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.
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.