Inward supply of goods and services which have been exported or on inputs or input services used in products and services shipped. Note that if the goods are exposed to export duty, the refund will not be permitted. Input tax credit is not utilized due to output supplies being exports or zero-rated supplies. Input tax credit is unutilized due to reversed duty structure. When the tax rate on inputs is more than the price of tax on output supply, please note, that in this case, the refund under GST is not applicable when supplies are NIL rated or fully exempt.
Types of Refund in GST
Various kinds of GST refunds, namely refunds on account are as follows:-
- Additional payment of tax due to fault or negligence;
- Excess balance in Electronic Cash Ledger;
- Export with payment of IGST or under Bond/LUT;
- Supplies made to SEZ unit/developer on payment of IGST or under Bond/LUT;
- Inverted duty structure;
- Deemed Exports;
- Persons holding UIN;
- Miscellaneous refunds.
Refund in GST Process
Application for Refund in GST
Any individual claiming refund of tax or interest or any other total amount should be paid to file an application for refund in Form GST RFD-1 before the expiry of 2 years from the ‘relevant date.’ The ‘relevant date’ in each scenario of return is given under:
- Goods transferred by sea or air – Date on which the ship or aircraft in which the products are loaded, leaves India;
- Goods transported by land – Date on which the goods pass the border;
- Goods transferred by post – Date of dispatch of goods by the concerned post office;
- Services shipped, where the Supply of service has been completed before the receiving of payment – Date of receiving of payment;
- Facilitiestransferred, where the payment has been received in advance, before the date of issue of statement – Date of issue of the statement;
- Non-utilized input tax credit – End of the financial year in which the claim for tax refunds arises.
A suit for reimbursement of the balance sheet in the automatic cash ledger should be completed through the applicable regular return, i.e., Form GSTR-3 in case of a regular dealer, and Form GSTR-4 in case of arrangement dealer.
The documents essential for the refund in GST are as follows-
- If the amount claimed as a tax refund in GST is not more than Rs. 5 Lakhs – The person is required to file announcement founded on the documents or other evidence available with them, attesting that the incidence of tax or interest is claimed as the repayment has not been approved on to any other individual.
- If the amount claimed as a refund in GST is more than INR 5 Lakhs – The application for a refund must be escorted by:
- Written evidence to establish that the refund is due to the individual.
- Written or other evidence to establish that the amount was paid by him/her and that the incidence of the tax or interest has not been passed on to another person.
Order for Refund in GST
If the reimbursement is on account of the export of goods and services, the authorized officer will refund 90% of the total amount claimed as a refund on a provisional basis in Form GST RFD-4. After that, after due confirmation of the documents equipped, the officer will issue an order for the final settlement of the refund entitlement. Interim refund will be granted subject to the following circumstances-
- The person demanding refund has not been prosecuted for tax evasion of an amount exceeding Rs250 Lakhs during the preceding five year;
- The person’s GST compliance assessment is not less than five on a scale of ten;
- No pending petition, appraisal or reconsideration exists on the sum of reimbursement.
If the officer is fulfilled that the whole or part of the sum claimed as a refund in the application is refundable, he will issue an order for the return in Form GST RFD-5. This can be done within 60 days from the date of receiving of the application form. If the refund is not authorized within 60 days, interest on the repayment amount will be paid for the period after 60 days till the date of the actual reimbursement of tax.No refund should be made if the amount claimed as a refund is less than INR 1,000.
Extraordinary Scenarios of Refund in GST
Following are few extraordinary Refund in GST rules, India might come across are as follows-
- Tax on supply of goods related as deemed exports. E.g., Supply of products or facilities to a Special Economic Zone or Export Oriented Unit (EOU).
- Tax is refundable as significance of a judgment, verdict, and order or on the direction of an Appellate Authority, Appellate Tribunal or any court.
- The tax has been compensated on a supply which has not been provided solely or partially and for which a statement has not been delivered.
- Tax incorrectly composed and put with the Central Government or State Government. If a person has paid SGST and CGST on a domestic supply or IGST on an intrastate supply, the person is eligible for a repayment of the quantity once the tax has been dispatched properly.
- IGST paid on supply of goods to travellers traveling out of India, if the products are transported out of India.
The ‘relevant date’ in these situations of refund are mentioned under:
- Goods observed as deemed exports – Date on which the return relating to the deemed exports is filed;
- Tax refundable as a consequence of judgment, verdict, order or on the direction of an Appellate Authority, Appellate Tribunal or any court- Date of communication of the resolution, verdict, order or direction;
- Tax provisionally paid – Date of adjustment of charge after the final assessment
- In the case of a person, other than the supplier -Date of receipt of goods or services by the person;
- Any other case – Date of payment of tax.
The refund process under GST remains the same for both normal as well as exceptional scenarios.
Input tax credit is not utilized due to output supplies being exports or zero-rated supplies. Input tax credit is unutilized due to reversed duty structure. It is when the tax rate on inputs is more than the price of tax on output supply. Please note, that in this case, the refund in GST is not applicable when supplies are NIL rated or fully exempt. The provisions relating to refund contained in the GST law aim to modernize and standardise the refund procedures under GST regime.
Our CorpBiz group shall be at your disposal if you seek expert advice on any aspect related with GST Registration along with complete compliance. We will help you ensure full compliance concerning all the requirements based on your anticipated activities, ensuring the productive and well-timed completion of your expectation.