India’s goods and services tax regime has made it easier to file and pay your company’s taxes each month. Since it takes time for business transactions to process, however, you might end up paying more tax than you owe. When this happens, you can claim a GST refund from the Indian government.
When Can You Get a GST Refund?
There are 12 different situations that entitle you to claim a refund on your GST. If you accidentally pay too much because of a mistake on your return, you can get that excess money back. Does your company sell supplies to special economic zones, developers, the United Nations, or embassies? Your GST, in that case, is also refundable. The same goes when you sell products and services that are considered exports by the government.
If you’re an exporter, you are refunded for the IGST you pay on your goods. Plus, if you build up an extra input tax credit on your exports, the government will refund you that amount in cash. Importers can also get an ITC refund, usually because of the inverted duty structure. Other things that can give you a GST refund include:
- A court decision that you are entitled to a refund
- A finalised provisional assessment where your actual GST is lower than what you paid
- A pre-deposit made by you
- A voucher, in your possession, for taxes you paid in advance for goods that were never supplied
- A shipment changes from intrastate to interstate, and vice versa
What About Credit Notes?
In the course of business, you probably need to deal with returned products. In that case, you refund the money to the customer. However, you have also paid GST on that sale to the government. That means that you’ve paid too much in taxes and are entitled to a credit.
To ease this process and avoid sending refunds for every return, the government issues a credit note. When you file the next month’s returns, that amount is deducted from the taxes you owe. If you claimed an ITC for the products that were returned, the government first makes sure that your next ITC is reduced accordingly.
Time Limit for Filing Refund
A registered taxpayer needs to file claim for GST refund within two years from the relevant date.
What Does Relevant Date Mean For Different Types of GST Refund Claims?
Goods Exported Outside India
This is the case where goods are exported outside India and the refund is available for:
- goods exported or
- the inputs or input services used in making such goods
Relevant period in such a case would be if goods are exported by:
- sea or air – the date on which ship or aircraft in which the goods are loaded leaves India
- land – the date on which such goods pass the frontier
- post – the date of despatch of goods by the concerned post office to a place outside India
Goods Regarded as Deemed Exports
In case of goods regarded as deemed exports, the refund of tax is available in respect of such goods exported.
Relevant date for deemed exports would be the date on which the return for such deemed exports is filed by the registered taxpayer.
Services Exported Outside India
Where the services are exported outside India, the refund of tax is available with regards to:
- such services exported or
- inputs or input services used in providing such services
Relevant date in such a case would be date:
- on which the payment is received in convertible foreign exchange – in cases where supply of services is completed before the receipt of such payment
- of issue of invoice – in cases where payment of services is received in advance before the date of issue of invoice
Refund on Account of a Judgement, Decree or Order
There are situations where GST becomes refundable as a result of a judgement, decree, order or direction of the Appellate Authority, Appellate Tribunal or any court.
Relevant date in such a case is the date of communication of such judgement or order to the registered taxpayer.
Unutilized Input Tax Credit On Account of Inverted Duty Structure
The registered taxpayer is entitled to claim refund arising on account of inverted duty structure. Relevant date in such a case is the end of the financial year in which such a claim for refund arises.
In cases where tax is paid on provisional basis, relevant date is the date of adjustment of tax after the final assessment thereof.
In other cases, the relevant date is the date of payment of tax.
Interest on Delayed Refunds
As per the GST provisions, government is required to pay the refund claimed by registered taxpayer within 60 days from the date of receipt of refund application. In cases where GST refund is delayed beyond 60 days, interest not exceeding 6% is payable to the applicant by the government. Such an interest is calculated from the date immediately after the expiry of 60 days from the date of receipt of refund application until the date of payment of refund.
The interest rate charged for GST refund arising on account of an order passed by the Appellate Authority or Appellate Tribunal or court is different. If in such a case, tax is not refunded within 60 days of the receipt of the refund application, interest not exceeding 9% is payable by the government. The interest is such a case is calculated from the date of receipt of application till the date of refund.
GST Refund Process: How to Claim a GST Refund
Filing Claim For GST Refund
Claiming refund under GST is easy in fact, you can do it all on the online GST portal. If you’re liable to claim a refund under GST, you need to file for the claim via GST refund application form RFD – 01. There are two things that need to be understood here.
First, the RFD – 01 form should ideally be prepared by a certified Chartered Accountant. Second, the GST refund claim must be made within 2 years from the ‘relevant date’ of GST refund application.
There are different relevant dates defined for various GST refund scenarios. You must either check with your chartered accountant or an online tax site for the same.
On submitting the GST refund form, you receive an auto-generated acknowledgement on GST RFD – 02 form. This is sent to you on your email address or as an SMS on your phone number.
In instances where errors are identified in the GST refund claim, form RFD – 03 is generated . It is sent to you, to make the necessary corrections in the refund application.
While filing for refund claim under GST, you must serve a declaration that the refund amount would not be transferred to any third person or entity. In case of the refund claim exceeding INR 5 lakhs:
– you are also required to provide additional documents as a proof that such an amount has been paid by you.
The duration for filing of GST refunds by:
– UN’s body ,
– consulates or
– foreign embassies is 90 days from the quarter end in which they have acquired goods or services.
Processing Of Claim For GST Refunds
GST refunds are usually processed within a period of 30 days from the date of filing of GST refund form. This duration may, however, vary depending upon the amount of GST refund to be processed.
The GST refund application may then either undergo a scrutiny or an audit, as the case may be. On finding the application appropriate, the GST refund amount claimed for shall be credited to your account.
On the contrary, in case the adjudicating body finds you coming under the category of being unjustly enriching, then the said GST refund amount shall be transferred to the consumer Welfare Fund.
In cases where exporters claim GST refund for export of goods and services, government sends 90% of the balance on a provisional basis via RFD – 04 form. The remaining 10% comes when the refund is finalised, typically within 60 days. You can only claim these refunds if:
– you have not been prosecuted under GST or an earlier tax law for evading taxes that total more than INR 250 lakh over a period of the past five years.
– your GST compliance rating is five and above out of ten.
– you do not have any appeal pending with regards to your GST refunds.
When you run a business, it’s not uncommon to overpay your taxes. With the easy GST refund system, you can claim your extra money quickly to improve your company’s available working capital.[/vc_column_text][/vc_column][/vc_row]