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When is refund allowed under GST?

In the following cases, a refund can be claimed in Goods and Services Tax law-

(1) Excess payment of tax due to mistake or error

(2) Excess GST balance in Electronic Cash Ledger

(3) Unutilized input tax credit balance on account of inverted rated supply (Rate of GST paid on purchases higher than GST rate on output)

(4) Unutilized input tax credit balance on account of zero Rated Supply

(5) GST paid on an inter-state supply which later held as intra-state supply or vice-versa

(6) GST paid on a supply that is not rendered and an invoice for which has not been issued

(7) GST paid on zero-rated supplies

(8) Refund in respect of finalization of provisional assessment

(9) Refund in respect of the decision of any court, appellate authority, or appellate tribunal in favor of the taxpayer

(10) Taxes paid during the investigation (Pre-deposit)

What are the preconditions to claim a GST refund?

(a) Refund application must be filed within 2 years from the relevant date.

(b) GSTR-3B for the relevant month has been filled.

(c) Outward supplies must be taxable i.e. should not be nil rated or exempted

(d) Claimed refund amount should not be less than Rs 1000.

(e) In case of a refund of an input tax credit, the export supply shall not be subject to export duty and duty drawback of integrated tax paid has not been availed by the taxpayer.

(f)  IGST amount has been deposited to the Government - in case of refund arises because of CGST/SGST paid on an inter-state supply which later held as intra-state supply or vice-versa.

What is the refund process under GST?

Steps to claim a refund under Goods & Services Tax is given below in the categorized manner-

Step 1: Filing of refund application

Online refund application will be filed in Form GST RFD-01 within 2 years from the relevant date. An application must be supported by documentary evidence proving the payment of tax, interest, or any other amount. Note, where a refund claimed by a taxpayer is less than 2 lakh, documentary evidence is not required to furnish.

Step 2: Securitization of application

At this step, the concerned officer will check whether the application filed by the applicant is complete or accurate in all aspects. If there is no issue with an application, the acknowledgment will be issued in GST RFD-02. This form will apparently specify that period of refund shall be counted from this date. In case of any variance in an application, the same will be communicated to the applicant in GST RFD03.

Step 3: Refund Order

The tax officer has to pass the refund order within 60 days from the date of receipt of a complete application. A refund order will be issued in GST RFD05 with payment advice in the form GST RFD06. The amount of refund will be automatically credited to the registered bank account of the taxpayer. In case of zero-rated supply, provisional refund order for 90% of the claimed amount shall be passed within 7 days of acknowledgment of application. A provisional refund order will be issued in GST RFD-04.

When interest is payable on refund under GST?

The taxpayer entitled to claim interest on a period of refund delay if the refund has not been processed by the concerned officer within 60 days from the date of receipt of the refund application. Amount of interest along with refund amount shall be credited electronically to a taxpayer registered bank account.

  • Interest rate is 9% p.a. if a refund arises on account of the favorable decision of any court or appellate authority.
  • Interest rate will be 6% p.a. in any other case.

Refund forms under GST

Documents involved in the refund process are said to be GST refund forms. There is a total of 11 refund forms prescribed in GST law which are given below.

GST RFD–01

Application for refund

GST RFD- 01A

Application for a refund (Manual)

GST RFD- 01B

Refund order details

GST RFD–02

Acknowledgment

GST RFD–03

Deficiency memo

GST RFD–04

Provisional refund order

GST RFD–05

Payment advice

GST RFD – 06

Refund sanction/rejection order

GST RFD–07

Order for Complete adjustment of sanctioned refund

GST RFD–08

Notice for rejection of application for refund

GST RFD–09

Reply to show cause notice

GST RFD–10

Application for Refund by any specialized agency of UN or any Multilateral Financial Institution and Organization, Consulate or Embassy of foreign countries, etc.

GST RFD-10A

Application for a refund by Canteen Stores Department (CSD)

GST RFD–10B

Application for a refund by Duty-Free Shops/Duty Paid Shops (Retail outlets)

GST RFD–11

Furnishing of bond or Letter of Undertaking for export of goods or services

 

Computation of GST refund in various cases

Refund formula in case of export of goods or services, (Export turnover*Net input tax credit) / Adjusted total turnover Refund formula in case of inverted rated supply, (Inverted rated supply turnover*Net input tax credit) /Adjusted total turnover – Tax paid on inverted rated supply Explanation of terms used in the formula

  • Net ITC shall mean input tax credit availed on inputs during the relevant period other than the input tax credit availed for which refund is claimed under sub-rules (4A) or (4B) or both.
  • Inverted Supply Turnover = Value of inverted supply of goods and services during the relevant period.
  • Tax payable on such inverted rated supply = Tax liability on such inverted rated supply under the same head, i.e. IGST, CGST, SGST.
  • Adjusted Total turnover = Total turnover during the relevant period – Exempted supplies during relevant period
  • Relevant period means the period for which the refund claim has been filed.

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