cases, the entire debited amount is immediately re-credited to the same ledger. There is no requirement for the tax officer to issue Form PMT-03. The applicant taxpayer must then rectify the identified deficiencies and submit a new refund application.

The Form GST PMT-03 includes several crucial details:

Basic Details

The tax officer records fundamental information about the applicant, such as their name, GSTIN, address, and the specific tax period to which the refund relates.

Ledger to which the debit entry was made

The form indicates whether the debit entry was made to the Electronic Cash Ledger or the Electronic Credit Ledger.

Debit entry Number

The officer must specify the debit entry number, the date of the entry, and the Application Reference Number (ARN) of the original refund application.

Amount of credit

The tax officer is required to detail the type of tax (e.g., IGST, SGST, CGST, interest) and the exact amount that is being re-credited due to the refund rejection.

A tax official can only re-credit the electronic credit ledger by issuing Form PMT-03 after receiving a written undertaking from the applicant confirming they will not file an appeal against the order. If an appeal is nonetheless filed, it will be decided against the applicant according to the regulations. Should the appellate authority rule in favor of the applicant, a new refund claim can be submitted using the 'Claim Refund' option, specifically selecting 'On Account of Assessment/Provisional Assessment/Appeal/Any other Order.' This allows the taxpayer to manually receive the credit.

Consider this example: Mr. A claims a refund of Rs. 150 for accumulated ITC, but Rs. 50 of this amount is rejected. The tax officer issues a show-cause notice (Form GST RFD-08) to Mr. A, asking why the Rs. 50 should not be rejected due to ineligible ITC. If Mr. A's response is deemed unacceptable, the tax officer will record the Rs. 50 (plus any applicable interest and penalty) in Mr. A's electronic liability ledger using Form GST DRC-07. Subsequently, Rs. 50 will be re-credited to Mr. A's electronic credit ledger via Form PMT-03, provided Mr. A submits an undertaking not to appeal the PMT-03 order.

Rule 86(4B) of the CGST rules outlines procedures for re-crediting amounts related to erroneous refunds sanctioned to a registered person. This rule addresses two specific situations where an erroneous refund might have occurred:

• Under sub-section (3) of section 54 of the Act, or
• Under sub-rule (3) of rule 96, in violation of sub-rule (10) of rule 96.

The taxpayer must deposit the erroneously refunded amount, along with applicable interest and penalties, through Form GST DRC-03. Once this form is verified by the proper officer, an order in Form GST PMT-03A will be issued, and an equivalent amount will be re-credited to the taxpayer's electronic credit ledger.

Thus, if a refund was erroneously sanctioned in any of the following categories, the taxpayer can facilitate the re-credit of that amount, including interest and penalty, to their electronic credit ledger via Form GST PMT-03A:

• Refund of Input Tax Credit due to an inverted tax structure.
• Refund of unutilized ITC concerning zero-rated supply of goods or services to an SEZ developer or unit without tax payment.
• Refund of GST obtained in contravention of Rule 96(10).
• Refund of unutilized Input Tax Credit on account of the export of goods or services without tax payment.

The format of Form PMT-03A is prescribed as per recent circulars.

The introduction of Form GST PMT-03A enables the proper officer to re-credit amounts to the taxpayer's electronic credit ledger in instances of erroneous refunds. The steps a taxpayer must follow to achieve this re-credit are detailed below:

Step 1: Completing Form GST DRC-03

Firstly, the taxpayer needs to fill in the details in Form GST DRC–03 and deposit the amount of the erroneous refund. This must also include any applicable interest and penalty, which should be debited from the electronic cash ledger. The taxpayer must clearly state the reason for payment within Form GST DRC-03, indicating it as a deposit for an erroneous refund of unutilized ITC or other mentioned categories.

Step 2: Submitting a Written Request

The taxpayer is required to submit a written request, following the format provided in Annexure A, to the jurisdictional proper officer. This request seeks the re-credit of an amount equivalent to the erroneous refund. This manual procedure will remain in effect until an automated system is implemented.

Step 3: Verification of Form GST DRC-03 and Issuance of Order in Form GST PMT-03A

The officer must confirm that the taxpayer has paid the refund amount (along with any applicable penalty and interest) via Form GST DRC-03, in compliance with Section 50 of the CGST Act. Upon verification, the officer will then issue an order in Form GST PMT-03A, re-crediting an amount equivalent to the erroneous refund to the electronic credit ledger. This order should be passed within 30 days from the date of receiving the re-credit request or the date of payment of the erroneous refund, whichever is later.