Most Taxpayers & Tax Practitioners struggle around this provision of the GST Regime- GST Refunds. Despite being so important it remains to be a tedious task, & requires a deep understanding of the entire concept.
GST Refund claim is vital for businesses to avoid any loss of funds through taxes.
The article covers all the details you must know before you claim a GST Refund such as types of GST Refund, Forms, Relevant time, withholding GST Refund & a lot more.
GST Refund Process | Complete Steps For Claiming GST Refund By CA Swapnil Munot
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What is a Refund under GST?
Refund under GST is the process of reversal of taxes paid by the taxpayer, for one or the other reason. You can claim a refund of the tax that you paid if you are eligible for it, by filing a refund return form under GST.
There can be multiple cases where a taxpayer is eligible for a refund of some sort, most of these situations are specified by CBIC or the Government.
If you have paid taxes in any situation that falls under this specified category, then you can claim a refund of such GST, for example- Exports, they are kept tax-free by the Government to endorse exports by keeping it simpler. Exporting is an international activity & brings profit to the government in numerous ways.
Hence, exporting goods is tax-free, however, you may have to pay IGST, as export is also an inter-state movement of goods.
But the Government gives you an option to claim a refund of the IGST paid, as you paid taxes on a Zero-rated Supply.
Just like the above, there may be other cases where a taxpayer can claim a GST refund such as extra tax payment, tax payment on zero-rated supplies, refund by order, etc.
The Taxpayer will have to submit a relevant Refund Return Form, get it signed by an authorized person- CA & then submit it to the common GST Portal along with the supporting documents.
GST refund process is online & patterned depending upon the type of case. A taxpayer can claim the GST Refund within the defined time-frame only.
Although there are generic processes & forms, etc. in refund under GST, all cases may be different & unique on its own. In such cases, relevant details must be filled in the relevant forms depending on the situation supported by the relevant documents.
What are the Forms under GST Refund Process
In order to claim a GST refund, you must first understand the GST refund forms & know what each form signifies.
There are a total of 10 Forms under GST Refund & we have listed them down explaining each one of them-
- Form GST RFD 01- The main refund application is made through this form. You must furnish the required details & attach the supporting documents while filing this form. This form also needs to be verified by a CA before submission on the GST Portal.
- Form GST RFD 02-This form is an auto-generated acknowledgment of the GST RFD-01 form.
- Form GST RFD 03- This form can be called an error file. In case of any mistakes or deficiencies in Form GST RFD-01, this error file will be sent to the taxpayer, containing the errors or indicating deficiencies. The taxpayer can rectify these errors & try re-filing Form GST RFD 01.
- Form GST RFD 04- This form is the Provisional Refund form, mostly a provisional amount of 90% of the refund claimed is granted to the taxpayer initially within 7 days of filing the refund form.
- Form GST RFD 05- On successful validation of the refund application the authorized official will issue a final order through this form. The authorized official must do it within 60 days from the application date.
- Form GST RFD 06- This form is used to adjust the refund against the taxable amount.
- Form GST RFD 07- This form is a notice of rejection of a refund application.
- Form GST RFD 08- This is the payment advice or the Notice Form under refunds, issued by the Tax Official to the taxpayer.
- Form GST RFD 09- In case the refund is delayed from the tax official's end, then this form will serve as an order for interest on late payments to be paid to the taxpayer.
- Form GST RFD 010- This is the main refund form for UN bodies, foreign embassies, or consulate. Any foreign bodies or embassies (as per section 55 of the CGT Act) can claim their refunds through this form.
- Additionally, there is Form GST RFD-11 but it is not a refund form, it is the Letter of Undertaking or LUT form, that is filed in case of exports while exporting goods without the payment of IGST.
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Application of GST Refund- Cases Of Allowable Refunds
There are certain scenarios where the taxpayer is eligible to claim a refund of GST paid.
We have listed down the most common cases where a refund can be claimed-
- Refund of excessive paid taxes.
- Refund of taxes paid for the Export of goods & services with IGST.
- Refund of taxes paid on the supplies made to SEZ Unit/SEZ Developers with IGST.
- Refunds for UNOs, of tax paid on inward supplies of goods or services by the United Nations Organization, etc. as notified under section 55.
- Refund of unutilized Input Tax Credit (ITC) on account of Exports without the payment of integrated tax.
- Refund of unutilized input tax credit (ITC) on account of goods or services supplied to SEZ Unit/ SEZ Developers without the payment of integrated taxes.
- Refund of unutilized Input Tax Credit on account of accumulation due to the inverted tax structure, where the input tax is more than outward tax liabilities.
- Refund for the supplier, of tax paid on deemed export supplies.
- Refund for the recipient, of tax paid on deemed export supplies.
- Refund of excess balance in the electronic cash ledger.
- Refund on assessment/provisional assessment/appeal/any other order.
- GST Paid by foreign tourists can also be subject to refunds.
These are the most basic & generic situations where GST Refund is applicable, but there may be other situations & special cases as well & the procedures for claiming refunds in each situation may vary.
Exceptional Scenarios under GST Refund
There are various other situations where the GST Refund claim may be ineligible & yet allowed.
Similarly, there may be situations where the refunds are eligible & yet not be allowed under special circumstances.
These are exceptional cases & need to be treated differently by the taxpayers.
Following are the special cases of GST Refund claim-
- Taxes paid under wrong GST Head- In case you have paid CGST & SGST for inter-state movement of goods you are eligible to claim a refund of the CGST & SGST after paying the taxes in the right GST Head.
- For Supplies not receive- If you have paid taxes on a supply that you didn't receive & for which an invoice was not generated, then you can claim a refund of such taxes.
- Tax refund order- Taxes can be refundable as a consequence of a judgment, decree, order or on the direction of an Appellate Authority, Appellate Tribunal or any court.
- No Refund on ITC in case of exports- You cannot claim ITC on taxes paid on exports that were taxable under excise duty.
- Duty Drawback- If your supplier has availed the benefit of duty drawback paid under excise duty, then you cannot claim a refund of such ITC.
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What is Relevant Date & Time Limit For Claiming GST Refunds?
Claiming GST Refunds is squared into a time-frame. The refunds may best be claimed within the boundaries of this time-frame.
A GST refund may be claimed within two years from the relevant date. This means that the relevant date is the earliest date from when a taxpayer can start claiming their refunds.
Different cases of GST refunds have different Relevant Dates.
Given below is a table for you to understand the relevant dates for each case-
GST Refund Scenarios
Goods are exported by sea or air
Date on which the Ship or the Aircraft in which such goods are loaded, leaves India
Goods are exported by land
Date on which such goods pass the frontier
Goods are exported by post
Date of dispatch of goods by Post Office concerned
Goods regarded as deemed exports
Date on which the return relating to such deemed exports is filled.
Services exported out + supply of service had been completed prior to the receipt of payment
Date of Receipt of payment
Services exported out + payment received in advance prior to the date of issue of the invoice
Date of Issue of invoice
Tax refundable in consequence of judgment, decree, order or direction of Appellate Authority, Appellate Tribunal or any Court
Date of communication of such judgment, decree, order or direction
Unutilized input tax credit
End day of the financial year in which such claim for refund arises
Tax is paid provisionally under this Act
Date of adjustment of tax after the final assessment
What is withholding of Refunds under GST & its Consequences?
Although the GST Refund process is smooth & hasslefree there may be some complications in it.
Generally, a taxpayer files the form GST RFD 01, by filing the relevant details & attaching the supporting documents, he then gets the form verified by a CA and submits the form to the relevant Tax Official.
The role of the taxpayer ends here, & the rest of the process will lie in the hand of the Tax Official, he may accept, hold, or reject your GST Refund application on authentication of the same.
Although, the Tax Officials are obliged to process your refund or at least take required actions to it within 60 days from the date of applying.
The Tax Officials cannot hold your GST Refund without informing or without generating a relevant revert form stating facts as to why is the refund being withheld.
In the case where a refund is liable to further proceedings or appeal & the Commissioner is opinioned that a refund may be a liability to the Revenue on account of false or fraud commitments & claims, then the jury may withhold such GST Refunds.
The minimum declared amount of claiming a refund is Rs. 1000, any amount less than that & no refund will be granted.
Ideally, a tax official is required to produce a deficiency memo, acknowledgment form, or a rejection form within 15 days from the date of ARN generation, & release the provisional credit within 7 days from the date of ARN generation, if the refund application is accepted.
Also, the Tax Officials are required to release the refund within 60 days from the date of ARN generation, if they fail to do so, then the Government will have to pay interest to the taxpayer at the rate of 6% per annum, calculated for the period of the delay.
The interest amount will be auto-credited to the taxpayer's bank account that he mentioned while registering.
Refund under GST is highly complicated despite being one of the most important provisions of the GST Regime. One must be aware of even its minor details to claim the refund accurately.
The GST Refund process is a variable subject & can mold differently for different situations & cases.
In fact, incorrect GST refund applications can be massive troublemakers for Businesses, especially if they are escalated to an appeal or a proceeding.
You are also likely to lose the credits due to having incomplete information about the process & other provisions of GST Refund.
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