HOW TO CLAIM REFUND UNDER GST?

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. GST or Goods and Service Tax is the comprehensive tax that has replaced all other indirect taxes imposed by the state and central government. However, various situations allow for claiming a refund. It is levied on manufacture, sale and use of the goods and services. Levying GST will use the collected amount to propel the economic growth of the country.

GST law provisions streamline and standardize refund procedures in 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.

Customers can claim a refund in the following situations.

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. GST refunds to international tourists for goods bought in India and taken abroad upon departure.
  11. Refund issued for taxes paid on unfulfilled advances.
  12. Refunding CGST & SGST due to incorrect classification as intra or inter-State supply.

The GST law mandates that you must file every claim for refund within 2 years from the relevant date.

Procedure for making a refund claim

1. Documentation

Whenever someone makes a refund claim, they need to submit a specific set of documents 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. If the refund pertains to the export of services, you must submit not only the invoice statements but also provide the relevant bank realization certificates as evidence of foreign currency payment receipt. If the supplier is claiming a refund from the SEZ unit, they must include an endorsement from the Proper Officer confirming the receipt of goods/services within the SEZ. The SEZ unit must provide a declaration stating that they have not availed Input Tax Credit (ITC) on the tax paid by the supplier.

If the refund claim is less than Rs. 2 Lakhs, the applicant’s self-declaration stating that they have not passed the incidence of tax to any other person will suffice to process the refund claim for crossing the bar of unjust enrichment. 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. They cannot reject any claim without notifying the applicant.

3. Payment to be credited online

Digital transfer of payment takes place for crediting the refund. The system directly deposits the amount into the applicant’s bank account, eliminating the need for in-person collection of cheques or cash.

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

In extreme cases, where further proceedings or default cases may require it, the Commissioner has the right and power to withhold the refund. After affording the taxable person an opportunity to express their views, he can withhold the refund until he decides on the appropriate timing.

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

In case of non-qualification, we will transfer the refund to CWF (consumer welfare fund). You can apply for a refund 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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