Explained: Procedure to Claim Refunds under GST

In the existing regime of indirect taxation refund is one of a most strained area, both for the taxpayer and the tax administration. It is obvious that a lot of refunds related issue will transit from the existing regime to GST regime.

The Model GST Laws deals with the transition of refund of taxes which are paid under the existing system under the Transitional Provisions and insulated GST mechanism from refund of taxes paid under the existing regime.

Section179 insulates the GST framework from all pending refund application made under existing laws. This section bars to credit or set-off of all refund/demands arises out of disposal of such refund applications. Thus the credit ledger will have no impact from disposal of such refund applications.

With the introduction of GST regime, all the major three acts i.e. Central Excise Act, Service Tax Act & VAT Act have been merged and the system prevalent under the GST is creating the refunds, almost for every dealer especially for exporters and the dealers those are purchasing the goods as a raw material at higher rates and ultimately manufacture goods are covered under the Lower Tax ability. To address with these types of contingencies and to obtain the refund, a special provision of refund in Shrine in the GST Act has been included under the GST Act.

Eligible classes for refund

Following are the conditions, where the refund can be applied:

– Refund of tax paid on Deemed Exports- Deemed exports have been introduced as a category of supply under the Goods and Services Tax. The Government has listed the following types of supply to be categorized as deemed exports:

  1. Supply of goods by a registered person against Advance Authorization
  2. Supply of capital goods by a registered person against Export Promotion Capital Goods Authorization
  3. Supply of goods by a registered person to Export Oriented Unit
  4. Supply of gold by a bank or Public Sector Undertaking specified in the notification No. 50/2017-Customs, dated the 30th June, 2017 (as amended) against Advance Authorization.

Refund of excess balance in Electronic Cash Ledger- Previously, there was no option to alter the returns at GSTN Network. Now, the government says that if any of the traders had paid an extra amount of tax by mistake while filing returns, the money will be returned to them. This facility has started online from 29th November. With just one click, the money will be transferred directly to the bank account of the particular taxpayer.

– Refund of tax paid on zero rated supply of goods or services of both.

– Finalization of provisional assessment.

– Refund for tax paid on purchase made by UN bodies and other Notified Agencies.

– Tax Refund for International Tourists.

– Refund of tax on inputs/input services used in making zero rated supply.

– Refund on account of ITC accumulated due to Inverted Tax Structure.

– On account of appeal/any other adjudication order


Procedure to claim refund

Refund in case of Export on payment of IGST

A registered person is able to clear the goods for export either without paying IGST under Letter of Undertaking (LOU) and can claim refund ITC. Or he can pay IGST and claim refund of tax paid.

If there is ITC of GST in balance which cannot be used otherwise, the registered person could clear the goods on payment of IGST & claim its refund. If not having ITC of GST in balance, he can clear the goods against letter of undertaking. The decision can be made consignment wise.

The shipping bill containing details of invoice shall be deemed to be an application for refund of IGST paid. When the exporter will file his monthly GSTR-1 (Table 6A) return & GSTR-3B, details of relevant tax invoice shall be transmitted electronically by common portal to Customs System. The custom system shall process the refund claim and amount of refund will be electronically credited to bank account of exporter.

TABLE–II-Refund of unutilized ITC (Export without payment of IGST & Other cases)

Application for refund shall be filed for a tax period in FORM GST RFD-01A online on the common portal.

Valid return in FORM GSTR-3B and GSTR-1 has to be filed for the tax period for which refund application has been filed.

Registered person applying for refund must give an undertaking to the effect that the amount of refund sanctioned would be paid back to the Government with interest in case it is found subsequently that the requirements have not been complied with in respect of the amount refunded.

On filing of refund application, an Acknowledgement Reference Number shall be generated.

The FORM GST RFD-01A along with the ARN and other necessary documents prescribed in Rule 89(2) of the CGST Rules, 2017 / Circular No. 17/17/2017-GST dated 15.11.2017 needs to be submitted manually in the office of the jurisdictional Tax officer

  1. Refund of unutilized ITC to exporters

Refund of any unutilized input tax credit of inputs and input services will be allowed except where the goods exported out of India are subjected to

  • Export duty; or
  • Exporter claims drawback of CGST or refund of IGST paid on such export.

Time period for processing the refund application, otherwise interest @ 6%

The amount of refund is required to be sanctioned within 60 days from the date of receipt of application. It is also not disputed that 90% of the amount will be refunded within 7 days from the date of acknowledgment in form GST-RFD-04. If the amount will not be refunded or the application will not be decided within 60 days then applicant/ claimant is entitled for interest @ 6%. Refund amount will be credited directly to the claimant’s bank account.

Provisional refund shall be calculated taking into account the total Input Tax Credit, without making any reduction of credit being provisionally accepted.

List of documents required for GST Refund in case Exports

  1. RFD 01A Online
  2. RFD 01 Manual
  3. GSTR 1
  4. GSTR 3B
  5. Credit ledger ( of Debit of amount on applying of refund)
  6. Forwarding letter
  7. ARN Receipt received on applying of refund
  8. Copies of BRC
  9. Copies of shipping bill
  10. Copies Bill of lading

List of documents required for GST Refund in case of Inverted Tax Structure

  1. RFD 01A Online
  2. RFD 01 Manual
  3. GSTR 1
  4. GSTR 3B
  5. Credit ledger (of Debit of amount on applying of refund)
  6. Forwarding letter
  7. ARN Receipt received on applying of refund
  8. Copies of all the purchase bills of refund period
  9. Few copies of sale bill
  10. List of all the raw materials used (% of GST, HSN Code)
  11. List of goods sold (% of GST, HSN Code)

These documents have to be self attested.

  • Time lines have been set for processing of refund claims and claims not settled within 60 days will be paid with interest @6%.
  • Refund amount will be credited directly to the claimant’s bank account.
  • The process is online and hassle free and with minimum interface with tax authorities.

There is a Limitation period for filing the claim of refund. The refund claim has to be filed within two years from the relevant date.

Refund can be claimed even if payment was made in wrong head. A claimant can apply for refund of amount of tax which was wrongly deposited. To deal with this situation the taxable person is to file the refund application for the amount of wrongly credited in the Electronic Cash Ledger.

At last it can be said that effort to compile the provisions of refund under the GST Act beside this during the process of refund application it has been observed that still the claimants have to submit number of documents while filing the application manually which results in creating unnecessary trouble in the business community. So it is very important to issue the necessary instructions to the offices so that unnecessary documents should not be called for thereby making the whole system simpler.