GST Refund Process: A Complete Guide

GST Refunds: Meaning –

GST refunds refers to payments due to the taxpayer by the taxation authorities for excess payments of tax or for some other reasons. A taxpayer is liable to get a GST refund or can claim a tax refund only in special mentioned cases.

Why GST Refunds are Important –

It is important for the taxpayer or the business organization to get GST refunds or Input Tax Credits on time for maintaining a continuous cash flow

GST Refund Process

When Can a GST Refund Be Claimed

A GST refund can be claimed and filed at the end of a quarter. To make a successful claim the minimum amount is set as one thousand rupees. A GST refund can be claimed by the taxpayer in one of the below mentioned cases:

  • On excessive payment of tax due to mistake and lack of knowledge or confusion about type of transaction.
  • On payment of Integrated GST during export or export under letter of undertaking.
  • When suppliers provide credit notes in form of incentives.
  • When the Electronic Cash Ledger has excessive balance.
  • On deemed exports.
  • On inverted duty structure.
  • When supplying in Special Economic Zone’s
  • Tax refunds that are applicable for international tourist.
  • Dues left after the completion of final provisional assessment.
  • When the tax investigation is finalized and excessive amount is due.
  • Tax paid on purchases made by United Nation body or embassies.
  • When a taxpayer deposits fee at time of any appeal and the decision is made in favor of the taxpayer.
  • Tax paid on partially or fully delivered supply of goods but no invoice have been generated or issued for the same.
  • Tax paid on zero-related goods mentioned in GST act.
  • When Income Tax Credits are unutilized in case of zero-rated goods.
  • Tax paid on the input supplies that were used to make zero-related goods.
  • Tax paid on goods and services that are exported or on input supplies used for making goods that are exported.

Process of Claiming a GST Refund

GST refunds can be claimed by the taxpayer while filing the periodical tax returns.  A procedure laid down under GST rules must be followed by taxpayer who wants to claim interest or refunds or input tax credits. The GST Refund process of claiming is as follows:

  • For refund claims an application FORM GST RFD-01 has to be filled by the claimant on GSTN portal or website.
  • A unique number will be generated on acknowledgement in FORM GST RFD-02 once the application is submitted by the claimant.
  • The application is checked by the concerned officer who will communicate any loopholes or deficiencies in FORM GST RFD-03.
  • A provisional refund is granted to the claimant.
  • The concerned officer will scrutinize the application and the documents submitted by the claimant for validity. Once the verification is successfully done the officer passes an order in FORM GST RFD-04 ordering a provisional refund of tax requested by the claimant in the application. This has to be done within seven days from the date of acknowledgement or application.
  • A payment advice shall be issued in FORM GST RFD-05, once the application process is completed and the refund amount is deposited in the claimant’s bank account.
  • An adjustment would be made to the electronic cash and credit ledgers of the claimant and to return and reduce the Input Tax Credit liability.
  • Any unjust claim in the application is also examined and if the application is not passed then the tax refund amount is deposited in the government’s consumer welfare fund.
  • If the claimant has asked for refund that is higher than the already determined refund he’s eligible for then a pre-audit process is held to determine the actual refund amount.

What If a GST Refund is Delayed –

Usually an application for GST refund claim is processed within seven days from the date of the application. But in any case if it takes more than two weeks to process the application then the claimant is to be paid a fixed interest rate on the refund amount.

GST Refund: Frequently Asked Questions

What is GST Refund?

GST refunds are the payments due to the taxpayer by the taxation authorities. These are to be paid for excess payments of tax or for some other reasons to the taxpayer. Only taxpayers having GST Registration and a refund amount of Rs. 1000 are liable to a GST Refund. The taxation authorities owe GST Refund amount to the taxpayer only in special mentioned cases which means a taxpayer can claim the refund only in these special conditions as mentioned in the GST rules. GST Refunds including Input Tax Credits are very important for the taxpayer or the business entity to get on time for maintaining a continuous cash flow throughout the financial year.

What are the conditions for getting GST Refund?

The GST Refunds can be claimed in the below mentioned cases or conditions-
• Excessive payment of tax by inadvertence or mistake.
• On finalization of assessment in provisional cases.
• When the Input Tax Credits are unutilized.
• Deposits made before in case of appeals.
• On order/decree of case judgements in an appeal.
• When tax has been paid on transactions by any UN bodies, paramilitary forces, etc.
• Tax paid on zero rated goods including deemed exports.
• When there is excessive balance in the electronic cash ledgers.
• Tax paid on goods and services yet not received fully or partly and for which no invoice was issued.

What is the process for claiming GST Refund?

The process of GST Refund is easy and viable. It can be done online on the GST Portal for convenience and saving time. The process involves the following steps-
• A refund claim is to be made by the applicant through Form GST RFD-01.
• Fill the Form GST RFD-02 to acknowledge and to receive a unique number.
• After checking the concerned officer will tell the deficiencies in the application through Form GST RFD-03.
• The officer checks and verifies all the information and data and documents. He orders a provisional refund through Form GST RFD-04.
• Through Form GST RFD-05 a payment advice by the officer is sent.
• The amount of refund is deposited in the bank of the applicant after all the adjustments.
• If the amount of refund claimed is not reasonable then a pre-audit is advised to get the correct amount of refund.

What are the documents required during GST Refund?

The documents required for claiming a GST Refund are:
• Copies of the receipts of [payment of tax or duty.
• Copies of the invoices for supply of goods and services.
• Documents showing that the person is liable to receive a tax refund and he has not transferred it to other person.
• Documents and proof asked by the taxation authorities during the filing of the GST Refund.

What are the time limitations for claiming GST Refund?

The time limit for claiming a GST Refund is 2 years from relevant date. These relevant dates can be different depending upon the situation. These are:
• In case of excess GST payments it is from the date of payment.
• In case of finalization of the provisional assessment it is the date of final adjustments of tax.
• In case of exports including deemed exports it is from the date of dispatch or shipment.
• In case of claiming Input Tax Credits the date is the last day of the previous financial year.
• In other cases the date is when the tax or payment has been made.

What happens in case of delayed GST Refund?

The application for claiming GST refund is processed within seven days from the date when application is made. If the refund claim application process is been delayed for more than two weeks then the claimant has to be paid an interest rate fixed by the taxation department and government on the refund amount.

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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.