Introduction
All we have made payment of our tax dues under GST regime, and we filed our GSTR 3B, and now we are ready to file our GSTR-1, 2, 3 in coming week and we are eagerly waiting for our refund of taxes paid as ITC. Timely refund mechanism is essential in tax administration, as it facilitates trade through the release of blocked funds for working capital, expansion and modernisation of existing business.
Under GST regime there are two ways in which we can claim refund one is from electronic cash ledger and other one is from electronic credit ledger.
Situations Leading to Refund Claims
The relevant date provision embodied in Section 54 of the CGST Act, 2017, provision contained in Section 77 of the CGST Act, 2017 and the requirement of submission of relevant documents as listed in Rule 89(2) of Refund Rules is an indicator of the various situations that may necessitate a refund claim. A claim for refund may arise on account of:
1. Export of goods or services
2. Supplies to SEZs units and developers
3. Deemed exports
4. Refund of taxes on purchase made by UN or embassies etc.
5. Refund arising on account of judgment, decree, order or direction of the Appellate Authority, Appellate Tribunal or any court
6. Refund of accumulated Input Tax Credit on account of inverted duty structure
7. Finalisation of provisional assessment
8. Refund of pre-deposit
9. Excess payment due to mistake
10. Refunds to International tourists of GST paid on goods in India and carried abroad at the time of their departure from India
11. Refund on account of issuance of refund vouchers for taxes paid on advances against which, goods or services have not been supplied
12. Refund of CGST & SGST paid by treating the supply as intra-State supply which is subsequently held as inter-State supply and vice versa
Provisions of GST Law
Section 49(6) the balance in the electronic cash ledger or electronic credit ledger after payment of tax, interest, penalty, fee or any other amount payable under this act or the rule made there-under may be refunded in accordance with the provision of section 54.
Section 54 (1) any person claiming refund of any tax and interest , if any , paid on such tax or any other amount paid by him, may make an application before the expiry of two years from the relevant date in such form and manner as may be prescribed:
Provided that a registered person, claiming refund of any balance in the electronic cash ledger in accordance with the provision of sub section (6) of section 49, may claim such refund in the return furnished under section 39 in such manner as may be prescribed.
Section 54 (3) subject to provision of sub-section (10), a registered person may claim refund of any unutilisied input tax credit at the end of any tax period
Provided that no refund of unutilized input tax credit shall be allowed in cases other than-
(i) zero rated supplies made without payment of tax
(ii) where the credit has accumulated on account of rate of tax on input being higher than rate of tax on output supplies
Provided further that no refund of unutilized input tax credit shall be allowed in cases
(i) where the goods exported out of India are subject to export duty
(ii) if the supplier of goods or services or both avails of drawback in respect of central tax or claims refund of the integrated tax paid on such supplies.
Grant of Provisional refund in case of zero rate supply, 90 % of total amount so claimed, excluding the amount of input tax credit provisionally accepted within 7 days from the date of the acknowledgement under sub-rule (1),(2) of rule 90.
The acknowledgement of refund application is normally issued within a period of 14 days but in case of refund of integrated tax paid on zero rated supplies, the acknowledgement would be issued within a period of three days. The provisional refund would not be granted to such supplier who was, during any period of five years immediately preceding the refund period, was prosecuted.
Provisionally input tax credit– As per section 41 (1) every registered person shall, subject to such condition and restriction as may be prescribed, be entitled to take the credit of eligible input tax, as self-assessed, in his return and such amount shall be credited on a provisional basis to his electronic credit ledger.
Refund of input tax credit shall be granted as per the following formula-
Refund = (Turnover of zero rated supply of goods+ Turnover of zero rated supply of services) x Net ITC ÷ Adjusted Total Turnover
Where,
| (a) | Refund amount | a) Maximum refund that is admissible |
| (b) | Net ITC | b) ITC availed on inputs and input services during the relevant period |
| (c) | Turnover of zero rated supply of goods | Value of zero rated supply of goods made during the relevant period without payment of tax under bond or letter of undertaking |
| (d) | Turnover of zero rated supply of services | Value of zero rated supply of services made during the relevant period without payment of tax under bond or letter of undertaking |
| (e) | Adjusted Total Turnover | turnover in a state or a union territory, as defined under sub-section (112) of section 2, excluding the value of exempt supplies other than zero rated supplies, during relevant period. |
| (f) | Relevant period | period for which the claim has been filed. |
Forms for application of tax refund
| 1 | GST RFD-01 | Refund application | |
| 2 | GST RFD-02 | Acknowledgement at the common portal | |
| 3 | GST RFD-03 | Communication of deficiencies | |
| 4 | GST RFD-04 | Provisional – Order sanctioning the amount of refund | |
| 5 | GST RFD-05 | Payment advice | |
| 6 | GST RFD-06 | Final order sanctioning the amount of refund | |
| 7 | GST RFD-07 | Order giving details of adjustment of outstanding demands with refund amount | |
| 8 | GST RFD-08 | Issuance of notice if refund not admissible | |
| 9 | GST RFD-09 | Reply to notice | |
| 10 | GST RFD-10 | Refund application by embassies, etc. | |
| 11 | GST RFD-11 | Statement of inward supplies of goods/services by embassies, etc. |
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