Nyn (Associate Member of Team GST Cornor)
Provisions of refund of Taxes are very important as delay would adversely impact exporters, manufacturers. In some States there is no refund in reality and in many States it is available in a delayed manner with a very high transaction cost. The Service tax refund has similarly seen period of no refund and even today the refunds for the year 2008 are outstanding!!
Looking to the concern of the exporters especially of services, the GST provisions for refund are simpler and have built in time limit on 90% for export/ SEZ refund claim.
Let’s understand the refund scenario under GST in detail:
Zero-Rated Supply: The following taxable supplies of goods and/or services are considered as ‘zero rated supplies’:
– Export of goods or services or both
– Supply of goods or services or both to a SEZ developer or SEZ unit
Deemed Exports: The government notifies certain supplies of goods which are manufactured in India as deemed exports, where good supplies does not leave India and payment for such supplies is received either in Indian rupees or convertible foreign exchange. It is very important for treating supplies of goods as deemed exports those goods should be manufactured in India
Export of Goods means taking goods out of India to a place outside India.
Export of Services means the supply of any service when,–
– The supplier of service is located in India;
– The recipient of service is located outside India;
– The place of supply of service is outside India;
– The payment for such service has been received by the supplier of service in convertible foreign exchange; and
– The supplier of service and the recipient of service are not merely establishments of a distinct person.
TYPES OF REFUNDS UNDER GST
– Refund of tax paid on zero rated supplies of goods or services or both
– Refund of tax paid on input or input services used in making above zero rated supplies
– Refund of tax on the supply of goods regarded as deemed export
– Refund of tax paid on supply which is not provided and for which invoice has not been issued.
– Refund of tax paid on advance receipt but subsequently no supply is made and issue refund voucher against receipt voucher issued at the time of advance receipt.
– Refund of tax (Central Tax + State Tax or Central Tax + Union Territory Tax) which is wrongfully paid on considering transactions as intrastate supply but subsequently transactions treat as interstate Supply (No vice-versa)
– Refund of any balance lies in the electronic cash ledger
– Amount of advance tax deposited by a causal taxable person or non-resident taxable person
– The tax or interest borne by notified class of applicants.
– The tax/ interest/ other amounts paid by the applicant, if he had not passed on the incidence of tax to any other person.
– Following persons are eligible for a refund of tax paid by it on inward supplies of goods or services or both –
– A specialized agency of the United Nations Organization or
– Any Multilateral Financial Institution and Organization notified under the United Nations (Privileges and Immunities) Act, 1947,
– Consulate or Embassy of foreign countries or
– Any other person or class of persons as notified under section 55.
– All outbound passengers carrying goods on which IGST has been paid (charges by the supplier), are entitled to claim refund at the port-of-exit i.e at the time of leaving India
REFUND OF UNUTILIZED INPUT TAX CREDIT:
– Zero rated supplies made without payment of tax i.e letter of bond supply
– Credit accumulated on account of ‘Rate of tax on inputs’ being HIGHER than the ‘Rate of tax on output supplies’ OTHER THAN NIL RATED OR FULLY EXEMPT SUPPLIES.
Conditions for refund of unutilized ITC:
– No refund of unutilized credit where the goods are exported out of India are subjected to export duty
– No refund of Input Tax Credit if the supplier of goods or service or both avails of ‘drawback in respect of central tax’ or ‘claims refund of integrated tax paid on such supplies’
– No refund of supplies of goods or service or both as may be notified by the government.
TIME LIMIT FOR CLAIMING REFUND
– A person claiming refund should make an application before 2 years from the relevant date. The time limit of two years will not apply where tax / interest / or any other amount has been paid under protest or otherwise.
– There is no provision to condone the delay and the refund claim will be rejected at the threshold without getting into merits of the refund claim.
– In case of taxable person claiming refund of any balance in the electronic cash ledger, it can be claimed at the time of furnishing return under section 39 i.e. FORM GSTR-3 or FORM GSTR-4 or FORM GSTR-7 as the case may be
– A registered person may claim refund of any unutilized input tax credit at the end of any tax period
– Agencies such consulate or embassy of foreign countries etc who is eligible for a refund of tax paid by it on inward supplies of goods or services or both, may make an application for refund within six months from the end of the quarter in which such supply was received.
Relevant date means:
In case of goods exported out of India
| Sr. No. | Situation | Relevant Date |
| 1. | Exported by sea or air | Date on which the ship or aircraft leaves India, on which goods loaded |
| 2. | Exported by land | Date on which such goods pass the frontier |
| 3. | Exported by post | Date of dispatch of goods by PO to a place outside India |
In case of services exported out of India
| Sr. No. | Situation | Relevant Date |
| 1. | Where supply has been completed prior to the receipt of payment | Date of receipt of payment in convertible foreign exchange |
| 2. | Where payment has been received in advance prior to the date of issue of invoice | Date of issue of invoice |
In other cases
| Sr. No. | Situation | Relevant Date |
| 1. | Supplies of goods treated as deemed exported | Date on which return related to such supplies is furnished. |
| 2. | Refund as a consequences of judgment, decree, order or direction of authority | Date of communication of such judgment, decree, order or direction |
| 3. | Refund of unutilized input tax credit | End of the financial year in which such claim for refund arises |
| 4. | Tax is paid provisionally | Date of adjustment of tax after the final assessment |
| 5. | Person other than the supplier | Date of receipt of goods or services or both by such person |
| 6. | In other cases such as amount of advance tax deposited by a casual taxable person or a non-resident taxable person etc. | Date of payment of tax |
PROCEDURE FOR CLAIMING REFUND
– Application for refund shall be filed electronically in FORM GST RFD-01, which shall be accompanied by necessary documents.
– The applicant must submit documentary evidences [including invoice or any other similar tax paying document] to establish the fact that incidence of tax/interest/amount paid was not passed on by the claimant to any other person.
– In case of amount of refund claim is less than Rs.2.00 lakhs, then a self-declaration based on the documentary and other evidences available with the claimant, certifying that he has not passed on the incidence of such tax, interest or any other amount claimed as refund has not been passed on to any other person. (This is only required in case refund of the tax and interest, if any, or any other amount paid by the applicant, if he had not passed on the incidence of such tax and interest to any other person)
– In case of amount of refund claimed exceeds Rs.2.00 lakhs, then a certificate in Annexure of FORM GST RRFD-01 issued by a chartered accountant or a cost accountant to the effect that the incidence of tax, interest or any other amount claimed as refund has not been passed on to any other person. (This is only required in case refund of the tax and interest, if any, or any other amount paid by the applicant, if he had not passed on the incidence of such tax and interest to any other person)
– The refund application has to be supported by following documentary evidence as applicable that the refund is due to the applicant:
| SITUATION | DOCUMENTARY EVIDENCE |
| Refund as a consequences of judgment, decree, order or direction of authority | – The reference number of the order
– A copy of the order passed by the officer/authority |
| Refund on account of exports of goods | – A statement containing the number and date of shipping bills or bills of export
– The number and date of relevant export invoices |
| Refund on account of exports of services | – A statement containing the number and date of invoices
– The relevant Bank Realization Certificates or Foreign Inward Remittance Certificates |
| Refund on account of supply of goods to a SEZ unit or SEZ developers | – A statement containing the number and date of invoices
– Letter of authorized operation as endorsed by the specified officer of the zone – Declaration to the effect that the SEZ unit or SEZ developers has not availed of the input tax credit of the tax paid by the supplier of goods or services or both |
| Refund on account of supply of goods to a SEZ unit or SEZ developers | – A statement containing the number and date of invoices, the evidence regarding
– Letter of authorized operation as endorsed by the specified officer of the zone – Details of payment – Declaration to the effect that the SEZ unit or SEZ developers has not availed of the input tax credit of the tax paid by the supplier of goods or services or both |
| Refund on account of deemed exports | – Statement containing the number and date of invoices along with such other evidence as may be notified in this behalf |
| Refund on account of ‘Rate of tax on inputs’ being HIGHER than the ‘Rate of tax on output supplies’ OTHER THAN NIL RATED OR FULLY EXEMPT SUPPLIES | – A statement in Annex 1 of FORM GST RFD-01 containing the number and date of invoices received and issued during a tax period |
| Refund arises on account of finalisation of provisional assessment | – Reference number of the final assessment order and a copy of the said order |
| Refund on accounts of tax paid on considering transaction as intrastate supply but subsequently treated as interstate supply | – A statement showing the details of transactions considered as intra-State supply but which is subsequently held to be inter-State supply |
| Refund on account of excess payment of tax | – A statement showing the details of the amount of claim |
POINTS TO BE REMEMBER
– In case of export of goods, application for refund shall be filed only after the export manifest or an export report.
– In respect of supplies to a SEZ unit or SEZ developers, the application for refund shall be filed by the supplier after receipt of evidence for authorized operations in SEZ unit or SEZ developers, as endorsed by the specified officer of the zone.
– In respect of supplies regarded as deemed exports, the application shall be filed by the recipient of deemed export supplies.
– In case of refund of advance tax deposited by casual taxable person or non-resident taxable person shall be claimed in the last return required to be furnished by him.
ORDER SANCTIONING REFUND
– On receipt of application, if the proper is satisfied that the whole or part of the claimed as refund is refundable, he shall make an order in FORM GST RFD-06 along with the payment of advice in FORM GST RFD-05 sanctioning the amount of refund to which the applicant is entitled.
– The order in Form GST RFD-06 mentions the amount refunded to him on a provisional basis, amount adjusted against any demand under this Act or under any existing law and the balance amount refundable.
– In case where the amount of refund is completely adjusted against any outstanding demand then the adjustment shall be issued in Part A of FORM GST RFD-07.
– In case where the amount of refund is liable to be withheld then the proper officer shall pass an order in Part B of FORM GST RFD-07 informing the reason of withholding.
– In case where the whole or any part of the amount claimed as refund is not admissible or is not payable then the proper shall issue a notice in FORM GST RFD-08 to the applicant after the applicant a reasonable opportunity of being heard.
– The refund relating to an application if found in order, will be sanctioned within sixty days from the date of receipt of application.
– The refundable amount shall be paid to the applicant instead of credited to the fund, if such amount is relatable to:
– Refund of tax paid on zero rated supplies of goods or services or both
– Refund of tax paid on input or input services used in making above zero rated supplies
– Refund of unutilized input tax credit
– Refund of tax paid on supply which is not provided and for which invoice has not been issued.
– Refund of tax paid on advance receipt but subsequently no supply is made and issue refund voucher against receipt voucher issued at the time of advance receipt.
– Refund of tax (Central Tax + State Tax or Central Tax + Union Territory Tax) which is wrongfully paid on considering transactions as intrastate supply but subsequently transactions treat as interstate Supply (No vice-versa)
– The tax or interest borne by notified class of applicants.
– The tax/ interest/ other amounts paid by the applicant, if he had not passed on the incidence of tax to any other person.
POINTS TO BE REMEMBER
– In case of claim of refund of unutilized input tax credit, the refund due will be either withheld or deducted in cases where –
– A person defaults in furnishing any return;
– A person is required to pay any tax, interest or penalty ordered, which is not stayed by Court or appellate Authority within the last date for filing an appeal under this act
– In case order giving rise to a refund is subject matter of an appeal or further proceeding or where any other proceeding under this act is pending and the Commissioner is of the opinion that grant of refund would affect the revenue adversely in the appeal or proceeding on account of malfeasance or fraud committed, the commissioner may withhold the refund till such time as it may be determined. This can be done only after affording the taxpayer an opportunity of being heard
– The amount of advance tax deposited by a casual taxable person or a non-resident taxable person at the time of taking registration would be refunded only after completion of entire period for which the certificate of registration granted and all the returns required to be furnished under section 39 are furnished.
– No refund shall be granted or paid to an applicant, if the amount is less than Rs. 1000/-.
REFUND IN CASE OF ZERO RATED SUPPLY
– In case of registered person other than notified person, where refund is on account of zero rated supply of goods and/or services, the proper officer may refund 90% of the total amount claimed (excluding input tax credit not yet finalized) on provisional basis within a period of 7 days from the date of acknowledgement and pass an order in FORM GST RFD- 04 along with payment advice in FORM GST RFD-05
– Amount of refund sanctioned shall be electronically credited to the bank accounts of the applicant.
Conditions: When person claiming the refund during any period of 5 years immediately preceding the tax period has not been prosecuted for any offence where the amount of tax evaded exceeds Rs.2.50 crores.
– Remaining 10% may be refunded after due verification of documents furnished by the applicant.
– In case of zero rated supplies made without payment of tax under bond or letter of undertaking, refund on input tax credit shall be granted as per following formula:
REFUND AMOUNT = (TURNOVER OF ZERO RATED SUPPLY OF GOODS OR SERVICE) * NET ITC ÷ ADJUSTED TOTAL TURNOVER
Adjusted Total Turnover means the turnover in a State or a Union territory excluding the value of exempt supplies other than zero-rated supplies, during the relevant period.
– In case of refund on account of inverted duty structure, refund of input tax credit shall be granted as per the following formula:
MAX. REFUND AMOUNT = (TURNOVER OF INVERTED SUPPLY OF GOODS) * NET ITC ÷ ADJUSTED TOTAL TURNOVER
LESS: TAX PAYABLE ON SUCH INVERTED RATED SUPPLY OF GOODS
REFUND IN CASE OF TAX PAID ON INWARD SUPPLIES
– Following persons are eligible for a refund of tax paid by it on inward supplies of goods or services or both –
– A specialized agency of the United Nations Organization or
– Any Multilateral Financial Institution and Organization notified under the United Nations (Privileges and Immunities) Act, 1947,
– Consulate or Embassy of foreign countries or
– Any other person or class of persons as may be notified
– An applicant shall apply for refund in Form GST RFD-10 once in every Quarter along with statement on inward supplies of goods or service or both in Form GSTR-11. (Maximum time limit under which an application for refund made is 6 months from the end of the quarter in which such supply was received)
– Where an express provision in a treaty or other international agreement, to which the President or the Government of India is a party, is inconsistent with the provisions of these rules, such treaty or international agreement shall prevail.
Conditions of Refund:
– The inward supplies of goods or services or both were received from a registered person against a tax invoice.
– Name and GSTIN or UIN of the applicant is mentioned on the tax invoice.
– The price of the supply covered under a single tax invoice exceeds Rs.5000/-, excluding tax paid, if any
INTEREST ON DELAYED REFUNDS
– A person shall be eligible for payment of interest on delayed of refunds beyond the period of sixty days from the date of receipt of application.
– Interest is liable to be paid at the rate not exceeding 6% in general case or 9% in case of favorable order by adjudicating authority or appellate authority or court.
– Interest is liable to be paid from the date immediately after the expiry of 60 days from the date of receipt of an application till the date of refund of such tax.
Illustration:
ABC Ltd has filed a refund claim of excess tax paid with all the documents and records on 19.08.2017. The department sanctioned the refund on 30.11.2017. In such a case, interest has to be paid for the period from 18.10.2017 to 30.11.2017.
– Where the orders of Appellate Authority / Tribunal / Court sanctions refund in an appeal, against the order of refund sanctioning authority, the order of Appellate Authority / Tribunal / Court will be considered as orders passed by refund sanctioning authority. In other words, by virtue of such order, the refund has become due and the interest will then be computed form the date of completion of 60 days from the date of original refund claim made.
Illustration:
ABC Ltd has filed a refund claim of excess tax paid with all the documents and records on 19.08.2017. It was rejected by refund sanctioning authority. On Appeal the Appellate Authority passed the order for refund based on which the department sanctioned the refund on 30.09.2018. In such case, interest has to be paid for the period from 18.10.2017 to 30.09.2018.
– The proper officer shall make an order along with a payment advice in FORM GST RFD- 05, specifying therein following details:
– The amount of refund which is delayed;
– The period of delay for which interest is payable; and
– The amount of interest payable.
– Amount of interest shall be electronically credited to the bank accounts of the applicant.
SYNOPSIS OF FORMS RELATED TO REFUND
| Sr. No. | FORM | Particulars |
| 1. | FORM GST RFD-01 | Refund Application FORM
Annexure:-1 Details of Goods Annexure:-2 Certificate by CA |
| 2. | FORM GST RFD-02 | Acknowledgement of receipt of refund application FORM |
| 3. | FORM GST RFD-03 | Notice of deficiency on application for refund |
| 4. | FORM GST RFD-04 | Refund order on provisional basis |
| 5. | FORM GST RFD-05 | Payment advice for the amount sanctioned |
| 6. | FORM GST RFD-06 | Refund Sanction/Rejection Order |
| 7. | FORM GST RFD-07 | Order for complete adjustment of claimed refund |
| 8. | FORM GST RFD-08 | Show Cause Notice for rejecting of refund application |
| 9. | FORM GST RFD-09 | Reply to Show Cause Notice |
| 10. | FORM GST RFD-10 | Refund application FORM for any specialized agency such as embassy etc. |
| 11. | FORM GST RFD-11 | Statement of Inward Supply of Goods or Services for any specialized agency such as embassy etc. |
Feedback/Suggestions are invited at gstcornor@gmail.com or whatsapp at 8989077616.
Above information/detail is mostly based on The Central Goods & Service tax Act, 2017 and Final Refund Rule as on 7th June, 2017.
Disclaimer: The views expressed in this article are of the CA. Nayan Jain, Nyn (Associate member of Team GST Cornor). The information cited in this article has been drawn from various provision of The CGST Act, Rules, ICAI publications and other various sources. While every effort has been made to keep, the information cited in this article error free, team GST Cornor does not take the responsibility for any typographical or clerical error which may have crept in while compiling the information provided in this article.
This article includes general information about legal issues and developments in the proposed law of GST in India. Such materials are for informational purposes only and may not reflect the most current legal developments. These informational materials are not intended, and must not be taken, as legal advice on any particular set of facts or circumstances. We disclaim all liability in respect to actions taken or not taken based on any or all the contents of this article to the fullest extent permitted by law. Do not act or refrain from acting upon this information without seeking professional legal counsel.
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