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Complete Guide on GST Refund.

There is no uncertainty that for every taxpayer provision related to refunds are always most favorite under any Act and GST Act is no different. In fact, every association designs their business process in such a manner so as to make optimum use of the refund provisions

We are trying to provide the readers the ready reckoner and the significant points that should be kept in mind while filing refund applications incorporating all the important Sections, Rules and Circulars up to 31 March 2020 with the help of this article.

For the sake of easy understanding, we shall be discussing the refund provisions in the following manner:

Points to be considered while filing refund applications
Procedure of filing refund application
Types of refund

POINTS TO BE CONSIDERED WHILE FILING GST REFUND APPLICATIONS

Refund can only be filed electronically. Manual Application can be allowed to be filed by the authorities only in exceptional circumstances
The refund may be filed for a tax period or by clubbing successive tax period, which may spread across different financial years also
Many times the ITC on inward supplies is spread in multiple months while the Zero Rated supplies or inverted duty supplies are done in few months, in these circumstances the period of refund should be selected the maximum to guarantee higher amount of refunds
Refund can be obtained for tax and interest, if any, before the expiry of two years from the significant date. Significant date is specified against every refund case given below
Refund shall not be paid to the applicant if the amount is less than Rs.1, 000. This amount shall be applied for each tax head independently and not cumulatively
The refund allowed may be adjusted with any tax or other outstanding from the applicant
If the date of credit of refund in the bank account of the applicant exceeds 60 days from the date of generation of ARN, then the applicant shall be eligible for interest @6% for the number of days beyond such 60 days till the actual date of credit of refund in the bank
In the cases where refund of Input Tax Credit is involved, i.e. type (a), (c) and (e) given below

Refunds can be filed chronologically, i.e. once a refund is submitted for any tax period, subsequent refund application for previous period shall not be allowed
Refund of only that ITC shall be allowed which is appearing in Form GSTR-2A of the applicant. This guideline given in Circular is against the eligibility of ITC as given in Act and Rules and is subject to litigation
Transitional Credit cannot be treated as part of Net ITC and hence no refund allowed

In the refund of tax falling under type (i) to (l) given below, the refund shall be allowed to the applicant in the same proportion in which original payment was made, i.e. where the tax to be refunded has been paid by Credit as well as Cash ledger, the refund to be paid in credit ledger and cash (i.e. Bank Account) shall be in the same proportion in which they were debited during the relevant period
The complete refund is processed for all heads of tax, i.e. IGST, CGST, SGST and cess by the same jurisdictional officer to whom the refund application is forwarded by the portal
In the case of refund on account of export of goods with payment of tax, the shipping bill filed by an exporter is deemed to be an application for refund along with details filled in GSTR-1 and GSTR-3B, hence the same is not discussed below

PROCEDURE OF FILING GST REFUND APPLICATION

a) Online Application Form GST RFD-01

The application for refund shall be supported by various documents depending upon the category of refund. The online portal provides facility to upload 10 files of 5MB each. The application is transferred to the jurisdiction officer for the purpose of further processing

b) Deficiency Memo Form GST RFD-03

c) Acknowledgement Form GST RFD-02

If the refund application is complete in all aspects, acknowledgement in Form RFD-02 shall be issued within 15 days of submission of application. Once an acknowledgement has been issued no deficiency memo on whatsoever grounds can be issued by the officer.

d) Provisional Order (RFD-04) / Payment Order (RFD-05) / Refund Order (RFD-06)

The officer upon being satisfied that prima facie the refund is due towards the applicant may sanction 90% of the refund amount on a provisional basis within seven days of the refund application in Form RFD-04 in the case of any claim for refund on account of zero-rated supplies
However, the officer may upon being fully satisfied about the eligibility of the refund and is of opinion that no further scrutiny is required, directly issue refund order Form RFD-06, which is practically happening in mostly all the cases
Along with issue of the above forms, payment order Form RFD-05 shall be issued for the amount sanctioned and the same shall be electronically credited to the applicant’s bank account.

e) Other Forms (RFD-07 / RFD-08 / RFD-09)

Form RFD-07 is prescribed in Rules for adjustment of refund with any outstanding demand from the applicant, but this is also now incorporated in Form RFD-06
If officer is of the view that certain refund amount is non-admissible, then notice is Form RFD-08 shall be issued asking reasons why the refund should not be rejected, against which the applicant shall submit reply in Form RFD-09

TYPES OF GST REFUND

a) Refund of tax paid on supplies made to SEZ Unit/SEZ Developer with payment of tax

The refund shall be filed once the supply is admitted in full in SEZ for authorised operations as endorsed by the specified officer of the zone
The details of supply to SEZ shall be uploaded in statement 4

b) Refund of tax paid on export of services with payment of tax

c)Refund of untilized ITC on account of supplies made to SEZ unit/SEZ Developer without payment of tax

d) Refund of unutilized input tax credit (ITC) on account of exports without payment of tax

The amount of refund shall be the minimum of:

(Zero Rated Turnover/Adjusted Total Turnover) * Net ITC
Balance in Electronic Credit Ledger at the time of filing of refund
Balance in Electronic Credit Ledger at the end of period for which refund is filed

The relevant date in the case of goods shall be:

If exported by sea or air, the date when ship or aircraft leaves India
If exported by land, the date when such goods passes frontier
If exported through Post, the date of dispatch of goods by Post Office

The relevant date in the case of services shall be the date of:

Receipt of convertible foreign exchange or Indian rupees wherever permitted by the RBI, where services have been completed prior to receipt of payment
Issue of invoice, where payment had been received prior to issue of invoice

In case of export of goods, the shipping bill details as uploaded in the refund application in statement 3 shall be checked by the officer with ICEGATE. In the case of services BRC/ FIRC details shall be uploaded as a proof of receipt of payment
ITC paid on Capital Goods shall not be included in Net ITC for the purpose of computing refund
Receipt of convertible foreign exchange, or Indian rupees wherever permitted by RBI is a precondition in case …..of refund against export of services only and not in the case of goods
The refund cannot be denied even if LUT has not been furnished by the applicant on a timely basis and such delay can be condoned by the officer. Also if the applicant fails to export the goods within a period of 3 months from the date of invoice, the jurisdictional commissioner may consider granting extension of time limit for export
If there is difference in the value of invoice and shipping bill, then lower of the two should be considered for the purpose of refund
A taxpayer who has received goods at GST 0.05% and 0.10% under Notification 40/2017 and 41/2017 – Central Tax Rate and Integrated Tax Rate respectively can export the goods only against LUT and then file refund under this category

e) Refund of unutilized ITC on account of accumulation due to inverted tax structure

f) Refund to supplier of tax paid on deemed export supplies

g) Refund of excess balance in Electronic Cash Ledger

Balance lying in Electronic Cash ledger, which can be on account of excess challan payment or due to excess TDS deduction can be claimed as refund under this category

h) Refund to recipient of tax paid on deemed export supplies

i) Refund of excess payment of tax

j) Refund of tax paid on intra-State supply which is subsequently held to be inter-State supply and vice versa

k) Refund on account of assessment/provisional assessment/appeal/any other order

l) Refund on account of “any other” ground or reason

FAQ

GST Registration

GST refers to Goods and Services Tax which subsumes all taxes such as Sales tax, Service tax, Excise duty etc. into GST. GST registration is required primarily if your annual sales are more than Rs. 20 Lakh. Even if your sales are less than Rs. 20 Lakh, we suggest that you voluntarily opt for GST registration because:

GST Notice Reply

If the determination of assessee goes wrong i.e. assessee has short paid any taxes or not paid any taxes or has wrong availed and utilized any input tax credit or has erroneously been refunded, then, under such circumstances demand would be raised by the GST officials by way of issuing GST notices - to be called as Show cause notices under taxation parlance.

GST Surrender

Cancellation/Surrender of GST registration simply means that the taxpayer will not be a GST registered person any more. He will not have to pay or collect GST.

GST Modification & Correction

GST registration amendment maybe required in some cases, wherein wrong information about the taxable person under GST has been updated in the GST Portal. In this article, we look at the procedure for correcting mistakes in GST registration certificate.

What is refund?

Refund has been discussed in section 54 of the CGST/SGST Act.
“Refund” includes
(a) any balance amount in the electronic cash ledger so claimed in the returns,
(b) any unutilized input tax credit in respect of (i) zero rated supplies made without payment of tax or, (ii) where the credit has accumulated on account of rate of tax on inputs being higher than the rate of tax on output supplies (other than nil rated or fully exempt supplies),
(c) tax paid by specialized agency of United Nations or any Multilateral Financial Institution and Organization notified under the United Nations (Privileges and Immunities) Act, 1947, Consulate or Embassy of foreign countries on any inward supply

Can unutilized ITC be given refund, in case goods Exported outside India are subjected to export duty?

Refund of unutilized input tax credit is not allowed in cases where the goods exported out of India are subjected to export duty - as per the second proviso to Section 54(3) of CGST/SGST Act.

Will unutilized ITC at the end of the financial year (after introduction of GST) be refunded?

There is no such provision to allow refund of such unutilized ITC at the end of the financial year in the GST Law. It shall be carried forward to the next financial year.

Whether purchases made by Embassies or UN are taxed or exempted?

Supplies to the Embassies or UN bodies will be taxed, which later on can be claimed as refund by them in terms of Section 54(2) of the CGST/SGST Act. The claim has to be filed in the manner prescribed under CGST/SGST Refund rules, before expiry of six months from the last day of the month in which such supply was received.
[The United Nations Organization and Consulates or Embassies are required to take a Unique Identity Number [section 26(1) of the CGST/SGST Act] and purchases made by them will be reflected against their Unique Identity Number in the return of outward supplies of the supplier(s)]

What is the time limit for taking refund?

A person claiming refund is required to file an application before the expiry of two years from the “relevant date” as given in the Explanation to section 54 of the CGST/SGST Act.

In case the tax has been passed on to the consumer, whether refund will be sanctioned?

Yes, the amount so refunded shall be credited to the Consumer Welfare Fund - Section 57 of the CGST/SGST Act.

Is there any time limit for sanctioning of refund?

Yes, refund has to be sanctioned within 60 days from the date of receipt of application complete in all respects. If refund is not sanctioned within the said period of 60 days, interest at the rate notified will have to be paid in accordance with section 56 of the CGST/SGST Act. However, in case where provisional refund to the extent of 90% of the amount claimed is refundable in respect of zero-rated supplies made by certain categories of registered persons in terms of sub-section (6) of section 54 of the CGST/SGST Act, the provisional refund has to be given within 7 days from the date of acknowledgement of the claim of refund.

Can refund be withheld by the department?

Yes, refund can be withheld in the following
circumstances:
i. If the person has failed to furnish any return till he files such return;
ii. If the registered taxable person is required to pay any tax, interest or penalty which has not been stayed by the appellate authority/Tribunal/ court, till he pays such tax interest or penalty; The proper officer can also deduct unpaid taxes, interest, penalty, late fee, if any, from the refundable amount – Section 54(10) (d) of the CGST/SGST Act
iii. The Commissioner can withhold any refund, if, the order of refund is under appeal and he is of the opinion that grant of such refund will adversely affect revenue in the said appeal on account of malfeasance or fraud committed - Sec.54 (11) of the CGST/SGST Act.

Where the refund is withheld under Section 54(11) of the CGST/SGST Act, will the taxable person be given interest?

If as a result of appeal or further proceeding the taxable person becomes entitled to refund, then he shall also be entitled to interest at the rate notified [section 54(12) of the CGST/SGST Act].

Is there any minimum threshold for refund?

No refund shall be granted if the amount is less than Rs.1000/-. [Sec.54 (14) of the CGST/SGST Act].

How will the refunds arising out of existing law be paid?

The refund arising out of existing law will be paid as per the provisions of the existing law and will be made in cash and will not be available as ITC.

Whether refund can be made before verification of documents?

In case of any claim of refund to a registered person on account of zero rated supplies of goods or services or both (other than registered persons as may be notified), 90% refund may be granted on provisional basis before verification subject to such conditions and restrictions as may be prescribed in accordance with sub-section 6 of section 54 of the CGST/SGST Act.

In case of refund under exports, whether BRC is necessary for granting refund?

In case of refund on account of export of goods, the refund rules do not prescribe BRC as a necessary document for filing of refund claim. However, for export of services details of BRC is required to be submitted along with the application for refund.

Will the principle of unjust enrichment apply to exports and supplies to SEZ Units?

The principle of unjust enrichment would not be applicable to zero-rated supplies [i.e. exports and supplies to SEZ units]

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