Process of Refund Under GST

This article is a procedural explanation of when one can claim refund under GST. With the process, it also discusses the scenarios under which such refund can be claimed and the cirucumstances that are essential for claim. Read this article to understand GST refund claims for your business.

Wed Jun 29 2022 | Govt. Agencies and Taxation | Comments (0)

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Refund is an integral part of Goods and Service Tax law since it is the government reimbursement of taxes to a taxpayer. Thus, the taxpayer as well as the refund authorities have to be fully acquainted with refund provisions under GST.

Any delay in refund can adversely impact the taxpayers cashflow and working capital requirement. Therefore, while framing GST law, lawmakers intention has been to ensure smooth process of refund resulting in effective tax administration.

There are various situations that can led to refund of tax under GST. The table below enumerates the types of refund under GST.

S. No.Type of Refund
A.Refund of unutilised Input tax credit (ITC)Refund of unutilized ITC on account of Zero rated supply without payment of tax
Refund of unutilized ITC on account of accumulation due to inverted tax structure
B.Refund of tax paidRefund of tax paid on zero rated goods/ services made with payment of tax
Refund to supplier/ recipient of tax paid on deemed export supplies
Refund of Excess payment of tax
Refund of tax paid under incorrect head
C.OtherRefund on account of assessment / provisional assessment / appeal / any other order
Refund on account of any other ground or reason

 

A. Refund of Unutilised Input tax credit (ITC)

It is imperative to understand that refund of only that ITC can be claimed which is unutilised i.e. the eligible ITC which is left after the adjustment of output tax liability by taxpayer. The refund of unutilised ITC can be claimed only in below two situations:-

  1. Refund of unutilised ITC on zero rate supply:- Zero rated supply means
    • export of goods or services or both
    • supply of goods or services or both to a Special Economic Zone developer or a Special Economic Zone unit.

    In both the above cases, the taxpayer can claim the refund of unutilised ITC if the goods/ services are supplied under bond or Letter of Undertaking (LUT) without payment of integrated tax (IGST).

  2. Refund of unutilised ITC on Inverted duty structure:- Inverted duty structure means where the rate of tax on inputs is higher than the rate of tax on output supplies (other than NIL rated or fully exempt supplies). Refund of unutilised ITC can be claim by taxpayer where the credit has been accumulated on account of inverted duty structure.

However, no refund of unutilized ITC would be allowed under the following cases
1.    If the unutilized ITC is for GST paid on goods exported out of India which is subject to excise duty.
2.    If the supplier of goods/ services has availed duty drawback on the excise duty paid or claims refund of integrated tax (IGST) paid on such supplies.

B. Refund of tax paid under GST

  1. Refund of tax paid on zero rated goods/ services made with payment of tax
    In case of zero rated supply i.e. Exports and SEZ, taxpayer can claim refund of integrated tax (IGST) paid on such supply of goods/ services.
  2. Refund to supplier/ recipient of tax paid on deemed export supplies:- There are certain supplies of goods manufactured in India (and not services) which are notified as deemed supplies namely:-
    • Supply of goods against advance authorisation issued by DGFT for import or domestic procurement of inputs on pre-import basis for physical exports.
    • Supply of Capital goods against Export promotion capital goods authorisation
    • Supply of goods to export oriented unit
    • Supply of gold by specified bank/ Public sector undertaking against advance authorisation.
    • These supplies do not leave India. Further, the payment for such supplies is received either in Indian rupees or in convertible foreign exchange.  It is imperative to understand that deemed exports are not zero rated supplies and therefore will be subject to levy of taxes under GST i.e. such supplies can be made on payment of GST and cannot be supplied under a Bond/LUT. Refund of tax paid on deemed export is admissible to either the supplier or the recipient.

  3. Refund of Excess payment of tax:- If there is balance in Electronic cash ledger due to excess payment of tax and same cannot be utilised, taxpayer can claim refund of said tax paid.
  4. Refund of tax paid under incorrect head:- Taxpayer can claim refund of tax paid on intra-state supply (i.e. CGST and SGST) which is subsequently held to be an inter-state supply (i.e. IGST) and vice versa.

C. Other Refunds

  1. Refund on account of assessment / provisional assessment / appeal / any other order:- Taxpayer can claim refund of tax under GST arising out of assessment, provisional assessment, appeal or any other order passed under Goods and Service Tax law.
  2. Refund of integrated tax paid on supply of goods to tourist leaving India:- Any tourist who is not resident of India and enters India for a stay not more than six months for legitimate non-immigrant purposes can claim the refund of integrated tax (IGST) on leaving India on any supply of goods taken out of India by him.

Procedure for claiming refund


Initially, the refund applications were filed manually under GST due to technical hitches in GST portal. However, with effect from September 2019, refund procedure has been made fully electronic. All steps of submission and processing of refund shall be undertaken online through GST portal. In this respect, detailed calcifications have been issued vide Circular No. 125/44/2019 dated November 18, 2019.

1. What are the taxes that can be claimed as refund

IGST, CGST, SGST, UTGST, interest paid and any other amount (say, penalty, fees) can be claimed as refund. However, no refund can be claimed if amount is less than INR 1000/-

2. Time limit for filing refund claim

Refund can be claimed within a period of two years from the relevant date. Relevant date is fundamental and imperative for filing online application.

    
S.No.CaseWhat is Relevant date
1.Export of goodsDate when ship/ aircraft leaves India or date when goods cross the frontier or date of dispatch of goods by Post Office.
2.Export of servicesIf supply of service is completed prior to the receipt of payment Date of receipt of convertible foreign exchange/ INR as the case may be If payment is received in advance prior to the invoice date- Date of issue of invoice
3.Deemed export When return of such deemed exports is filed
4.Person other than supplier Date of receipt of goods/services by such person
5.Consequence of judgment, order, decree or direction of Appellate Authority, etc. Date of communication of such judgment, order, decree etc
6.Unutilized input tax credit End of the financial in which such refund claim arises
7.Provisional payment of tax Date of tax adjustment after the final assessment
8.Any other caseDate of payment of tax

 

However, an agency of the United Nations Organization or any multilateral financial institution and organizations notified under the United Nations, Consulate or Foreign embassies can claim refund of ITC before the expiry of six months from last day of the quarter in which such goods/service were received.

3. Application for filing refund

The taxpayer claiming refund must file relevant refund application online in their GST portal in Form GST RFD 01. In case of refund claimed by Embassy, Agency of UNO, in GST RFD-10. In case of refund due to balance in electronic credit ledger, in  relevant monthly return, i.e. Form GSTR-3 in case of a regular dealer, and Form GSTR-4 in case of a composition dealer.

4. Documents required for filing refund

The taxpayers is required to file various documents in support of its refund depending upon the nature of refund such as

  • Statement of invoices in required format for which refund is claimed,
  • BRC/ FIRC in case of export of services, 
  • Copy of GSTR-2A in case of unutilised ITC refund,
  • Self-certified copy of Invoices whose details are not entered in GSTR-2A,
  • Documentary evidence to establish that the refund is due to the person and that the incidence of the tax or interest has not been passed on to another person.
  • Relevant self-declaration forms in required format such as incidence of tax or interest being claimed as refund has not been passed on to another person.
  • Endorsement from the specified officer of the SEZ regarding receipt of  goods/ services for authorized operations,
  • Self-declaration regarding non-prosecution under relevant GST Rules for availing provisional refund,
  • Reference number of the order and a copy of the Assessment/Appeal/ Order, etc.,
  • Any other relevant document in support of the claim.

5. Refund Order

If the proper officer is fully satisfied about the eligibility of refund claim and is of the opinion that no further scrutiny is required, refund order will be issued in form GST RFD-06.

However, in case of zero rated supply of goods/ services , prior to final refund order, 90% of provisional refund is granted against claim for refund. The provisional refund is generally issued within 7 days from the date of acknowledgement through form GST RFD-04.

Conclusion

Though the GST law makers endeavour at streamlining and standardising the procedures pertaining to GST refund, however, still the taxpayers refunds are delayed. Key reasons for such delay is due to technical mistakes made by the taxpayers in filing of returns, lack of clarity on procedure to file the refund form, numerous clarifications, notifications, press release, forms, documents, etc. being issued in this respect compounding confusions among taxpayers. It is always preferable that the taxpayers must be compliant with the provisions and latest clarification/ notifications for timely filing of refund application in order to get faster sanction of GST refunds.

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