FIRC saga for GST refunds

 

CA Darshan Ranavat

 

Navigating the complexities of GST refunds can be dispiriting for businesses, particularly those engaged in exports. One of the recurring issues has been the requirement of a Foreign Inward Remittance Certificate (FIRC) as proof of receipt of foreign exchange. However, in a recent landmark decision, the Karnataka High Court [2025-VIL-415-KAR] clarified that procedural rigidities must not override substantive compliance. 

 

Background of the Case 

Nokia Solutions and Networks India Pvt. Ltd., the petitioner, filed a writ petition challenging the denial of GST refund on the grounds of non-submission of FIRC. The revenue authorities had previously set aside refund claims, citing technical discrepancies such as: 

 

o   Non-submission of Bank Realization Certificates (BRCs) / FIRCs. But the petitioner submitted Foreign Inward Remittance Advices (FIRA). 

o   The petitioner's location in FIRA was Gurgaon, i.e., different from where services were exported, i.e. Bengaluru.

o   In the FIRC, the purpose of remittance is mentioned as "against intercompany receipt" which is not the same as remittance for zero-rated supply

o   The remittances were received in a bank account different from the bank account number mentioned on the invoice.

 

Key Takeaways from the Court's Ruling 

1. Discontinuation of FIRCs by RBI

The court pointed out that the Reserve Bank of India (RBI) discontinued the requirement of FIRCs.

2. Receipt of export proceeds

FIRAs clearly establish the receipt of the export proceeds. Chartered Accountant (CA) certificates were also submitted for correlating the FIRAs. Later, the petitioner also submitted E-BRCs to establish receipt of export proceeds. 

3. Administrative convenience

The petitioner's location was listed as Haryana in FIRAs instead of Bengaluru for procedural convenience. The account number variations was not relevant because both bank accounts belonged to the petitioner. These differences had no bearing on the legitimacy of the refund claim.  

4. Global Financial Systems

The purpose of remittances mentioned as "against intercompany receipt" on FIRAs was only in order to follow global finance system and the said entry would also be neither relevant nor material.

5. Substance over form

The Court reiterated that procedural requirements must not be treated as mandatory if substantive conditions of export are fulfilled. Denying refunds merely on the basis of missing FIRCs, despite the presence of other valid proof, amounted to an unjustified technical rejection. 

 

Conclusion

This decision, coupled with previous decisions in the case of Alex Tour and Travel Pvt. Ltd. [2023-VIL-284-DEL] and Philips India Ltd. [2023-VIL-237-KAR], would set a new benchmark in the context of "substance over form" for claiming refunds.

 

The Delhi High Court, in Alex Tour and Travel Pvt. Ltd., held that submission of transaction-wise FIRCs is impractical for businesses with voluminous transactions. Instead, a consolidated FIRC issued by the bank was deemed sufficient proof of foreign exchange receipt.

 

Similarly, in Philips India Ltd., the Karnataka High Court quashed the revenue department's order rejecting the refund claim solely on the ground that e-Bank Realization Certificates (e-BRCs) addressed to corporate office in Kolkata could be misused for refunds across other ports. The court held that e-BRCs are issued for specific invoices and cannot be used for multiple refunds, making the department's concerns unfounded. 

 

It is also pertinent to refer to the clarifications given by the Board in Circular No. 112/6/2009-S.T. dated 12.03.2009:

 

a.   Where FIRCs are issued on consolidated basis, the exporters should submit self-certified statement alongwith FIRC showing the details of export in respect of which the FIRC pertains. Refunds should be allowed on such certified statements.

b.   Normally certified copy of the documents like invoice, BRC, etc.  should be accepted. Only in case of indepth enquiry original documents can be verified.

c.    Refund is admissible on the basis of gross amount received for the exports and deductions made by the banks from export remittances, in lieu of services provided by bank, should not be deducted while granting refund.

 

The Hon'ble Supreme Court has also explained the Doctrine of Substantial Compliance in the case of Hari Chand Shri Gopal [2010-VIL-01-SC-CE]. The Court observed that the doctrine of substantial compliance is a judicial invention, designed to avoid hardship in cases where a party does all that can reasonably expected of it, but failed or faulted in some minor or inconsequent aspects which cannot be described as the "essence" or the "substance" of the requirements. Substantial compliance means "actual compliance" in respect to the substance essential to every reasonable objective of the statute.

 

These decisions serve as a reminder that tax authorities must adopt a pragmatic approach, facilitating trade rather than obstructing it with unnecessary technicalities.

 

[Date: 12.05.2025]

 

(The views expressed in this article are strictly personal.)