Refund under GST is still perplexity for some people. Many registered person has no idea when they are eligible to get it, in which time period they should apply and what are the process for it. Here general idea of refund to simplify it .

General Understanding: When an applicant can claim refund.

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 provisions 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.

To understand this sub section we need to understand the a few terms in detail. These terms are-

  • What is relevant date to make an application for refund?
S. No. Situation Conditi ons /Mode Relevant Date Ex ception 54(3) (No ref und ava ilable)
1. Refund of IGST paid on Export of goods or where the accumulated ITC of inputs/ input services used in such supplies is available for refund By Air/ Sea Date of departure of Aircraft/ Ship from India –  No refund of ITC where goods are sub jected to Export duty.

–       Where supplier of goods or services or both avails draw back in respires of ce ntral tax or claims refund of inte grated tax on sup plies

Export by land Date on which vehicle passed on frontier
Export by Post Date of dispatch by Post office to place outside India
2. Refund of Tax paid on Deemed exports Date when the return is furnished declaring the deemed export
3. Refund of IGST paid on Export of Services or where the accumulated ITC of inputs/ input services is used for such supplies is available for refund Where invoice is issued before the com pletion of service and payment Date of Issue of Invoice
Where receipt is issued before the com pletion of service and payment Date of Receipt of Payment in Convertible Foreign Exchange
4. Refund of tax by judgment/decree /order/direction Date of communication of such judgment/decree/order/direction
5. Refund of unutilized ITC Zero rated supplies made without payment of tax The end of financial year in which refund claims arises
Inverted Duty Structure
6. Where tax is paid provisionally Date of adjustment of tax after the final assessment
7. Recipient/Any person other than supplier Date of receipt of goods/services by recipient/ such other person
8. Other cases not mentioned above Date of payment of Tax

Once you applied for refund with in relevant time with the relevant documents, then the department will come in to picture. They can approve, cancel or withhold the refund.

Withhold of refund of taxes in following cases:

As per section 54(10) withholding of refund if there is-

  • Default in furnishing of return
  • Default in payment of taxes, interest or penalty
  • The proper officer is authorized to adjust the pending taxes, interest or penalty amount from the refund amount.

As per section 54(11) withholding of refund-

  • Where an order giving rise to a refund is the subject matter of an appeal or further proceedings under this act is pending and the commissioner is of the opinion that grant of such refund is likely to adversely affect the revenue in the said appeal or other proceedings on account of malfeasance or fraud committed, he may, after giving the taxable person an opportunity to being heard, withhold the refund till such time as he may determine.

As per section 54(13) withholding of refund in case of casual taxable person or non- resident taxable person    The amount of advance tax deposited by a casual taxable person or a non-resident taxable person under sub-section (2) of section 27, shall not be refunded unless such person has, in respect of the entire period for which the certificate of registration granted to him had remained in force, furnished all the returns required under section 39.

But you cannot apply for refund if your refund amount is less than one thousand rupees and this limit applicable separately on each tax head not cumulatively and this is clarified in the circular 125/44/2019.

Interest On Refund

Once an application for refund is filed, within 60 days the GST officer may issue an order if he is satisfied with the whole or partial refund of amount claimed.

If the refund is not provided within 60days of the application of the proper officer then refund has to be paid with an interest at 6%p.a. calculated for the period of delay.

Exception: If refund from an order/direction from the appellate authority / tribunal/ court is granted then the interest on refund is 9% calculated for the period of delay.

Period of delay for Interest Calculation: To find out the period for which interest at 6% / 9% is to be calculated, count the number of days from the date of receipt of application for refund till the date of payment of Refund.

Exception: A casual taxable person / Non- Resident Taxable person who claims the refund of the balance unutilized advance deposit of tax made at the time of registration, is eligible to count the days from the date of deposit till the date of payment of refund.

The interest shall be paid by issuing Payment advice in RFD-05. Payment advice (RFD-05) contains the amount of refund delayed, the period of delay and amount of interest being paid.

The interest amount is directly credited to the registered bank account of the claimant that was declared at the time of GST registration.

Calculation of Refund in case of Zero rated Supply of Goods or Services or Both

Rule 89(4) stipulates that in case of zero rated supply, refund of ITC is granted as per following formula:

Refund Amount = [(Turnover of zero rated supply of goods or services or both + turnover of zero rated supply of services) *Net ITC]/ adjusted total turnover

Where,

1. “Refund Amount” means the maximum amount of refund that is admissible.

2. “Net ITC” means ITC availed on inputs and input services during the relevant period other than ITC availed for which the refund is claimed under sub-rules (4A) or (4B) or both.

3. “Turnover of zero rated supply of goods” means zero rated supply of goods made in relevant period without the payment of tax under bond/LUT, other than the supplies in respect of which refund is claimed under sub rules (4A) or (4B) or both.

4. “Turnover of zero rated supply of services” means zero rated supply of services made in relevant period without the payment of tax under bond/LUT, calculated in the following manner:

  Aggregate of Payments received of zero rated supply of services during the period xxx
Add: Advance received for services in prior period and services completed during the period xxx
Less: Advance received for services during the period and services completed subsequent period (xxx)
  Turnover of zero rated supply xxx

1. “Adjusted Total turnover” means the sum total of the value of:

2. The turnover in a State or a Union Territory, as defined under section 2(112), excluding turnover of services &

3. The turnover of zero rated supply of services determined in terms of clause (D) above and non- zero rated supply of services,

Excluding:

1. the value of exempt supplies other than zero rated supplies; and

2. the turnover of supplies in respect of which refund is claimed under sub rule (4A) or sub rule (4B)or both, if any, during the relevant period

3. “Relevant Period” means the period for which the claim has been filed. 

  • Rule 89(4A) stipulates that in the case of supplies received on which the supplier has availed the benefit of deemed exports, refund of ITC, availed in respect of other inputs/ input services used in making zero-rated supply of goods or services or both, shall be granted.
  • Rule 89(4B) stipulates that where the person claiming refund of unutilized ITC on account of zero rated supplies without payment of tax has-

1. Received supplies on which the manufacturer supplier has availed benefit of supply of goods to merchant exporters at the concessional rate of 0.1% or

2. Availed the benefit of exemption from IGST and Compensation Cess, for the goods imported under Advance Authorization (AA/EPCG), the refund of ITC, availed in respect of inputs received under the said notifications for export of goods and input tax credit availed in respect of other inputs or input services to the extent used in making such export of goods, shall be granted.

Calculation of Refund in case of Inverted Duty Structure in Supply of Goods or Services or Both

Rule 89(5) stipulates that in the case of refund on account of inverted Duty structure, refund of ITC shall be granted as per the following formula-

Maximum Refund Amount = [(Turnover of inverted rated supply of goods and services*Net ITC)/Adjusted total turnover]-Tax payable on such inverted rated supply of goods and services

 Where,

1. “Net ITC” means ITC availed on Inputs* during the relevant period other than the ITC availed for which refund is claimed under sub-rules (4A) or (4B) or both

2. “Adjusted Total Turnover and Relevant Period” have the same meaning as assigned in Sub-rule (4) above.

*Clarification on Inputs

Note- 1: It may be noted ITC availed on only inputs. In definition of inputs doesn’t include services or capital goods, so it prevent the refund of tax paid on input services and capital goods as part of refund of ITC accumulated on account of inverted duty structure.

Note- 2: If there are multiple inputs attracting different rates of tax, Net ITC covers the ITC availed on all inputs in the relevant period, irrespective of their rate of tax. The calculation of refund of accumulated ITC on account of inverted tax structure, in cases where several inputs are used in supplying the final product/output, can be clearly understood with the help of the following illustration:

Illustration: Suppose a manufacturing process involves the use of an Input A (attracting 5% GST) has value Rs.500/- and input B (attracting 18% GST) has value Rs.2000/- to manufacture output Y (attracting 12% GST). Assume that output Y has value Rs.3000/- during the relevant period for which refund is being claimed. The claimant has no outward supply, therefore total adjusted turnover for the relevant period is Rs.3000/-

Now Net ITC shall be equal to Rs.385/- (Rs.25 and Rs.360/- on input A and input B respectively).

Therefore, multiplying Net ITC by the ratio of turnover of inverted rated supply of goods and services to the adjusted total turnover will give the figure of Rs.385/- and from this we deduct Rs.360/- refund from inverted rate structure (input B) and get the maximum refund amount is Rs.25/-.

Section 54(4) stipulates about the documentary evidence. Where the amount claimed as refund is less than Rs.2 lakh, then it shall not necessary for applicant to furnish any documentary evidence, he may file declaration, based on the documentary or other evidences available with him, certifying that there is no unjust enrichment i.e. the incidence of such tax and interest had not been passed on to any other person.

There is no refund if the refund amount is less than Rs.1000/-

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Qualification: CA in Job / Business
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Location: LUDHIANA, Punjab, IN
Member Since: 16 May 2020 | Total Posts: 4

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