Refund is most important, attractive and powerful tool of any tax regime, tax makers cannot even imagine law without this arm. Basically there are various situations which can lead a person to claim refund. In GST, procedures of refund seems comfortable as compare to earlier tax structure. Let us make a study how and when refund under GST will be granted.

1. Refund of any balance in the electronic cash ledger:

  • Can be claimed in the return furnished under section 39 in GSTR 3, GSTR 4 or GSTR 7 before the expiry of 2 years from relevant date,

2. Refund of tax paid by it on inward supplies of goods or services or both:

  • A specialized agency of UNO, consulate or embassy of foreign countries
  • By making refund application within 6 months from the end of the quarter in which such supply was received.

3. Refund of the unutilized input tax credit can be claimed at the end of any tax period in following cases:

  • Export of goods or services or both out of India on which export duty is not payable or zero rated supplies,
  • Inverted duty structure ( where tax on inputs are higher than tax on output)

Except,

If goods exported are subject to export duty;

If goods supplied are exempt or Nil rated;

If supplier avails duty drawback or refund of IGST on such supplies.

before the expiry of 2 years from relevant date

4. Refund of wrong tax paid i.e. IGST paid instead of CGST/SGST or vice versa

5. Documents Required for Application of Refund

  • Documents evidencing tax, interest or any other amount paid, required to be enclosed with the refund application
  • Copy of proof of deposit of tax and invoices and Documents evidencing export
  • Where the refund amount claimed is less than Rs. 2 Lakh, the applicant may not furnish Documentary evidences and instead file a declaration based on available evidences

6. Procedure:

  • Application is to be file in form GST RFD 01 with above mentioned
  • Acknowledgement in form GST RFD 02 shall be made available to the applicant within a period of 15 days of filling application
  • If there is any deficiencies are noticed then communication shall be made through GST RFD o3
  • PO after scrutiny of the claim shall make provisional order in form GST RFD 04, sanctioning the amount of refund within 7 days from date of Note in case of refund of export u/s 54(6), 90% of the amount will be granted subject to condition that the person claiming refund has not been prosecuted for any offence under the act where tax evasion exceeds 25oL during preceding 5 years.
  • PO shall issue payment advice in form GST RFD 05
  • After examining all the documents PO make final order under GST RFD 06 for actual amount of refund.
  • If PO is of the opinion that the amount of refund is liable to withheld , then he shall pass an order in GST RFD 07
  • Where the PO is satisfied for reasons, that the whole or any part of the amount claimed as refund is not admissible, he shall issue a notice in form GST RFD 08 to the applicant requiring him to furnish a reply in form GST RFD o9.

7. Interest on Refund:

  • Refund application to be processed within 6o days from the date of application complete in all respects
  • For refunds made after 6o days from date of application – interest at the
    rate not exceeding 6%, as may be recommended by the GST Council.
  • Refund arise from an order passed by an adjudicating authority or court then interest not exceeding 9% will be granted.

8. Consumer welfare fund will be created for crediting refund amount in such manner as may be prescribed.

9. No refund shall be granted if the amount is less that Rs.1,000/-.

10.Refund to international tourist:

Where an international tourist procuring goods in India, may while leaving the country seek refund of IGST paid by them.

11. Payment to be credited online:

The refund will be directly credited to the bank account of applicant. The applicant need not to come to the authorities for collecting cheques.

12.Advance Tax deposited by a casual or a non-resident taxable person under Section 27(2) shall not be refunded unless such person has furnished all the returns required under Section 39 i.e. generally at the end of registration period.

13.Unjust enrichment:

Taking about unjust enrichment , a presumption is always drawn that the businessman will shift the incident of tax to the final consumer, because burden of IDT is borne by consumer. Test of unjust enrichment needs to be satisfied before granting refund.

Exception to this rule

  • Refund due to accumulated ITC
  • Refund on account of export
  • Refund of payment of wrong tax.
  • Unjust enrichment:

14.Compliance with natural justice:

In case refund claim is sought to be rejected by the PO , a notice has to be given online to the applicant stating the ground on which refund is sought to be rejected. Reply for the same shall be given within 15days.

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Author Bio

Qualification: CA in Job / Business
Company: Own Practice
Location: Delhi, New Delhi, IN
Member Since: 16 Sep 2017 | Total Posts: 25
I am member of ICAI since Novemer, 2011. Having experience in Taxation and public speaking. i also posted few videos on you tube for GST. View Full Profile

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5 Comments

  1. CA. Sanjeev Singhal says:

    Circular No. 17/2017-GST dated 15.11.2017 has not been considered which talk about the manual filing of refund through Form No. GST RFD-01A and 01B.

  2. Parag Mehta says:

    Very informative article. In my view in point No 3 it mentions that no refund for accumulated ITC is allowed if supplies are exempt. However Section 16(2) of IGST Act, specifies that Subject to provisions of sub-section 5 of Section 17 of CGST , credit of ITC may be availed for making zero -rated supplies, notwitstanding that such supply may be an exempt supply.
    Hence refund may be allowed for export of exempted supply.

    1. vaibhav kansal says:

      Dear sir thanks for your appreciation.
      sure sir you are correct, but actually
      i only wrote in exception to point no 3 that, if goods supplied are exempted, but i specifically mentioned export in point no 3, exception is only when there is supply of goods domestically which are exempted.

      Thanks for reading

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