Process of Refund of Input Tax Credit or Integrated GST paid on export supply of Goods

GST Refund in case of Export of Goods:

Provision:

As per Section 16(3) of the IGST Act, 2017, a registered person making zero-rated supply is eligible to claim a refund under either of the following options, namely: –

  • Supply of goods or services or both under bond or Letter of Undertaking, subject to such conditions, safeguards and procedure as may be prescribed, without payment of integrated tax and claim refund of the unutilized input tax credit; or
  • Supply of goods or services or both, subject to such conditions, safeguards and procedure as may be prescribed, on payment of integrated tax and claim refund of such tax paid on goods or services or both supplied

On account of zero-rating of supplies, the supplier will be entitled to claim an input tax credit in respect of goods or services or both used for such supplies even though they might be non-taxable or even exempt supplies.”

Export

Analysis:

A person can make the export supply of goods by making payment of Integrated GST and refund can be claimed for the same. Further exports can be made without making payment of IGST after the submission of Bond/LUT. In such cases, a refund of accumulated Input Tax Credit on expenses may arise.

Export supply including supply to the special economic zone is categorized as Zero Rated Supply.

In simple words;

In the case of Zero-rated supplies, a Refund of unutilized Input Tax Credit or Integrated GST paid on export supply can be claimed.

Process for Claiming GST Refund:

The Government has issued standard guidelines for the purpose of claiming a refund. An applicant has to file Form RFD-01 online on the common portal. The same application will be forwarded to the proper officer for scrutinizing and verifying the completeness of the application. If the proper officer is found that the application is satisfactory in all the field he shall issue an acknowledgment in Form RFD-02 within 15 days from the date of application electronically on the common portal.

However, on review of an application, if any discrepancy observed then the proper officer shall issue a notice in RFD-03 to the applicant.

Every claim for refund is to be filed within 2 years from the relevant date**

Further, no refund shall be granted for the amount of less than Rs.1,000.

Timelines for issuing of Refund:

According to the provisions of section 54(6) & 54(7) of the CGST Act 2017, Refund arises on account of zero-rated suppliers, the provisional refund shall be granted at 90% of the amount claimed as refund.

According to Rule 91 of CGST Rules 2017, the Provisional refund shall be granted within 7 days from the date of acknowledgment in form RFD-04. The refund shall be credited to the bank account of the applicant as mentioned in the application in refund and payment advice for the same will be issued in RFD-05 by the proper officer.

The balance 10% refund will be paid within 60 days from the date of acknowledgment, however, If the same is not paid within 60 days from the date of acknowledgment, interest @6% under section 56 would be payable to the applicant from the 61st day of the acknowledgment date. And payment advice for the same will be issued in RFD-06 by the proper officer.

The provisional refund would not be granted to such a supplier who was, during any period of five years immediately preceding the refund period, was prosecuted.

Any inadmissible amount shall be communicated to the applicant in the RFD-08 and the applicant shall be given 15 days to revert on the notice in form RFD-09.

On receiving the response from the applicant, the proper officer shall make an order in Form RFD-06 sanctioning the amount of refund in whole or in part or rejecting the said refund claim on the common portal of GST.

A reasonable opportunity of being heard has to be given to the applicant before rejecting any application of refund.

Following are the calculation for calculating the refund amount in case of export made under Bond/LUT:

In the case of exports of goods without the payment of tax on submission of Bond/LUT, the refund of the input tax credit shall be granted as per the following calculation:-

Refund Amount =

(Turnover of zero-rated supply of goods) x Net ITC ÷ Adjusted Total turnover

  • “Refund” means the maximum refund that is admissible;
  • “Net ITC means input tax credit availed on inputs during the relevant period;
  • “Turnover of zero-rated supply of services” means the value of zero-rated supply of services made without payment of tax under bond or LUT
  • “Turnover of zero-rated supply of services” means the value of zero-rated supply of services
  • “Adjusted Total turnover” means the turnover excluding the value of exempt supplies other than zero-rated supplies, during the relevant period
  • Relevant period means the period for which the application for refund has been filed

Certificate from Chartered Accountants:

Rule 89(2) of the CGST Rules, 2017, specifies documents to be attached with the refund application in case of different types of Refund applicants. However, it has been provided under section 54(4) of the 315 CGST Act, 2017, that where the amount claimed as refund is less than two lakh rupees, then, for certifying that the incidence of such tax and interest had not been passed on to any other person, it shall not be necessary for the applicant to furnish any documentary and other evidence but he may file a declaration, based on the documentary or other evidence available with him.

A certificate in Annexure 2 of Form RFD-01 is required from Chartered Accountant or Cost Accountant in case the refund amount exceeds Rs.2 Lakhs to give the effect that the incidence of tax, interest, or any other amount claimed as refund has not been passed on to any other person. For the purpose of this rule, where the amount of tax has been recovered from the recipient, it shall be deemed that the incidence of tax has been passed on to the ultimate consumer.

Relevant date**:

If goods exported:

1). Through Air or Sea; 

– “Date on which ship or aircraft leaves India”

2). Through Land Route:                    

“Date on which the Goods cross the land frontier of the country”

3). Through Post:  

“Date of dispatch of goods from the Post Office”

4). Deemed exports i.e. supply to SEZ or 100% EOU: Return filing date relating to deemed export.

Disclaimer: All information & views expressed above are my own and not representing any legal opinion.

Author Bio

Qualification: CA in Job / Business
Company: Sameer Mittal & Associates LLP
Location: NEW DELHI, New Delhi, IN
Member Since: 17 Apr 2020 | Total Posts: 4
Experienced in Risk Advisory Services with a demonstrated history of working in the management consulting industry. Skilled in Internal Audit, IFC/ICFR, Indirect Taxation, Direct Taxation, Accounting, and Microsoft Office. Strong information technology professional with a Chartered focused in Busine View Full Profile

My Published Posts

More Under Goods and Services Tax

10 Comments

  1. Vandana Gupta says:

    Hi,
    Just want to know if we have domestic sales also with export, so while calculating Net ITC we have to deduct GST payable on output domestic supply.

  2. Hiren vora says:

    Dear author, do not mislead anyone please. You did not explain the amended rules, namely Rule 89 (4) and Rule 96B. Please understand that these are super important. Additionally, you were also expected to explain the provisions of Circular No. 135.

    1. garg.nishank@gmail.com says:

      Hi Hiren,

      I have Partially explained Rule 89 in another article including rule 96B. Further here it is not possible to go with complete other circulars as well which is specific to a point.

  3. Darshan says:

    we are exporter of FMCG . our refund of IGST over 50 lacs is pending for the last various month and refund of GST ( Vat) of Rs 40 lacs also pending for the last 2 years. Can some one professionally help us in this matter

  4. garg.nishank@gmail.com says:

    Further Just to clarify:
    the above post is specially for ITC where export made without payment of IGST. However RFD-01, also used for IGST paid on export supply of services, supplies made to SEZ with payment of IGST including the IGST paid on deemed export.

    1. garg.nishank@gmail.com says:

      In case of export of goods with IGST payment, the export document which is the Bill of Export or the Shipping Bill itself is considered as the application for refund of IGST. The GST Officer verifies the shipping bill details declared by the exporter in GSTR-1 with the details appearing on the ICEGATE portal. Accordingly, if he is satisfied with the declaration made, the officer shall credit the refund amount into the bank account declared by the taxpayer at the time of GST registration.

      1. garg.nishank@gmail.com says:

        Further Just to clarify:
        the above post is specially for ITC where export made without payment of IGST. However RFD-01, also used for IGST paid on export supply of services, supplies made to SEZ with payment of IGST including the IGST paid on deemed export.

Leave a Comment

Your email address will not be published. Required fields are marked *

Search Posts by Date

October 2020
M T W T F S S
 1234
567891011
12131415161718
19202122232425
262728293031