Refund under GST

Even after five years of GST implementation, the Auditor General of India (CAG) stated in its report on Indirect Taxes that there is no proper system to review and post-audit to correct mistakes in granting refunds. (source Taxscan). Article briefly explain on refund under GST, how you can get refund under GST and more. 

According to the report, "timely refund processing benefits taxpayers by providing much-needed liquidity and cash inflows."

During the departmental Audit under GST, discovered specific systemic and compliance issues concerning the Department's grant of refund, which must be addressed."

The report also stated that "a mechanism exists to match ITC availed by a taxpayer with the GSTR-1 returns filed by suppliers and to identify fraudulent cases through data analytics after the amount has been paid."

However, adequate systems were not in place to prevent and mitigate refund-related fraud by using real-time/near-real-time data analytics to alert tax officials before refund sanction."

The Audit examined data from the Public Financial Management System (PFMS ) relating to PFMS GST refunds received from 34 Commissionerates between July 2017 and September 2019 (pre-automation) and conducted a substantive audit of the payment process.

 An audit discovered 410 instances of double payments due to the Department's lack of reconciliation and monitoring, totalling 13.73 crore.

Refund under GST fascinating theory

When the GST paid exceeds the GST liability, the situation of claiming a GST refund arises. The process of claiming a refund under GST is standardised to avoid confusion. The process is done online, and time limits have been set.

Current GST return filing requires that, after filing GSTR-1 to report sales, one file GSTR-3B to report the ITC and make the necessary GST payment each month. If a refund is required, it can be obtained by completing the appropriate refund forms.

According to the most recent update on July 5, 2022, taxpayers can exclude the COVID pandemic period (March 1, 2020, and February 28 2022) from the time limit for filing GST refund applications under Sections 54 or 55 of the CGST Act.

Read more related articles:

Export of Goods and Services Under GST – Implications & Refund Provisions

Refund under GST deadline - Things you are not aware!

Reasons for GST refund

The deadline for requesting a refund is two years from the relevant date. In each case, the applicable date is different.

For some cases, the relevant dates are as follows:

The reason for claiming GST Refund

Date of Relevance

Payment date

Goods or services exported or deemed to be exported

Date of dispatch/loading/border crossing

ITC accumulates as output becomes tax-free or nil-rated.

Last day of the financial year to which the credit refers

Provisional evaluation is completed.

Tax adjustment date

How Can You Get Your Refund

There are numerous situations where a refund can be obtained.

Here are a few examples:

  • Excess tax is paid due to an error or omission.
  • Dealer exports (including deemed export) goods/services to claim a GST refund on exports or refund
  • ITC accumulation as a result of the output being tax-exempt or zero
  • Tax refunds on purchases made by embassies or UN bodies
  • International Tourist Tax Refund
  • Provisional assessment completion

Read more related articles:

GST Refund Application for UN & Embassies

GST Refund Claim In Case of Inverted Duty Structure under GST

Refund under GST Has Been Applied - Mistakes that you may make

Refund under GST mistakes

The application filed by a refund applicant or taxpayer will appear as a pending work item on the dashboard of the tax officer or refund processing officer.

They will verify and scrutinise the application as well as the supporting documents.

Filed applications can be tracked by selecting "Track Application Status" from the Refunds menu. Following an inspection by a GST official, the refund amount will be credited to the applicant's bank account.

The officer will take the following actions:

  • The refund application must be submitted in Form RFD 01 within two years of the relevant date. A Chartered Accountant should also sign the Form.
  • If the application is complete in all aspects, an acknowledgement in Form RFD-02 is issued within 15 days of filing the refund application.
  • In form RFD-01W, there is a new option to withdraw the applicant's refund application. The refund debited to the taxpayer's electronic credit or cash ledger upon filing the refund application will be credited to the respective GST ledgers once the withdrawal application is submitted.
  • Otherwise, the officer may issue a deficiency memo in form RFD-03 within the same time limit to correct any deficiencies by the applicant. If the ledger had been debited when filing the refund, an auto re-credit of the amount claimed refund will occur at this point. In such cases, a new application must be submitted.
  • For certain types of refunds, a provisional refund can be granted using Form RFD-04. It must be issued within seventy-seven days of the acknowledgement date, with at least 90% of the amount claimed. The officer may issue a notice to seek clarification in form RFD-08 to reject the application or recover a refund granted in error. In such cases, the applicant must respond to form RFD-09 within 15 days.
  • The officer must issue a sanction or rejection order on Form RFD-06. Following that, a payment order in Form RFD-05 is given in cases of sanction. RFD-05 is also sometimes given after RFD-04.
  • In some cases, the officer may issue a withholding order sanctioned in form RFD-07 (part-B). RFD-05 is never given in this country.
  • The officer may issue a notice to seek clarification in form RFD-08 to reject the application or recover a refund granted in error. In such cases, the applicant must respond to form RFD-09 within 15 days.
  • Re-credit the refund from the taxpayer's electronic cash or credit ledger in case of rejection or when the provisional refund was granted in form PMT-03.

Read more related articles:

GST Refund Series- A Detailed Guide on Basics Of the GST Refund Process

Everything about GST Refund of Excess Tax Paid

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Sameep Mohite

About the author

Sameep Mohite is a computer engineer with a passion for GST. He has written many articles on GST, Finance, and Technology topics.

He is a GST expert who writes for GSTHero. He wants to ensure you know what you're paying for and why.

He enjoys explaining complex technical terms in primary, easy-to-understand language.

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