GST Refund
/ GST

GST Refund – A Detailed Analysis

The concept of refund in the parlance of GST is crucial for a taxpayer as it facilitates trade by releasing blocked funds for working capital, expansion, and modernization of existing business. The GST refund can arise on account of excess cash balance in the electronic cash ledger or the accumulated Input Tax Credit unable to be utilized for tax payments due to zero-rated sales or inverted duty structure or on account of various other reasons that have been discussed below in the article.

The refund provisions in the GST law aim to streamline and standardize the GST refund procedure. Under the GST regime, there is a standardized form for making any refund claim. The claim and sanctioning procedure are primarily online and time-bound, which is a marked departure from the earlier time-consuming and cumbersome process.

In this article, we have highlighted the essential facets of GST Refund…

Situations Leading to Refund Claims
A claim for a GST refund may arise in the following situations:

  • Refund of IGST paid on a specified class of goods and services exported by a specified class of persons.
  • Refund of IGST paid on goods and services supplied for authorized operations to an SEZ developer/unit by a specified class of persons.
  • Refund of unutilized ITC in case of exports or supply to SEZ developer/unit for authorized operations without payment of IGST or in the case of inverted duty structure.
  • Refund of taxes paid on the supply of goods considered as deemed exports.
  • Refund any excess balance in the electronic cash ledger after payment of tax dues and other dues payable under the CGST Act or the rules made there.
  • Refund of taxes paid on a supply which is actually not made, either wholly or partially, and for which the invoice hasn’t been issued (tax paid on advance payment).
  • Refund of tax wrongly collected and deposited to the Government (i.e., IGST paid by treating the supply as inter-state supply, which is subsequently held as intra-state supply and vice-versa).
  • Refund of the IGST paid by tourists leaving India on any supply of goods taken out of India by him.
  • Tax becoming refundable due to judgment, decree, order, or direction of the Appellate Authority, Appellate Tribunal, or any Court.
  • Any tax becoming refundable to the taxpayer on finalization of provisional assessment (on account of assessed tax on the final assessment being less than the tax deposited by the taxpayer).
  • Refund taxes on purchases made by UN bodies or embassies, etc.
  • Refund of taxes to retail outlets established in the departure area of an international airport beyond immigration counters, making a tax-free supply to an outgoing international tourist.
  • Refund of advance tax paid by a casual taxable person/Non-resident taxable person.

Excess payment of tax refund in GST
The list mentioned above is only indicative and not exhaustive.

Application for Claiming Refund
Any person wanting to claim a refund of any tax, interest, penalty, fees, or any other amount paid by him has to file an application in Form GST RFD-01 electronically through GST common portal

However, in the case of export refund under GST, i.e., refund of IGST paid on goods exported out of India, there is no need to furnish Form GST RFD-01 since the shipping bill filed by the exporter is itself considered a refund claim.

Further, a registered person claiming a refund of any balance in the electronic cash ledger may claim such a refund through the return filed for the relevant tax period under section 39 in Form GSTR-3/GSTR-4/GSTR-7, as the case may be. However, presently, the application for a refund of the balance in the Electronic Cash Ledger is also being filed in Form GST RFD-01. Earlier, Form GST RFD01A was filed to claim the cash refund in place of Form GST RFD-01

Time Limit for Claiming Refund
Any person claiming a refund of any tax, interest, if any, paid on such tax or any other amount paid by him shall have to apply for such a refund before the expiry of 2 years from the ‘Relevant Date.’

However, no GST refund time limit is applicable in cases of refund of excess balance in the electronic cash ledger.

Cases where an ITC refund is not allowed
The GST credit refund is not allowed in the following cases:

  1. If the goods exported from India are subjected to export duty.
  2. If the supplier of goods and services avails the drawback in respect of CGST or claims the refund of the IGST paid on such supplies.

Minimum Refund Claim
As per section 54(4) of the CGST Act, an applicant shall not be paid any refund if the amount is less than Rs. 1,000. This limit of Rs. 1,000 applies separately for each tax head (i.e., CGST, SGST & IGST). Also, this limit would not apply in cases of refund of excess balance in the electronic cash ledger

Interest on Delayed Refunds
In a case where any tax ordered by the proper officer to be refunded to any applicant is not repaid within 60 days from the date of receipt of the GST Refund application, interest shall be payable to the applicant @6% p.a. on such refund amount from the date immediately following the expiry of 60 days from the date of receipt of the refund application till the date of repayment of such tax.

In a case where any claim of refund arises on account of an order passed by an Adjudicating Authority or Appellate Tribunal or Appellate Authority or Court and the same is not repaid within 60 days from the date of receipt of the refund application filed consequent to such order, interest shall be payable to the applicant @9% p.a. on such refund from the date immediately following the expiry of 60 days from the date of receipt of application till the date of refund.

Consumer Welfare Fund
Consumer Welfare Fund was created to protect and promote the welfare of consumers, spread consumer awareness and strengthen the consumer movement in the nation, particularly in rural areas. The refund amount not payable to the applicant is credited to the Consumer Welfare Fund. As already discussed above, the amount of refund is paid to the applicant in cases where the supplier has not passed the incidence of tax to the recipient and in circumstances where the principle of unjust enrichment is inapplicable. The said amount is credited to the Consumer Welfare Fund in all other cases

Withdrawal of Refund Application
An applicant can withdraw the refund application under GST filed by him by filing Form GST RFD-01W at any time before issuance of a provisional refund or final refund or payment order or refund withhold order, or notice. On submission of such withdrawal application, any amount debited by the applicant from the electronic cash ledger or electronic credit ledger while applying for the refund in Form GST RFD-01 shall be credited back to the ledger from which such amount was debited.