In this post, we will discuss about the Refunds under GST. It has become a problem for almost all classes of taxpayers, especially for exporters which are directly impacting their working capital.
We will cover the following topics:
- What are Refunds under GST?
- When can the refund be claimed?
- Refund of Input Tax Credit / ITC
- Calculation GST refund
- Refund Process under GST
- Time limit for claiming the refund
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 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/ITC
Cases against which you can claim the refund against ITC are given below:
- ITC left unutilized when the goods or services being supplied are exempted from GST.
- 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.
- 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.
Refund Process under GST
The Electronic Cash Ledger balance is claimed as a refund by submission of refund application Form RFD-01. It is done online on the GST Portal/GSTN.
If you paid excess GST, then you can apply for a refund within two years from the date of payment.
To process a refund claim under GST, follow the steps mentioned below:
- Go to GSTN portal and fill the application form to claim your refund.
- When you file the RFD – 01 application, you will get an email/SMS with an acknowledgement number.
- Your cash and return ledger are then adjusted and the “carry-forward input tax credit” is reduced.
- After your refund application is filed, authorities will then verify your application and other documents in 30 days.
- “Unjust enrichment” is strictly reviewed by the authorities. If not qualified then your refund is transferred to the Consumer Welfare Fund (CWF).
- If the refund claimed is more than the predetermined amount of refund, a pre-audit process is done before the sanction of the refund.
- Using NEFT, RTGS or ECS, the refund credit is done online to the applicant’s account.
At the end of each quarter, individuals can make applications for refund. No refund is provided to the individual if the refund amount is below Rs.1000.
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.