Refund
Refund includes refund of tax paid on zero-rated supplies of goods or services or both or on inputs or input services used in making such zero-rated supplies, or refund of tax on the supply of goods regarded as deemed exports, or refund of unutilized input tax credit as provided under section 54(3).
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NATURE OF GST REFUND
Refund includes refund of tax paid on zero-rated supplies of goods or services or both or on inputs or input services used in making such zero-rated supplies, or refund of tax on the supply of goods regarded as deemed exports, or refund of unutilized input tax credit as provided under section 54(3).
The GST law’s refund provisions aim to simplify and accelerate the processes for refunds under the GST system. There is a standardized form for submitting any refund claims under the GST system. The claim and sanction process are completely online and time-limited, which is a significant improvement over the previous lengthy and cumbersome process. Additionally, refund provisions are more accessible than those found in the previous indirect tax scheme.
A clAIM FOR REFUND MAY ARISE IN THE FOLLOWING SITUATIONS:
- Export/supply to SEZ developer/unit on payment of IGST In case where goods and/or services are exported or, goods and/or services are supplied to an SEZ developer/unit, on payment of IGST, subject to such conditions, safeguards and procedure as may be prescribed, refund of such IGST paid on goods and/or services supplied is available.
- Refund of unutilized ITC – In case of export/supply to SEZ developer/unit without payment of IGST or in case of inverted duty structure, refund of unutilized ITC is available.
- Refund of tax paid on the supply of goods regarded as deemed exports may be claimed.
- Refund of any balance in the electronic cash ledger after payment of tax, interest, penalty, fee or any other amount payable under this Act or the rules made there under may be claimed.
- Refund on account of tax paid on a supply which is not provided, either wholly or partially, and for which invoice has not been issued (tax paid on advance payment).
- Refund of tax wrongly collected and paid to the Government (i.e CGST & SGST paid by treating the supply as intra-State supply which is subsequently held as inter-State supply and vice versa.
- Refund of the IGST paid by tourist leaving India on any supply of goods taken out of India by him.
- On finalization of provisional assessment, if any tax becomes refundable to taxpayer (on account of assessed tax on final assessment being less than the tax deposited by the taxpayer).
- Refund of taxes on purchases made by UN bodies or embassies etc.
- Refund of advance tax deposited by a casual taxable person/ Non-resident taxable person.
- Refund of excess payment of tax.
APPLICATION FORM FOR CLAIMING GST REFUND
Any person claiming refund of any tax, interest, penalty, fees or any other amount paid by him may file an application in Form GST RFD-01 electronically through GST common portal [Rule 89(1)].
However, in case of refund of IGST paid on goods exported out of India, there is no need for filing a separate refund claim in refund application Form GST RFD 01 since the shipping bill filed by the exporter is itself treated as a refund claim.
Shipping bill filed by an exporter shall be deemed to be an application for refund of integrated tax paid on the goods exported out of India [Rule 96].
TIME LIMIT WITHIN WHICH REFUND CALIM CAN BE FILED
Any person claiming refund of any tax, 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 ‘Relevant Date’ in prescribed form and manner.
DOCUMENTARY EVIDENCES FOR FILLING REFUND CLAIM
The applicant need not file elaborate documents along with the refund claim. Standardized and easy to understand documents have been prescribed. Thus, for every claim the main document prescribed is a statement of relevant invoices/shipping bills (NOT THE INVOICES THEMSELVES) pertaining to the claim.
Note – Documentary evidence pertaining to passing of incidence of tax Further, a declaration needs to be furnished to establish that there is no unjust enrichment in the case of the applicant6 , in a case where the amount of refund claimed does not exceed ` 2 lakh.
However, where the amount of refund claimed exceeds ` 2 lakh, a Certificate in Annexure 2 of Form GST RFD-01 by a Chartered Accountant or a Cost Accountant to the effect that there is no unjust enrichment in the case of the applicant.
Further, neither a declaration by the applicant nor a certificate by a Chartered Accountant/Cost Accountant is required to be furnished in the following cases-
- Refund of tax paid on export of goods or services or both or on inputs or input services used in making such exports,
- Refund of unutilised ITC in case of zero rated supplies made without payment of tax or on account of inverted duty structure,
- Refund of tax paid on a supply which is not provided, either wholly or partially, and for which invoice has not been issued, or where a refund voucher has been issued.
- Refund of tax in pursuance of section 77, i.e. tax paid on a transaction treating it as an intra-State supply, but which is subsequently held to be an inter-State supply or vice-versa.
- The tax or interest borne by such other class of applicants as the Government may, on the recommendations of the Council, by notification, specify.
BENEFITS OF gST REFUND
Cash Flow Management: GST refund provides businesses with a significant benefit by improving their cash flow. By claiming a refund of the excess GST paid, businesses can recover the funds tied up in taxes, allowing them to allocate resources more efficiently and invest in their operations.
Export Promotion: GST refund plays a vital role in promoting exports. Under GST, exports are considered zero-rated, meaning that no GST is levied on export goods or services. By claiming a refund of the input taxes paid on inputs used in the production of export goods or services, businesses become more competitive in the international market.
Boost to Exporters: GST refund is particularly beneficial for exporters, as it reduces the cost of production and enhances their competitiveness. It provides relief by eliminating the burden of taxes on inputs, enabling exporters to offer their products or services at more competitive prices.
Encourages Compliance: GST refund encourages businesses to comply with GST regulations. In order to claim a refund, businesses need to maintain proper records, accurately report their exports, and meet the specified conditions and timelines. This promotes transparency, accountability, and compliance with tax laws.
Refunds for Inverted Duty Structure: In certain cases, businesses may face an inverted duty structure where the GST paid on inputs is higher than the GST liability on the output. GST refund allows businesses to claim a refund of the excess input tax credit, thereby addressing the issue of working capital blockage.
Encourages Investments and Expansion: By providing a mechanism for GST refund, the government encourages investments and expansion of businesses. The refund system ensures that businesses can recover taxes paid on inputs, reducing their financial burden and facilitating growth, innovation, and market expansion.
Supports SMEs and Startups: GST refund is particularly beneficial for small and medium-sized enterprises (SMEs) and startups, as it helps them manage their working capital efficiently. The refund process ensures that these businesses can recover the excess taxes paid, supporting their growth and sustainability.
Promotes Competitiveness: GST refund enhances the competitiveness of businesses by reducing their tax burden. It allows businesses to focus on product quality, pricing, and market expansion rather than being burdened by taxes on inputs, thereby promoting a level playing field and encouraging business growth.
Reduces Input Costs: GST refund helps businesses reduce their input costs. By claiming refunds on taxes paid on inputs, businesses can effectively lower their production costs, which can be passed on to customers through competitive pricing, driving consumer satisfaction and increasing market share.
Stimulates Economic Growth: Overall, GST refund plays a significant role in stimulating economic growth. By improving cash flow, promoting exports, encouraging compliance, and supporting businesses, it contributes to a thriving business environment, job creation, and overall economic development.
FAQs ON GST REFUND
Q1: What is GST refund?
GST refund is a mechanism that allows businesses to claim a refund of the excess Goods and Services Tax (GST) paid on inputs or exports. It provides relief to businesses by returning the tax amount that is not utilized or is eligible for a refund under the GST law.
Q2: Who is eligible to claim GST refund?
Eligibility for GST refund varies depending on the country or jurisdiction. In general, businesses engaged in exports, dealing with an inverted duty structure, or meeting specific criteria defined by the tax authorities may be eligible to claim GST refunds. The specific eligibility requirements can be obtained from the tax authorities or guidelines provided.
Q3: What are the types of GST refunds available?
The types of GST refunds available depend on the specific provisions of the GST law in a particular country or jurisdiction. Common types of GST refunds include refunds on export of goods or services, refunds for taxes paid on inputs used in exports, refunds for inverted duty structure, and refunds for excess or unutilized input tax credit.
Q4: How can I claim GST refund?
The process to claim GST refund typically involves filing a refund application with the tax authorities. The application needs to be accompanied by supporting documents, such as invoices, shipping bills, or any other relevant records as required by the tax authorities. The application is then processed, and the refund amount is credited to the applicant’s designated bank account.
Q5: What documents are required to claim GST refund?
The specific documents required to claim GST refund may vary depending on the type of refund and the regulations of the tax authorities. Generally, documents such as invoices, export-related documents (shipping bills, bills of lading), proof of payment of taxes, and other supporting records may be required. It is advisable to refer to the guidelines or seek guidance from the tax authorities.
Q6: How long does it take to receive a GST refund?
The time taken to receive a GST refund depends on various factors, including the efficiency of the tax authorities, completeness of the refund application, accuracy of information provided, and compliance with the refund procedures. The refund process can range from a few weeks to several months, and it may vary by jurisdiction.
Q7: Can I claim a GST refund for taxes paid on inputs used in exports?
Yes, in many jurisdictions, businesses engaged in exports can claim a GST refund for taxes paid on inputs used in the production of goods or services meant for export. This helps businesses recover the taxes paid on inputs and remain competitive in the international market.
Q8: Can I claim a GST refund for taxes paid on capital goods or assets?
GST refund for taxes paid on capital goods or assets may be available in certain cases, subject to the provisions and eligibility criteria defined by the tax authorities. The refund may be claimed based on the depreciation or value of the capital goods over a specified period.
Q9: Is there a time limit to claim GST refund?
Yes, there is generally a time limit within which businesses need to claim a GST refund. The time limit is specified by the tax authorities and may vary depending on the type of refund. It is important to adhere to the prescribed time limit to avoid any rejection or denial of the refund claim.
Q10: What should I do if my GST refund claim is rejected?
If your GST refund claim is rejected, you should review the reasons provided by the tax authorities for the rejection. It is advisable to consult with tax professionals or experts to understand the grounds for rejection and determine if any corrective measures can be taken. Depending on the circumstances, you may be able to file an appeal or rectify the issues to resubmit the refund claim.
