CA Dilip Jain

CA Dilip Jain

Provisions of refund of taxes are very important as delay would adversely impact exporters, manufacturers. Looking to the concern of the exporters especially of services, the GST provisions for refund are simpler.

  • Definition of Refund : “refund” includes refund of tax paid on zero-rated supplies of goods or services or both or on inputs or input services used in making such zero-rated supplies, or refund of tax on the supply of goods regarded as deemed exports, or refund of unutilized input tax credit
  • If Refund is on account of export or supply to SEZ, then 90 percent amount will be refunded on provisional basis.
  • If the person has defaulted in furnishing return or if the person is required to pay taxes, the Proper Officer may withhold the refund or may deduct tax payable from the refund amount.

There are four types of Refunds Available in GST:

Unutilized Input Tax Credit

Balance in Electronic Cash Ledger

Advance Tax deposited by Casual Taxable Person or Non Resident

Refund of Embassy, Agency of UNO

  • Refund of Unutilized ITC :

1. A Registered Person shall be eligible for Refund of Unutilized Credit in Following Situations:

Exporter of Goods or Services

Supply to SEZ Unit or Developer

Rate of tax on Input is higher than Rate of Tax on Outputs

2. He can Claim Refund of Unutilized ITC by Filing Form RFD-01 within 2 Years from relevant date.

3. A Registered Person shall not be eligible for Refund in following cases:

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If Supplier avails drawback in respect of CGST or Claims refund of IGST.

Goods Exported out of India were Subject to Export Duty.

  • Balance in Electronic Cash Ledger:

1. A Registered person can claim refund of balance in Electronic cash Ledger by Filing Form RFD 01 or GSTR-3, GSTR-4, GSTR-7 as may be applicable.

2. He can claim refund within 2 years from relevant date.

  • Advance Tax deposited by Casual Taxable Person or Non Resident :

1. They shall be eligible for refund if Furnishes all the return required under Section 39.

2. They can Claim Refund by Filing form RFD-01 or in the last Return within 2 Years from relevant date.

  • Refund of Tax Paid on Inward Supply by Embassy, Agency of UNO etc :

1. They can claim refund by Filing Form RFD-10 Quarterly within 6 month from the quarter end of receipt of Supply.

Meaning of Relevant Date:

Export of Goods: When ship or aircraft leaves India or goods pass the frontier or goods are Dispatched by Post Office.

Deemed Export:  When return of such deemed exports is filed.

Person other than Supplier: Date of Receipt of Such Goods or Services by Person.

Export of Services: 1. Receipt of CFE, if supply of service is prior to the receipt of such Payment.

2. Issue of invoice, if payment is received prior to the invoice date.

Consequence of judgment, order or direction of Appellate Authority: Date of communication of   such judgment, order, etc.

Unutilized Input Tax Credit: End of the F.Y. in which such refund claim arises.

Provisional Payment of Tax: Date of tax adjustment after the final Assessment

Other Cases: Date of payment of Tax.

Procedure of Claiming Refund:

  • The application of Refund shall accompany such documentary evidence as may be prescribed.  Like in case of Export of Goods, Bills of Export.
  • If Refund claim is less than Two Lakhs, no documentary evidence is required. Only Declaration that tax incidence is not passed on.

Transfer to Consumer Welfare Fund:

If prescribed procedure is not followed, the amount of Refund Will be transfer to Consumer Welfare Fund.

Following cases Refund is not transferred to Consumer Welfare Fund:

  • Tax Paid on Export/ sale to SEZ or Inputs/Input Services used.
  • Refund of Unutilized ITC
  • Refund of tax on supply which is not provided and Invoice not issued/ refund voucher issued.
  • Refund of tax wrongfully collected and paid.
  • Tax Incidence not passed on.

Interest on Delayed Refunds:

  • If amount is not refunded within 60 days from date of Receipt of application: Interest liability from expiration of period of 60 days to the date of grant of refund: 6 Percent.
  • Refund as a consequence of judgment, order or direction of Appellate Authority: Interest @ 9 Percent if not refunded within 60 days of application filed after the favorable order by adjudicating or appellate authority or court.

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