Refund has been discussed in Section 38 of the Model GST Law. ‘Refund’ includes refund of tax on goods and or services exported out of India or on inputs or input services used in the goods and or services which are exported out of India , or refund of tax on the supply of goods regarded as deemed exports, or refund of unutilised input tax credit as provided under Sub section (2) of Section 38.
Untilised Input Tax Credit be allowed as refund but only in the following cases as given in sub-section (2) of Section 38 :-
1. Exports of goods on which export duty is not payable;
2. Exports of services;
3. Where credit has accumulated on account of rate of tax on inputs being higher than the ate of taxes on Outputs.
Unutilised Input tax credit cannot be given refund only in the case of goods exported outside India are subjected to export duty.
Input tax credit of goods lying stock at the end of the financial year after introduction of GST, it is proposed to be carry forward.
For example: Suppose a taxable person has paid IGST, CGST and SGST mistakenly as an Interstate, Intra State supply, but the nature of which is subsequently clarified. In such a case the CGST and SGST cannot be adjusted against wrongly paid IGST or vice versa. He will have to pay the appropriate tax and claim refund of the tax wrongly paid under section 30 of IGST and as per section 53 of GST.
Purchases made by Embassies or United Nations will be taxed, which later on can be claimed as refund by them. Under Section 19(6) of Model GST Law the United Nations Organisation and Consulates or Embassies are required to take a Unique Identification Number and purchases made by them will be reflected against their number in the return of outward supplies of the supplier and refunds of taxes can be granted. A separate process will be notified in the rules.
For taking refund the person concerned is required to file the application before expiry of two years from the relevant date, as given in the explanation to Section 38 of Model GST Law.
The principle of unjust enrichment will be applicable in refund except in cases of exports and refund of unutilised input tax credit as referred to in sub-section (2) of section 38.
The tax has been passed on to the consumer then refund will be sanctioned. However the amount so determined shall be credited to the Consumer Welfare Fund.
There is time limit of sanctioning of refund is 90 days in all cases, excepting in a case where the refund to the extent of 80% of the total amount claimed is refundable to certain categories of exporters referred to in sub-section (4A) of Section 38. If refund is not sanctioned within the period of three months, interest will have to be paid by the department.
The refund can be withheld in the following circumstances:-
1. If the registered dealer has not submitted return(s), till he files the return (s).
2. If the registered taxable person is required to pay any tax, interest or penalty which has not been stayed by the appellate authority or Tribunal or any Court, till he pays such tax interest or penalty. The proper officer can also deduct unpaid taxes if any of the dealer from the refundable amount.
3. Commissioner or Board can withhold the refund. If the order of refund is under appeal and he is of he opinion that grant of such refund will adversely affect the revenue of the State under Section 38(9) of Model GST Law.
If as a result of appeal or further proceeding the taxable person becomes entitled to refund then he shall be also entitled for interest.
No refund shall be granted if the amount is less than Rs. 1,000/- under section 38(11) of Model GST Law.
The refund arising out of earlier law will be paid as per the earlier law and will be paid in cash under CGST or as per the provisions of the earlier law under SGST and will not be available as ITC under Section 156, 157 and 158 of Model GST Law.
For export refunds to notified category of dealers, 80% of refund can be granted before verification subject to such conditions and restrictions as may be prescribed under Section 38(4A) of Model GST Law.
Since the exporter has a time period of one year from the date of export for remtting of export proceeds. BRC may not be available at the time of refund application. But if export proceeds are received in advance BRC may be aailabe, Thus refund should be subject to submission of BRC details within a period of maximum one year or as extended by RBI, e-BRC module of DGFT wil be integrated with GST module. However for export of services BRC would be required before sanction of refund.
The principle of unjust enrichment is not applicable in case of actual exports of goods or services as the recipient is located outside the taxable territory. However, in case of deemed exports it will be applicable.
The person concerned may furnish together with the application such document(s) or evidence(s) to establish that the amount of tax and interest, if any, paid on such tax or any other amount paid in relation to which such refund is claimed was not passed on by him to any other person under section 38(3)(b).
Further to provide relief to taxpayers the above sub-section also provides that where the refund amount, as claimed , is less than Rs. 5 Lakhs a self declaration will only be required.
Simply on furnishing of declaration from the purchaser cannot purchase goods without payment tax like in VAT regime, there will be no such provision in GST. They will have to purchase goods upon payment of tax and claim refund of the accumulated input tax credit as discussed in Section 28(2) of Model GST Law.
Under the GST regime exports will be zero rated which means that the export goods would not suffer any actual tax liability although inputs for such exports would be tax paid. Under GST , refund will be allowable on the accumulated inputs as well as on exported finished goods.