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GST Refund Application, Payment & Procedure

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Complete Guide on GST Refund.

Updated on December 31, 2022 04:39:28 PM

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 applications must be filed electronically, with manual applications permitted only in exceptional circumstances. Refunds can be claimed for a single tax period or by combining multiple tax periods, even across different financial years.

When the Input Tax Credit (ITC) on inward supplies is spread over multiple months but zero-rated or inverted duty supplies are made in fewer months, the refund period should be chosen to maximize the refund amount.

To claim a refund for tax and interest, if any, it must be done before two years from the significant date. The significant date is specified for each refund case.

Refunds will not be processed if the amount is less than Rs. 1,000 for each tax head separately, not cumulatively. The refund allowed may be adjusted against any outstanding tax or other dues from the applicant.

If the refund is not credited to the applicant’s bank account within 60 days from the date of the Application Reference Number (ARN) generation, the applicant is eligible for interest at 6% for the period exceeding 60 days until the actual refund date.

For refunds involving Input Tax Credit (ITC), subsequent refund applications for previous periods are not allowed once a refund is submitted for any tax period. Refund of only the ITC appearing in Form GSTR-2A of the applicant is allowed, although this guideline is subject to litigation as it contradicts the eligibility of ITC as per the Act and Rules.

Transitional Credit cannot be considered part of Net ITC, and therefore, no refund is allowed on it.

For refunds involving tax payments made by both Credit and Cash ledgers, the refund is processed in the same proportion in which the original payment was made.

The complete refund for all tax heads (IGST, CGST, SGST, and cess) is processed by the same jurisdictional officer to whom the refund application is forwarded by the portal.

In cases of refunds due to the export of goods with tax payment, the shipping bill filed by the exporter is considered an application for refund, along with details filled in GSTR-1 and GSTR-3B.

TYPES OF GST REFUND

1: 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

2: Refund of tax paid on export of services with payment of tax

Unlike the case of export of goods with tax (refer last paragraph of points to be considered for goods), refund in the case of export of services with payment of tax needs to be filed separately
The details of the invoices and corresponding BRC/ FIRC shall be uploaded in statement 2
The relevant date remains the same as mentioned in above point

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

The amount of refund shall be the least 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 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 5

4: 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

5: Refund of unutilized ITC on account of accumulation due to inverted tax structure

The amount of refund shall be the least of:
- {(Turnover of inverted rated supply) x Net ITC ÷ Adjusted Total Turnover} – tax payable on such inverted rated supply
- 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 supplier supplying goods to exporter at GST 0.05% and 0.10% as detailed above shall also be eligible to file refund in this category
ITC paid on Capital Goods and Input Services shall not be included in Net ITC for the purpose of computing refund
If rate of tax has been reduced from upper rate to lower rate on any goods, the same shall not be eligible for refund in this case
The relevant date is the due date of furnishing of the return under Section 39 for the period in which such claim for refund arises
The details of inward and outward supplies along with corresponding tax values shall be uploaded in statement 1A

6: Refund to supplier of tax paid on deemed export supplies

For the purpose of filing refund, duly signed copy of invoice by the recipient EOU or acknowledgement by jurisdictional tax officer about receipt of said deemed export supplies by the authorization holder shall be needed
An undertaking that the recipient shall not claim ITC nor refund of tax charged in respect of such supplies
The details of outward supplies shall be uploaded in statement 5B
The relevant date is the date on which the return relating to such deemed exports is furnished

7: 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

8: Refund to recipient of tax paid on deemed export supplies

The amount of refund shall be the least of:
- Net Input ITC of Deemed Exports
- 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
A declaration that supplier has not availed refund with respect to said supplies
The details of inward supplies shall be uploaded in statement 5B

9: Refund of excess payment of tax

Supporting documents to establish excessive payment of tax shall be uploaded with the refund application

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

The details of supplies wherein the Place of Supply has changed shall be uploaded in the refund application in statement 6 stating the initial Place of Supply considered along with tax paid and the re-assessed Place of Supply with taxes

11: Refund on account of assessment/provisional assessment/appeal/any other order

Reference number and copy of the assessment / appeal / any order along with proof of payment of pre-deposit for which refund is being claimed shall be uploaded

12: Refund on account of “any other” ground or reason

Any other refund case which is not included in any of the cases can be claimed in this category mentioning the specification and amount of refund at the portal