Refunds under GST | Process | Frequently Asked Questions

FAQs on GST Refund: Part-II

Since the Refunds under GST is a vast topic some more frequently asked questions related to the same have been discussed as below:

Question 1. What happens when the application for refund under GST is transmitted to a wrong jurisdictional officer electronically?

Answer. In such a case, the officer in jurisdiction has to reassign the application to the to the right officer as soon as possible through electronic mode. This has to be done within 3 working days from the date of ARN generation.

Question 2. What is a deficiency memo?

Answer. In GST Refund Process applications where the jurisdictional officer founds deficiencies then he will issue a deficiency memo in Form GST RFD-03 within 15 days from the date of filing the application through ARN generation.

Question 3: What is the procedure to reply to the deficiency memo?

Answer: Once a deficiency memo is issued the amount that was debited from electronic credit or cash ledger is automatically credited. The taxpayer has to submit a new application for refund under GST.

Question 4. What is the procedure to be followed in cases where the final amount of refund that is to be sanctioned is less than the amount provisionally sanctioned?

Answer. In such cases, the officer issues a show cause notice to the applicant through FORM GST RFD 08, under section 54, read with Section 73 or Section 74 of the CGST Act, 2017. In which the applicant is required to show cause as to why:

  • The claimed amount should not be rejected as per the prescribed provisions.
  • The amount refunded erroneously, should not be recovered along with any liable penalty and interest under the Section 73 or section 74 of the CGST Act, 2017.

Question 5. What happens when the claim of refund under GST is rejected? What is the procedure for recrediting the electronic credit ledger on the basis of rejection?

Answer. The applicant is served with a show cause notice in FORM GST RFD-08 once the GST Refund service is rejected to them. The applicant has to reply to the same stating as to why:

  • The claimed refund amount should not be rejected under the relevant provisions.
  • The ineligible ITC should not be recovered under section 73 or Section 74, whichever the case may be, with liable interest and penalty of any kind.

If the said notice is decided against the applicant, along with the levied interest and penalty, the officer has to enter the same in the electronic liability register of the applicant through FORM GST DRC-07. Also, the amount of ITC will be credited through the FORM GST PMT03 only after an undertaking is received from the applicant. The effect of the same is that the applicant cannot file an appeal further or if he files an appeal, the same will be finally decided against the will of the applicant.

Question 6. Can refund be availed on input tax for making zero rated supplies which is also an exempt supply?

Answer. As per the Section 16(2) of the IGST Act, 2017 the Input Tax Credit can be availed on the making of zero-rated supplies with the scenario that such supply is an exempted supply which is non-taxable supply as per Section 2 (47) of the CGST Act, 2017. Therefore, refund under GST can be granted against such supplies.

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    Author: Anil Agrawal
    EZYBIZ India Consulting LLP, New Delhi. The firm is business and tax consultancy firm providing consultancy in Taxation, Regulatory, Transfer pricing, Valuation, Corporate funding and Business set up matters. He may be reached at 9899217778 or anil@ezybizindia.in.