GST Refund Scenario in India

The GST law is the latest and the most innovative law concerning the tax system in India post-Independence and is one of those tax reforms that will take the Indian Economic System to newer heights. There is hardly anyone who is not affected by this system and this is why it is necessary for all to understand and gain knowledge about GST and its provisions such as refunds etc. As a taxpayer you should be conversant whether you can claim refunds under the GST law or not.

The most common refund rules under GST law are as follows:

  • In case of an inward supply of goods and/or services that have been exported and tax is paid on them or there are inputs or input services that have been utilized in goods and/or services that have been exported and tax is paid, then in that case refund can be claimed. However, it is evident to note here that if there is some export duty to the goods so exported, then in that case no refund shall be claimable.
  • In case input tax credit has not been utilized due to an inverted duty structure. In this case the rate of tax on inputs is usually higher than the rate of tax that is applicable on output supply. In this case also refund under GST law is not applicable in case the supplies are fully exempted.
  • In case there is some input tax credit that has not
    been utilized due to export output supplies.

What is the process of GST Refund?

Filing an application for Refund

A taxpayer who wishes to claim refund of tax or interest or any other amount that has been paid under the concerned law, needs
to file an application for claiming the said refund in Form GST RFD-1 within a period of 2 years from the date that is relevant in their case.

The said date of relevancy has been defined for each scenario further:

  • In case of goods exported by mode of sea or air the
    relevant date would be the one when the said goods so loaded on the ship or aircraft, leave the country.
  • In case of goods exported by mode of land then the date would be the when the goods pass the frontier.
  • In case of services that have been exported and payment received in advance, then the relevant date would be the one when invoice is issued.
  • In case of services exported and where the supply of
    the said service has been finished before the payment has been made then in that case the date of receipt of payment would be the relevant date.
  • In case of goods exported by way of post then the
    relevant date would be the one when the dispatch of goods is made by the concerned post office.

What are the documents that are required for the refund?

In order to claim refund certain documents are
required and they are as follows:

In case the amount of tax refund claimed is less

  • than INR 5 Lakhs then the taxpayer has to file a declaration, which certifies that the said refund has not been passed on to another taxpayer and the same have to be based on the documents available with him or her.
  • Documents
    or any other evidence that show that the amount was paid by the said taxpayer, and that the said tax or interest has not been passed on further to any other individual.
  • In case the refund amount so claimed is more than INR 5 Lakhs then the application  has to be accompanied by:
  • Documents
    that show that the refund is due to the person.

Order of Refund by the authorized officer

In case refund is due towards a certain individual on the basis of export of goods or services, the officer who is authorised to do
so will issue a provisional refund of 90% of the total amount that has been claimed in Form GST RFD-4. Then the said officer shall get the verification of the documents done and issue a final settlement of the refund that has been claimed.

However, the provisional refund will only be granted subject to fulfilling of the following conditions:

The individual who has made a refund claim, has not been prosecuted in the past 5 years for tax evasion.

  • The said individual who claims refund, his or her GST compliance rating is not less than 5 on a scale of 10.
  • There is no pending appeal, review or revision on the amount of refund.

Are there any exceptional scenarios, if yes what are

Yes, there are certain scenarios considered as exceptional under the GST refund rules and they are as follows:

The tax that is applied on supply of goods that are

  • considered as deemed exports such as goods or services supplied to a Special Economic Zone an Export Oriented
  • The tax that is refunded as a result of a judgement,
    decree, order passed by a court, tribunal or appellate authority.
  • A tax amount that has been collected or deposited by
    mistake with either the Central or State Government. In case an individual has made payment of CGST and SGST in case of an interstate supply or IGST on an intrastate supply, then the said individual is liable for refund of the amount.
  • The tax that has been paid on goods that have been
    supplied but have not been done in a whole way and an invoice thereof has not been supplied.
  • IGST that has been paid on supply of goods to individuals
    going abroad and the said goods have been taken out of India.

(Also read about the best mutual funds here)

Final Word

GST refund can only be claimed in case there is a genuine eligibility based on the above stated facts. In case GST refund is claimed on forged or fake documents, an individual shall be punished strictly under the law. Therefore, it is always advisable to file correct
documents that have not been forged or fabricated just for the sake of claiming a refund.