Refunds under GST - Meaning, time limit and Calculation

In this post, we will discuss about the Refunds under GST. It has become a problem for almost all classes of taxpayers, mainly exporters which is directly impacting their working capital. We will cover the following:

What are Refunds under GST?

There are certain events where GST refund arises. Generally when the GST paid is more than GST liability the event of claiming the refund arises. The process of claiming the refund is standardized in order to avoid confusion.

When can the refund be claimed?

The refund can be claimed in the following cases. Excess payment of tax is made due to mistake or omission.

  • Exports (including deemed exports), where there is a cumulative balance of input credit arising out of such exports or under a claim of rebate.
  • If there is an excess payment of tax due to an inadvertent mistake.
  • Accumulation of credit resulting due to the output tax being nil or exempted from tax.
  • A refund may arise after a provisional assessment.
  • If an appeal is for a respondent, then the amount made as a deposit towards holding such appeal shall be refunded to the appellant.
  • Refund after investigation.
  • The refund can be provided to foreign embassies or bodies of the United Nations when the purchases are made by them.
  • When there is an accumulation of credit resulting due to the output tax being of a lesser rate than the input.
  • Suppliers receiving discounts or credits through the issuance of credit notes.
  • GST paid by international tourists.

Refund of Input Tax Credit or ITC

Cases against which you can claim the refund against ITC are given below:

  1. ITC left unutilized when the goods or services being supplied are exempted from GST.
  2. If input goods or services have a higher tax rate and the same goods or services have a lower output tax, then the accumulated ITC can be claimed as a refund.
  3. In case of a partial reverse charge, where the input tax credit cannot be used completely against the output tax.

Calculation of GST refund

Suppose Mr. ABC’s GST liability or the month of July is Rs. 50,000, due to some mistake he has made a GST payment of Rs. 5,00,000.

However, Mr. ABC has made the excess payment of Rs. 4.5 lakh which he can claim as a refund.

Time limit for claiming the refund

The time limit for claiming the GST refund is 2 years from the relevant date. The Relevant date is different in different scenarios. Here are the dates for some cases:

Cases for claiming the refund Relevant date
 Goods exported through air or sea The date on which such ship or aircraft leaves India.
Goods carried by a land vehicle Date when the goods cross the land frontier of the country
 The goods sent through the post Date of dispatch of goods
 Services performed after receipt of an advance  Invoice date
 Excess input tax credit left unutilized  End of the financial year
 Goods supplied for deemed exports, i.e., supply to SEZ or 100% EOU Return filing date related to such deemed exports filed.
 Excess payment of GST  Date of payment of tax
Tax paid following a provisional assessment The date on which tax was adjusted

This completes the post on Refunds under GST. Let us know your opinion by commenting below.

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