Refund Under GST Laws
Online GST Refund Process – A Step-By-Step Guide
- Introduction : Under GST law there is structured mechanism for claim of refund. Though there are various forms which has been prescribed as application to claim the refund, along with this there are various Due-date which has been prescribed for different situations. The above process is so much complicated that it becomes difficult to understand for layman. Government is also taking serious steps on speeding up refund processing system in these tough times to support all the registered persons who have applied for their refunds. With this background, let us understand the latest developments in GST Refunds along with process.
- Related Provisions : GST Law Mechanism provides for refund related provisions under Section 54 (Chapter IX) of CGST Act, 2017, Rule 89 to 97A (Chapter X) of CGST Rules, 2017 read with various Circulars &Notifications as issued time to time by CBIC. The timeline for filing the refund application is within two years from the relevant date wherein “relevant date” definition has been provided by way of an explanation to Section 54.
- Procedure : All the types of refund prescribed under the aforesaid provisions can be divided into 3 buckets i.e. Refund of Taxes Paid, Refund of Accumulated Input Tax Credit and Refund of other amount paid (e.g. Interest/Penalty/Late fees wrongly paid). Drastic changes came out to limelight when CBIC released Master Circular No. 125/44/2019 – GST dated November 18, 2019 which eliminated manual filing of refund applications by transforming to most efficient and time saving electronic filing system. The various types of Refund Applications which are to be filed online through the Common Portal W.E.F September 26, 2019 are listed below
|Sr. No||Type of refund application||Relevant for||Before 2 years from expiry of relevant date, where relevant date will be|
|1||Unutilized ITC on account of exports/SEZ supplies without payment of tax;||Exporter*||Before 2 years from expiry of relevant date, where relevant date will be|
Goods are exported out of Indiaand departure is by land then
1) Exported by sea or air: Ship/Aircraft leaves India.2)Exported by land: Date on which goods passes frontier.3)Exported by post: Date of despatch of goods by the Post Office.
|In the case of services exported out of India|
1) Date of receipt of convertible foreign exchange payment where it is received after completion of provision of service.
2) Date of issue of invoice in case where payment has been received prior to issuance of invoice.
|2||Unutilized ITC on account of accumulation due to inverted tax structure;||Specific Taxpayer having higher rate on Inward supply compared to rate on outward supply||Due date for furnishing of return under section 39 for the period in which such claim for refund arises.|
|3||Refund to supplier of tax paid on deemed export supplies;||Exporter*||Date on which the return relating to such deemed exports is furnished.|
|4||Excess balance in the electronic cash ledger;||Every Taxpayer||No minimum limit restriction for refund of excess amount in Electronic Cash Ledger and No time limit is also applicable for application of such.|
|5||Excess payment of tax;||Every Taxpayer||Date of payment of such tax.|
|6||Tax paid on intra-State supply which is subsequently held to be inter-State supply and vice versa;||Every Taxpayer||In this case assessee can avail the benefit of PMT-09 for unsettled tax liability for liability which has been already settled assessee is required to follow the refund procedure, further according to provision assessee will not be required to pay interest on this wrong levy.|
|7||Refund on account of assessment/provisional assessment/appeal/any other order;||Every Taxpayer||Date of communication of such judgment, decree, order or direction and in case of provisional assessment; Date of adjustment of tax after the final assessment thereof.|
- No refund of unutilised input tax credit shall be allowed in cases where the goods exported out of India are subjected to export duty.
- No refund of input tax credit shall be allowed, if the supplier of goods or services or both avails of drawback in respect of central tax or claims refund of the integrated tax paid on such supplies.
- Clarification on various issues.
- No refund will be allowed if the amount is less than one thousand rupees. In case of application of refund where amount less than one thousand rupees it will not be entertained. It is clarified vide Circular 125/44/2019 that the limit of rupees one thousand shall be applied for each tax head separately and not cumulatively.
- The Board has clarified that in cases where refund of tax paid on supplies other than Zero rated supplies, the disbursement of refund against such applications filed would now be admissible proportionately in the respective original mode of payment i.e. if the assessee had paid the taxes both by debiting electronic cash and credit ledgers then the refund would be disbursed in the same proportion in which such cash and credit ledgers has been debited for discharging the total tax liability for the relevant period for which refund claim was filed. Further, the aforesaid disbursal amount shall be paid by way of issuance of order in Form GST-RFD-06 towards amount refundable in Cash; by way of issuance of Form GST PMT-03 to re-credit the amount attributable to credit as ITC in Electronic Credit Ledger.
- For e.g. Mr. A has paid his total tax liability in proportion of 60% by debiting credit ledger and 40% in cash, then in that case if refund application has been accepted then the amount of refund will be credited in same proportion. Further as department has also allowed the refund application for unutilised ITC (except in case of Inverted duty structure and zero-rated supply without payment of Tax.), but in absence of any clarification assessee will be required to file fresh application of refund of unutilised ITC.
- Questions that may arise:
Question : Whether exporter can claim refund of unutilised ITC pertaining to RCM transactions which does not reflect in Form GSTR-2A?
Answer: Yes, Exporter can apply for refund of unutilised ITC in relation to RCM Transactions as per Circular No. 139/09/2020- GST dated June 10, 2020 read with 135/05/2020-GST dated March 31, 2020.
Question : Whether HSN Code is mandatory in Annexure B filed along with refund application?
Answer: Yes, as per Circular No. 135/05/2020-GST dated March 31, 2020; it will be mandatory to describe HSN code in Annexure B filed with refund application.
Some important question relating to documents to furnished.
|Questions||Documents to be furnished|
|Whether undertaking from assessee for grant of refund of provisionally accepted ITC is required?||Applicants shall be required to give an undertaking to the effect that the refund sanctioned would be paid back with interest in case of mismatch of credit.|
|Whether provisional refund can be granted even in cases where the officer believes that the claim should be rejected due to irregularities?||In such cases, the proper officer shall grant refund on provisional basis of 90% of refundable amount. Further final sanction of refund will be done after giving opportunity of being heard.|
|How to deal with rejection of refunds on the common portal pertaining to SEZ supplies due to incorrect disclosure in GSTR-3B||For the period July 1, 2017 to June 30, 2019, such applicants will now be allowed to file refund application on the portal.|