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Refunds under GST

Jan 16, 2023


Refund of GST is provided in many cases, typically when excess tax is paid that is more than GST liability of an individual or a business establishment under the GST regime. The claims for refund under GST have been standardised, even time limitation for making a claim have also been introduced. The claim and procedure for refund are completely online through the GST common portal.

Situations when refund can be claimed: –

The provisions governing refund claims under GST are Section 77, which provides the requirements and essential elements to make a refund claim and Section 54, which provides for relevant date and time limitation, of the central goods and service tax (CGST) Act, 2017. Apart from this, Rule 89 (2) of GCST Rules, 2017 states the documents required to make a refund claim, various situations where refund can be claimed is required to make are also provided.

A claim for refund may arise on account of: –

  • export of goods or services
  • supplies to Special economic zones (SEZs) units and developers
  • supply of goods regarded as Deemed Exports
  • refund of taxes on purchase made by UN or embassies etc. under Section 55 of CGST Act, 2017
  • refund arising on account of judgment, decree, order or direction of the Appellate Authority, Appellate Tribunal or any court
  • refund of accumulated Input Tax Credit (ITC) on account of inverted rate structure
  • finalisation of provisional assessment
  • refund of pre – deposit
  • tax paid in excess or by mistake
  • Refunds to International tourists of GST paid on goods in India and
  • carried abroad at the time of their departure from India (not notified yet)
  • refund of tax paid in wrong head under Section 77 of CGST Act, 2017 & Section 19 of IGST Act, 2017 treating the supply as intra-State supply which is subsequently held as inter-State supply and vice versa
  • refund on account of any other reasons.

According to Section 54 of CGST Act, 2017 the time limit for claiming for refund under GST is two years from the relevant date. The “relevant date” may vary depending upon the situation. Such as in case if the goods are exported by sea or air, the relevant date is on which the ship or the aircraft in which the goods are loaded, leaves India and in case of export by land the relevant date is when the goods passed the frontier, and in case if the goods are exported by post then the date of dispatch of the goods becomes the relevant date.

In case of services exported out of India where a refund of tax paid is available in respect of services themselves or, as the case may be. Sometimes, it could be the date of receipt of payment in convertible foreign exchange where the service has been provided prior to receiving the payment. In case of receiving payment in advance then, the relevant date would be the date of issuance of invoice.

The cases where it becomes eligible to make a claim of refund for unutilised input tax credit are provided under Section 54 clause (3) of the CGST Act, 2017. The refund will only be available in two cases, which are –

a)  Zero-rated supplies made without payment of tax: As per Section 16(3) of the IGST Act, 2017, a registered person making zero rated supply is eligible to claim refund in either case the supply of goods or service has been made with or without payment of integrated tax or to a special economic zone developer or unit.

On account of zero rating of supplies, the supplier is entitled to claim Input Tax Credit in respect of goods or services or both used for such supplies even though they might be non-taxable or even exempt supplies.

The tax shall be considered to have been refunded only when the amount has been credited to the bank account of the claimant. Therefore, interest will be calculated starting from the date immediately after the expiry of sixty days from the date of receipt of the application till the date on which the amount is credited to the bank account of the claimant. Accordingly, all tax authorities have been advised to issue the final sanction order in FORM GST RFD-06 within 45 days of the date of generation of Application Reference Number (ARN).

b)  Inverted duty structure: Where the credit has accumulated on account of rate of tax on inputs being higher than the rate of tax on output supplies (other than nil rated or fully exempt supplies), except supplies of goods or services or as may be notified by the Government on the recommendations of the Council, this would include even those cases where supply has been made to merchant exporters.

The unutilised input tax credit on export of goods which are subject to export duty is not available for refund. Further, no refund of input tax credit is allowed, if the supplier of goods or services avails drawback in respect of central tax or if they claim refund of the integrated tax paid on such supplies.

Procedure to claim refund

The tax payer to make a claim for refund of tax under GST has to submit FORM GST RFD 01 which is available on the GST common portal, to initiate the procedure for refund claims, except for refund claims under section 55 of the CGST Act, 2017 and claim for integrated tax paid on export of goods. The application within fifteen days for filing shall be analysed and if the application is complete an acknowledgement will be made available to the applicant in FORM GST RFD 02.

The claim if sanctioned in FORM GST RFD-06 within a period of 60 days from the date of receipt of the application if claim is complete in all respects. If this mandatory period is exceeded, interest at the rate of 6% (9% in case of refund made on order passed by an adjudicating authority or Appellate Tribunal or court which has attained finality) becomes payable.

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