Efficiency of any tax administration is directly proportional to timely refund process.
It helps in smooth trade process by releasing blocked funds.
These in turn help for capital, expansion & modernization of the existing business.
Objective of GST funds is to streamline as well as standardize the process for making claims and obtaining refunds.
The GST refund process will be online, time bound and constantly monitored unlike the current system which is cumbersome and time consuming.
Chapter-XI of CGST ACT deals with GST refunds i.e. Section 54, Section 55, Section 56
GST Refunds – Situations Resulting in Refund Claims
There are various situations that can result in refund claim situation. The Section-54 of the 2017 CGST Act outlines the situations wherein a claim can be made for GST refund.
An individual or entity can claim for refund/s during the following situations:
- Export of any goods/ services
- Deemed Exports
- Supply to SEZ developers and units
- Tax refund on purchases made by Embassies or UN etc
- Accumulated ITC (Input Tax Credit) Refund arising from inverted-duty structure
- Refund arising as a result of decree, judgement, order or any direction of Appellate Tribunal, Court or Appellate Authority
- Pre-Deposit Refund
- Provisional Assessment Finalization
- GST refunds claimed by foreign/international tourists on goods bought in India & taken abroad during their departure
- Excess payments made as a result of mistakes
- SGST & CGST refunds claimed after treating any supply as inter-state that is subsequently considered intra-state supply & vice versa.
- Refund claimed on vouchers when tax is paid in advance for vouchers against which services or goods were not supplied.
As per the GST law, each refund claim should be filed or generated within two years from relevant date.
Further Explanation of Situations leading to Refund Claims as described above:
Treatment for ZRS (Zero Rated Supplies)
Of the above categories, export accounts have the highest probability of claiming refunds. As per IGST Act, all supplies & exports to SEZs are categorised as ZRS (Zero Rated Supplies). Claims in this situation can be either of the accumulated ITC (Input Tax Credit) or of the Integrated Tax as per Sec-54 of the act
Payment of Different or Wrong Tax
There can be situations wherein a taxable individual might pay central tax/state tax instead or integrated tax or vice versa. These can happen due to incorrect applications at the supply areas. In such case, no interest is charged and the individual can claim refund for the incorrect tax paid without unjust enrichment provision.
Refunds to Non-Resident/Casual Taxable Persons
Non-Resident/Casual Taxable Persons are required to pay advance tax during registration. Refund is applicable in situations where in the actual tax on supplies made to them is lesser than the advance tax paid.
Refund to United Nation Bodies & Other Noted Agencies
Supplied made towards United Nation Bodies & Other Noted Agencies can be excused from GST payment according to international obligations. A taxable individual supplying to these bodies will charge tax. This will later be remitted to government account. UN and other bodies, who are notified under the 2017 CGST Act, can claim their tax refund for on purchases made by them.
Process for GST Refund
- An individual should file their application for refund claim through GSTN Portal. The application can be filed through Form GST RFD-01 on common portal.
- The applicant will receive a unique acknowledgement number via email or sms, after the application form is electronically filed.
- The process will adjust the return & cash ledger automatically. It will reduce the CF-ITC (Carry forward Input Tax Credit).
- The application for refund as well as documents submitted will be monitored and scrutinized within thirty days of application filing.
- Authorities will examine the ‘unjust enrichment’ concept for reaching the refund application state. In case the application does not pass or qualify, refund will be given to CWF (consumer welfare fund)
- If the claimed refund is more than the predetermined refund amount, then the application will be pre-audited for refund sanction.
- Once the application for refund is accepted, applicant will receive it via electronic transfer (NEFT, RTGS or ECS).
Other Important Rules or Provisions for GST Refund
- If the refund amount is less than Rs.1000 then no refund will be paid.
- If the amount of GST refund is less than Rs.5 lakhs, there is no need of submitting documentary evidence.
- In the case of zero-rates supply of goods or service or both without payment of tax under bond or letter of undertaking, refund of input tax credit shall be granted as per the following formula.
Refund Amount = Turnover of zero-rates supply of goods + Turnover of zero-rates supply of services x Net ITC / Adjusted Total Trunover