Refund under GST

REFUNDS UNDER GST

ABOUT REFUNDS UNDER GST

The implementation of GST in the country replaces majority of indirect taxes and hence every individual has to pay GST at some point in time. But there are cases when the taxpayer can claim for refund of the GST paid. Chapter XI of the CGST Act, 2017 talks about ‘Refunds’ under GST regime and lays down all the necessary guidelines for the same.

The usual case when the refund is claimed is when the taxpayer pays more GST than his liability,​​ when the supply is categorized as ‘zero rated supplies’​​ or when supplies made to SEZ zones etc. are some of the common examples of claiming Refund of GST paid.

ALLOWABLE​​ AND NON-ALLOWABLE​​ REFUNDS¹

Section 54(8) of the CGST Act, 2017 lays down the list of refunds allowable to be refunded back to the taxpayer.

• Refund of tax paid by supplier on zero-rated supplies of goods or services or both or on input services used in making zero-rated supplies.

• Refund of unutilized Input Tax Credit​​ under:

  • Zero rated supplies made without payment of tax;

  • Credit accumulated on account of rate of tax on inputs being higher than the rate of tax on output services other than nil rated of fully exempt supplies

• Refund of tax paid on supplies which have not been provided yet either fully or partially and for which the invoice has been raised.​​ 

• Refund of tax with respect to (Section 77: Tax wrongfully collected​​ and paid to Central or State Government)

  • Tax paid by individual for transaction considered by him as intra-state supplies but subsequently it is found to be inter-state supply,​​ 

  • Integrated tax paid by individual on transaction considered by him as inter-state but subsequently found to be intra-state supply

• Refund with respect to amount paid by the applicant of tax or interest which was not passed on incidence by him to any other person.

• Refund when the tax amount paid​​ is more than tax liability.

• Refund of tax paid on supplies made to SEZ unit/ SEZ Developer with payment of tax.

• Refund of tax for any other reason as the council may specify.

However, Section 54 (10) of the Act states the circumstances when the taxpayer shall not be eligible for refund:

• When the person has defaulted in furnishing any return;

• Defaulted in payment of tax, interest or penalty which has not been stayed by any court or tribunal.

In any of the above two situation, the proper officer may:

• Withhold the​​ payment of​​ refund amount​​ until the person furnishes the return or clears his dues with respect to payment of tax, interest or penalty; OR

• Deduct the arrears amount of payment of tax, interest or penalty which the person was liable to pay​​ and pay the remaining amount of refund to the person.​​ 

TIME LIMIT FOR REFUND

Section 54 (1) of the CGST Act, 2017 expressly mentions that the refund application shall be made within two years from the relevant date in the manner prescribed by the council. For ease and avoiding confusion the GST Council has prescribed online mode of making refund application to avoid confusion. The application of refund has be filed in Form GST RFD-1 on the CBIC website under Online Refunds Column.​​ 

PROCEDURE FOR ONLINE APPLICATION OF GST REFUND

According to CBIC Circular​​ (Circular 125/44/2019)​​ any refund application made after 26.09.2019, it had to be made only through online mode under form GST RFD​​ –​​ 01. The procedure of filing GST Refund application is discussed below:

• Filing of Form GST RFD – 01 with necessary documents

  • The application has to be filed with a declaration, tax invoices of the relevant period and all the necessary documents stated in the circular (Annexure – A).

  • The size of the documents attached shall not exceed 5 MB and all the submissions have to be done through online mode only.

• Acknowledgement and Application Reference Number (ARN)

  • Once the application is submitted with all the necessary documents the taxpayer gets an ARN which is electronically generated and is unique to that particular refund application.​​ 

• Determining period for refund application

  • The refund application can be made either monthly or quarterly and has to follow the said period throughout. The tax period for one month/quarter can be combined with other but cannot be done for 2 different financial years.

• Provisional refunds

  • A provisional refund shall be within 7 days of issue of acknowledgement number.

  • 90% of the provisional refund shall be granted on claim of refund against zero rated supply of goods, services or both.

• Issuing final refund amount

  • The final refund amount shall be issued within 60 days of issuing of ARN and on failure to do so, 6% interest is liable to be paid starting from termination of 60th​​ day.

  • Central/ State/ UT Tax officer shall be the authority for undertaking the refund application process as the case maybe. ​​