GST Refunds: Application for Refund, When can the refund be claimed?

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Timely refund mechanism is essential in tax administration, as it facilitates trade through the release of blocked funds for working capital, expansion and modernisation of existing business. Once GSTR 1 and GSTR 2 are filed a dealer is required to file GSTR 3 and make GST Payment. Also if a refund is required to be claimed the same can be done by filing relevant refund related forms.

The provisions pertaining to refund contained in the GST law aim to streamline and standardise the refund procedures under GST regime. Under the GST regime, there will be a standardised form for making any claim for refunds. The claim and sanctioning procedure will be completely online and time bound, which is a marked departure from the earlier time consuming and cumbersome procedure. Further, provisions relating to refund are more transparent as compared to provisions contained in the earlier indirect tax regime.

1. What is GST refund?

As per section 54(1) of the CGST Act, any person claiming refund of any tax and interest, if any paid on such tax or any other amount paid by him, may make an application before the expiry of 2 Years from the revelvant date in such form and manner as may be prescribed.

Explanation (2), to section 54 of the CGST Act, 2017 “relevant date” means –

(a) in the case of goods exported out of India where a refund of tax paid is available in respect of goods themselves or, as the case may be, the inputs or input services used in such goods,

Where goods are exported by air / sea

  • Date on which the vessel leaves India

When goods are exported by land

  • Date on which the goods pass the frontiers

When refund of unutilised ITC in case of zero rated supplies, or accumulated ITC in case of inverted duty structures is claimed

  • End of the Financial Year in which such claim for refund arises

In case of refund arising out of finalisation of provisional assessment

Date of adjustment of tax after the final assessment

Any other case

  • Date of payment of tax

(b) in the case of supply of goods regarded as deemed exports where a refund of tax paid is available in respect of the goods, the date on which the return relating to such deemed exports is furnished;

(c) in the 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, the inputs or input services used in such services, the date of–

  • (i) receipt of payment in convertible foreign exchange, where the supply of services had been completed prior to the receipt of such payment; or
  • (ii) issue of invoice, where payment for the services had been received in advance prior to the date of issue of the invoice;

(d) in case where the tax becomes refundable as a consequence of judgment, decree, order or direction of the Appellate Authority, Appellate Tribunal or any court, the date of communication of such judgment, decree, order or direction;

(e) in the case of refund of unutilised input tax credit under sub-section (3), the end of the financial year in which such claim for refund arises;

(f) in the case where tax is paid provisionally under this Act or the rules made thereunder, the date of adjustment of tax after the final assessment thereof;

(g) in the case of a person, other than the supplier, the date of receipt of goods or services or both by such person; and

(h) in any other case, the date of payment of tax

Application for Refund

Section 54 states that any person claiming a refund may file an application in form GST-RFD-01 electronically through the GST portal.

In case of advance tax deposits made by a casual taxable person OR a non-resident taxable person, the same shall be refunded only when such person has, in respect of the entire period for which the certificate of registration granted was in force, filed all the returns under Section 39. Also, the advance tax so paid, after adjusting any liability shall be claimed in the last return so filed.

When can the refund be claimed?

There are many cases where refund can be claimed. Here are some of them –

Excess payment of tax is made due to mistake or omission.

  • Dealer Exports (including deemed export) goods/services under claim of rebate or Refund
  • ITC accumulation due to output being tax exempt or nil-rated
  • Refund of tax paid on purchases made by Embassies or UN bodies
  • Tax Refund for International Tourists
  • Finalization of provisional assessment

How to calculate GST refund?

Rule 89 (4) states that in the case of zero rated supply of goods or services or both without payment of tax under bond or letter of undertaking in accordance with the provisions of sub-section (3) of section 16 of the Integrated Goods and Services Tax Act, 2017, refund of input tax credit shall be granted as per the formula mentioned thereby.

Rule 89(5) states that in case of inverted duty structure supplies of goods / services / both; refund of tax would be granted proportionately, i.e., as per the formula mentioned therein.

Let’s take a simple case of excess tax payment made.

Mr. B’s GST liability for the month of September is Rs 50000. But due to mistake, Mr. B made a GST payment of Rs 5 lakh.

Now Mr. B has made an excess GST payment of Rs 4.5 lakh which can be claimed as a refund by him. The time limit for claiming the refund is 2 years from the date of payment.

Documentation and Declaration

The refund application must be accompanied with the necessary documentation. Additionally, where the amount of refund claimed doesn’t exceed INR 200,000, the refund application must be accompanied with a declaration that the incidence of tax has not been passed on to any other person and that therefore there wouldn’t be unjust enrichment.

However, where the amount of refund claimed is greater than INR 200,000, a certificate as a part of Form GST RFD-01 by a Chartered Accountant or a Cost Accountant to the effect that there is no unjust enrichment and that the tax incidence has not been passed on to any other person, would be required to be submitted along with the refund application.

Refund Order

The refund order should be made by the proper officer within 60 days from date of receipt of application, which is complete in all respects.

Where the proper officer is satisfied that amount so refundable is payable to an applicant, he shall make an order in form GST-RFD-06 and the same will then be credited to the account of the applicant.

Where the proper officer is satisfied that amount so refundable is not payable to any applicant per se, he shall make an order in form GST-RFD-06 and the same will then be credited to the Consumer Welfare Fund.

What is the time limit for claiming the refund?

The time limit for claiming a refund is 2 years from relevant date.

The relevant date is different in every case.

Here are the relevant dates for some cases –

Reason for claiming GST Refund Relevant Date
Excess payment of GST Date of payment
Export or deemed export of goods or services Date of despatch/loading/passing the frontier
ITC accumulates as output is tax exempt or nil-rated Last date of financial year to which the credit belongs
Finalisation of provisional assessment Date on which tax is adjusted

Also if refund is paid with delay an interest of 24% p.a. is payable by the government.

How to claim GST refund?

The refund application has to be made in Form RFD 01 within 2 years from relevant date.

The form should also be certified by a Chartered Accountant.

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