Tax refund refers to the money received back from a tax return. They are a return of excess amounts of tax that a taxpayer has paid to the state or central government throughout the past year. However there are varied situations under which refund can be claimed. GST or Goods and Service Tax is the comprehensive tax brought into effect in order to replace all the other indirect taxes imposed by the state and central government. It is levied on manufacture, sale and use of the goods and services. The amount collected after levying GST will be used to propel the economic growth of the country.

The provisions pertaining to refund contained in the GST law aim to streamline and standardise the refund procedures under the GST regime. Thus, under the GST regime, there is a standardised form for making any claim for refunds. The claim and sanctioning procedure are completely online and time-bound, which is a marked departure from the existing time consuming and cumbersome procedure.

Situations when refund can be claimed

A claim for refund (Source: CBEC GST) may arise on account of:

  1. Export of goods or services
  2. Supplies to SEZs units and developers
  3. Deemed exports
  4. Refund of taxes on purchase made by UN or embassies etc.
  5. Refund arising on account of judgment, decree, order or direction of the Appellate Authority, Appellate Tribunal or any court
  6. Refund of accumulated Input Tax Credit on account of inverted duty structure
  7. Finalisation of provisional assessment
  8. Refund of pre-deposit
  9. Excess payment due to mistake
  10. Refunds to International tourists of GST paid on goods in India and carried abroad at the time of their departure from India
  11. Refund on account of issuance of refund vouchers for taxes paid on advances against which, goods or services have not been supplied
  12. Refund of CGST & SGST paid by treating the supply as intra state supply which is subsequently held as inter-State supply and vice versa

The GST law requires that every claim for refund is to be filed within 2 years from the relevant date.

Procedure for making a refund claim

1. Documentation

Whenever one makes a refund claim, there are a certain set of documents that need to be submitted along with the refund claim. For every claim, the main document prescribed is a statement of relevant invoices (not the invoices itself) pertaining to the claim. In case refund is on account of export of services, apart from the statement of invoices, the relevant bank realisation certificates evidencing receipt of payment in foreign currency is also required to be submitted. If it is a claim made by the supplier to the SEZ unit, an endorsement from the Proper Officer evidencing receipt of such goods/services in the SEZ also needs to be submitted. Further, a declaration is also required from the SEZ unit to the effect that they have not availed ITC of the tax paid by the supplier.

For crossing the bar of unjust enrichment, if the refund claim is less than Rs.2 Lakhs, then a self-declaration by the applicant to the effect that the incidence of tax has not been passed to any other person will suffice to process the refund claim. For refund claims exceeding Rs. 2 Lakhs, a certificate from a Chartered Accountant/Cost Accountant will have to be given. It is to be noted that such document need not be given if it is a claim arising on account of zero rated supplies or claim of accumulated ITC or payment of wrong tax (integrated tax instead of central tax and state tax and vice versa) or a claim where supply is not done or a refund voucher has been issued.

2. Compliance with Natural Justice

If there is any case arising where the applicant’s claim is to be rejected, he/she is given an online notice for the same stating the ground on which the refund is sought to be rejected. The applicant needs to respond online within 15 days from the receipt of such notice. Thus no claim can be rejected without putting the applicant to notice.

3. Payment to be credited online

Digital transfer of payment takes place for crediting the refund. The amount is directly transferred to the applicant’s bank account and he need not come to authorities to collect cheques or cash.

4. Power with the Commissioner to Withhold Refund in Certain Cases

In extreme cases such as the ones where further proceedings may be required or in default cases, Commissioner has the rights and power to withhold refund in such cases. He may, after giving the taxable person an opportunity of being heard, withhold the refund till such time as he may determine.

To summarize, following figure is a step by step depiction to easily understand the process.

For step 5, In the case of non-qualification, the refund would be transferred to CWF (consumer welfare fund). The application for refund can be made after every quarter. An amount less than 1000 is not eligible for the refund.

Starters’ CFO has well – trained professionals for resolving your queries regarding refund mechanism under GST. Any other assistance in relation to compliance with GST and related procedures can also be provided here.

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