Refund Process under GST

Last Update Date : August 13, 2018

refund process under GST

In usual cases, when the amount paid as GST is more than the GST liability, it creates a situation to claim GST refund. To avoid confusion and provide more clarity on refund process under GST, the process to claim a refund is standardized. This process is online and time lines to claim refund also have been fixed for the same.

In usual cases, when the amount paid as GST is more than the GST liability, it creates a situation to claim GST refund. To avoid confusion and provide more clarity on the refund process under GST, the process to claim a refund is standardized. This process is online and timelines to claim refund also have been fixed for the same.

Calculation of GST Refund

GST refund can be claimed when the tax paid is excess than assessed.

Example

The GST liability of Ms Parekh’s GST for the month of August is Rs 65,000. Mistakenly, she made a GST payment of Rs 6,50,000. Since, Ms. Parekh has made an excess GST payment of Rs 5,85,000, she claim the amount as GST refund.

Quick Note: The time limit for claiming the refund is 2 years from the date of payment or relevant date (relevant dates differ from case to case basis depending upon situations where refund can be claimed).

Situations where Refund can be Claimed under GST

A suitable refund mechanism is essential for effective tax administration. When the taxes are paid in excess than assessed either erroneously or mistakenly, refund can be claimed under GST. Few scenarios are given below:

  • Refund of pre-deposit
  • Excess payment of GST because of an error in either calculation or submission
  • Refund of CGST and SGST paid by considering the supply in the course of inter-state transaction
  • Refund due to issuance of refund vouchers for pre-paid taxes against which goods and/or services haven’t been supplied
  • Accumulation of ITC caused by output being tax exempt or nil-rated
  • Dealer Exports (including deemed export) goods/services under claim of rebate or Refund
  • Refund of tax for International Tourists paid on goods within the country and carried to overseas on their departure from India
  • Supplies to developers and units in special economic zones
  • Finalisation of provisional assessment
  • Refund of taxes when embassies make purchases
  • Refund arising from order, judgment, direction or decree of the Appellate Tribunal, Appellate Authority or any court of law
  • Refund of tax paid on inward supplies made by Embassies or UN bodies

Due Dates for Claiming Refund

The below are the relevant dates to claim the refund within two years in each of the situation where GST refund can be claimed:

Reason for claiming GST Refund Relevant Date
Excess payment of GST Date of tax payment
ITC accumulation due to output being tax exempted or nil-rated Last date of financial year to which the credit belongs
Export or deemed export of goods or services Date of (i) dispatch (ii) loading or (iii) passing the frontier
Finalisation of provisional assessment Date on which tax is adjusted

Quick Note: In case there is a delay in paying refund beyond 60 days, government will pay interest @ 6% p.a. and if the interest is arising on account of delay for the reason of adjudication, the government has to pay an interest of 9 % p.a. on the refund amount.

How to Claim Refund under GST?

The refund application has to be electronically submitted in Form RFD 01 within 2 years from relevant date. The refund application form must be certified by a Chartered Accountant / Cost Accountant, if the amount of refund exceeds Rs 2 lakhs.

Documents Required

The below is the list of standard documents to be filed along with refund claim by applicants making a claim:

  • For each claim, the primary document that has to be submitted is a statement of relevant invoices relating to the claim.
  • If the refund is made on account of export of services, not including the statement of invoices, the relevant bank realisation certificates verifying receipt of payment in overseas currency should also be furnished.
  • In case a claim is made by the supplier to the Special Economic Zones (SEZ) unit, the authorised officer will have to make an endorsement verifying the receipt of such commodities or services in the SEZ and submit the same along with the other documents.
  • Moreover, the SEZ unit will also have to provide a declaration stating that ITC of the tax paid by the supplier has not been availed.

The Process to Claim the Refund

In order to process a refund claim, the following procedure must be adhered to:

  1. Login to the GST portal, click on Services > Refund > Application for Refund.
  2. Fill in the application form intended for claiming refund. For this, select “Refund of excess balance in electronic cash ledger” and click on “create”
  3. Here, you need to enter values in editable “refund claimed” table, then select “bank” in which you want your GST refund to get credited and click on button “save”
  4. At last, tick the checkbox and select “authorised signatory” from the drop-down menu. Depending upon your type of organisation select either of “‘SUBMIT WITH DSC’ or ‘SUBMIT WITH EVC’”

Quick Note: On filing RFD – 01 Refund, an ARN Receipt is generated in PDF format. Once the inspection of refund application is done satisfactorily, the amount of refund gets credited to the selected bank account.

Other Important Points

  1. On filling application, GST portal will send you notification via an email or a text SMS containing acknowledgement number for your electronically submitted application.
  2. The electronic cash and return ledger will be adjusted with the refund amount and the “carry-forward input tax credit” will be reduced automatically.
  3. It takes around 30-day period for authorities to scrutinise submitted refund application.
  4. The authorities will thoroughly scrutinise “Unjust enrichment”. Unjust enrichment refers to the benefit obtained from another, not intended as a gift and not legally justifiable, for which the beneficiary must make restitution or recompose – Indian Council for Enviro-Legal Action v. UOI (2011) 8 SCC 161.
  5. On disqualification of refund application, the refund gets transferred to a Consumer Welfare Fund (CWF).
  6. When refund is claimed for excess GST paid, a pre-audit process is conducted before the refund is sanctioned.
  7. On approval, refund is electronically credited to the bank account of applicant through ECS, NEFT or RTGS.
  8. Individuals are permitted to apply for refund at the end of each quarter.
  9. In case, the amount of refund application is below Rs 5,00,000 both declaration by taxpayer and documents as evidence need to be attached
  10. In case, the amount of refund is below Rs 1,000, no refund will be provided.
  11. In case, GST officer fails to pass an order within 60 days of application, taxpayer shall receive an interest at the rate of 6% p.a. for the period exceeding 60 days till refund is received.

Quick Note: On the basis of the doctrine of unjust enrichment, Refund will be normally paid in Consumer Welfare Fund, and not paid to the taxable person who has applied for the refund – section 54(5) of CGST Act.

Important Forms for Refund Claims

Form name Purpose
Form RFD-01 Refund application form
Form RFD-02 Auto-generated acknowledgement of application
Form RFD-03 Form sent to taxpayer to make corrections in application
Form RFD-04 Provisional refund order issued by authorised officer
Form RFD-05 Final order issued by authorities
Form RFD-06 When refund needs to be adjusted against taxable amount
Form RFD-07 Show-cause notice for rejection of refund application
Form RFD-08 Payment advice
Form RFD-08 Order for interest on delayed payments
Form RFD-10 Refund application by UN’s body, consulates or foreign embassies

How can earlyGST help you?

After the implementation of GST, the tax compliance requirements changed drastically. As a result, several businesses find it challenging to focus on their business while trying to be GST compliant. This is where we come into the picture. Our team of in-house GST experts can help you meet all the GST compliance requirements right from registration and filing of returns to handling notices.

  • Share: