What is a refund in GST?
A GST refund is a way for registered taxpayers to reclaim any excess amount they’ve paid compared to their GST liability. Section 54 of the CGST Act discusses the refund process. Here’s a breakdown:
Refund includes:
(a) Any balance amount in the electronic cash ledger claimed in the returns.
(b) Any unutilized input tax credit for:
(i) Zero-rated supplies made without tax payment.
(ii) Accumulated credit due to a higher tax rate on inputs than on output supplies (excluding nil-rated or fully exempt supplies).
© Tax paid by specialized agencies of the United Nations, Multilateral Financial Institutions, Consulates, or Embassies of foreign countries on inward supplies.
To claim a refund, taxpayers can check the status on the GST portal (www.gst.gov.in). The GST refund process involves understanding the rules and following the correct procedure. For a successful refund claim, taxpayers need to be aware of how to claim a GST refund and the applicable rules.
How to claim GST Refund?
To claim a GST refund, follow these simple steps:
Step 1: Visit the GST portal at www.gst.gov.in and log in.
Step 2: Go to the services tab, click on Refunds, and then select “Refund pre-application form.”
Step 3: Fill in the required details and submit the form.
Step 4: In the services tab, click on Refunds, then select “Application for Refund.”
Step 5: Choose the necessary option and click on “Create Refund Application.”
Step 6: Complete the required details, attach the necessary documents, and submit the application.
Claiming a GST refund is a straightforward process through the GST portal. It involves logging in, filling out the necessary forms, and submitting the application.
Can unutilized Input Tax Credit be refunded under GST?
Unutilized input tax credit can indeed be refunded, as per section 54(3) of the GST Act, in specific situations:
1. Zero-rated supplies: Refund is allowed for supplies made without tax payment.
2. Inverted duty structure: When the tax rate on inputs is higher than that on output supplies (excluding nil-rated or fully exempt supplies).
However, certain scenarios restrict such refunds:
- No refund for goods exported with export duty.
- No refund if the supplier avails drawback or claims a refund on integrated tax paid on such supplies.
Is unutilized ITC refunded at the end of the financial year?
No, the GST law doesn’t provide for the refund of unutilized ITC at the end of the financial year. Instead, it carries forward to the next financial year.
In what situations is a refund of accumulated ITC allowed under GST?
Refund of accumulated ITC is permitted only in cases of zero-rated supply or due to an inverted rate structure.
What is the time limit for claiming a refund?
To claim a refund, one must apply within two years from the “relevant date.”
Claiming refunds and understanding the rules is crucial for businesses. Visit the GST portal at www.gst.gov.in for detailed information.
What is a “relevant date”?
The relevant date is:
- In the case of goods exported out of India where a refund of tax paid is available in respect of goods themselves or, as the case may be, the inputs or input services used in such goods, -
(i) If the goods are exported by sea or air, the date on which the ship or the aircraft in which such goods are loaded, leaves India; or
(ii) If the goods are exported by land, the date on which such goods pass the frontier; or
(iii) If the goods are exported by post, the date of despatch of goods by the Post Office concerned to a place outside India
- In the case of a supply of goods regarded as deemed exports where a refund of tax paid is available in respect of the goods, the date on which the return relating to such deemed exports is furnished
c) In case of zero-rated supply of goods or services or both to a Special Economic Zone developer or a Special Economic Zone unit where a refund of tax paid is available in respect of such supplies themselves or as the case may be, the inputs or input services used in such supplies, the due date for furnishing of return under section 39 in respect of such supplies
d) In the case of services exported out of India where a refund of tax paid is available in respect of services themselves or, as the case may be, the inputs or input services used in such services, the date of-
(i) Receipt of payment in convertible foreign exchange 2[or in Indian rupees wherever permitted by the Reserve Bank of India], where the supply of services had been completed before the receipt of such payment
(ii) Issue of invoice, where payment for the services had been received in advance before the date of issue of the invoice
e) In the case where the tax becomes refundable as a consequence of judgment, decree, order, or direction of the Appellate Authority, Appellate Tribunal, or any court, the date of communication of such judgment, decree, order, or direction
f) In the case of a refund of unutilized input tax credit under clause (ii) of the first proviso to sub-section (3), the due date for furnishing of return under section 39 for the period in which such claim for refund arises
g) In the case where tax is paid provisionally under this Act or the rules made thereunder, the date of adjustment of tax after the final assessment
h) In the case of a person, other than the supplier, the date of receipt of goods or services or both by such person
i) In any other case, the date of payment of tax.
Understanding Refund Time Limits in GST
Time Limit for Refund Sanction:
Refunds in GST must be sanctioned within 60 days of receiving a complete application. If not, interest at a rate not exceeding 6% (as per section 56 of the CGST Act) may be applicable. However, for provisional refunds related to zero-rated supplies by specific registered persons, a provisional refund must be granted within 7 days of acknowledging the refund claim.
Minimum Threshold for Refund
Refunds won’t be granted if the amount is less than Rs. 1000/- (as per Sec. 54 (14) of the CGST Act).
Filing Refund Claims without GSTR-1/3B
Refund claims can only be filed after submitting details in FORM GSTR-1 for the relevant tax period. Also, a valid return in FORM GSTR-3B for the last tax period before the refund application is crucial.
For more details and to file refund claims, visit the GST portal at www.gst.gov.in.
Conclusion
Utilize the www.gst.gov.in portal wisely, adhere to filing protocols like GSTR-1 and GSTR-3B, and meet refund criteria diligently. Timeliness matters, with a 60-day window for sanctioning; delays may incur interest.
Strategic use of unutilized input tax credit can be advantageous. Remember, there’s no automatic year-end refund; credits carry forward.
Navigating GST refunds demands precision, unlocking opportunities for cash flow optimization within the GST framework.
