GST refund claim process for UT of Daman and Diu before merger

The Union Territory of Daman and Diu merged with the Union Territory of Dadra and Nagar Haveli with effect from 26th January 2020. So, there was a need to issue a single state code under GST. The GST Council issued a state code of 26 to the Union Territory of Dadra and Nagar Haveli and Daman and Diu with effect from 1st August 2020.

Transfer of input tax credit

During the transition process, the taxpayers had to transfer the balance Input Tax Credit (ITC) from the electronic credit ledger of the old GSTIN to the new GSTIN. This had to be done by reversing the balance ITC when filing the last GSTR-3B for the old GSTIN. The ITC transfer procedure is detailed in Notification No. 10/2020- Central Tax.

Challenges faced by taxpayers due to transition

Taxpayers were facing problems while filing refund applications for its zero-rated supplies and inverted tax structure for the period before the merger. They had no ITC balance available in the old GSTIN for claiming refunds. Also, they were unable to claim refunds from new GSTINs because the invoices had old GSTIN and the system validations rejected applications filed from new GSTIN for the period before the merger.

The procedure prescribed for refund as mentioned in circular number 168/24/2021 of The Central Goods and Service Tax Act, 2017

1. The refund application shall be filed using the new GSTIN by choosing “Any other” on the GST portal. The taxpayer shall mention the category under which a refund application would have been filed otherwise in the remarks column as “Refund of unutilised ITC on account of export of goods/services without payment of tax for the period before the merger of Daman & Diu with Dadra & Nagar Haveli”. 
2. The supporting documents shall also be attached. He is not required to make any debit from the electronic credit ledger at this time.
3. The proper officer on receipt of the claim shall calculate the acceptable refund amount as per GST law. He shall also scrutinise the refund application for completeness and eligibility. If satisfied, he shall intimate the applicant via Form GST DRC-03 to debit the said amount through an electronic credit ledger.
4. After receiving the proof of debit by the proper officer, he shall issue a refund order in Form GST RFD-06. The payment order is issued in Form GST RFD-05.
5. In case of a category of refund where debit of ITC is not required, the applicant can file the refund under the category “any other” and mention the reasons in column “remarks”.

Note: None of the refund claims shall be filed using the old GSTIN.