GST Refund of Input tax Credit- Question and Answer

GST Refund of Input tax is the major issue in the Goods and service Tax Regime for almost all class of taxpayers. This article deals with questions and answers on Refund under GST.  

What are the situations in which GST refund may arise?

Refund of GST ITC claim may arise in following situations:

1. Export/ Supply to SEZ developer/ unit on payment of IGST
2. Refund of Unutilized Input Tax Credit (ITC) on Export/ Supply to SEZ developer/ unit without payment of IGST.
3. Refund of tax paid on Deemed Exports
4. Unutilized ITC on account of accumulation due to inverted tax structure.
5. Refund of any balance available in Cash ledger after payment of tax, interest, penalty, fees.
6. Refund of excess payment of tax
7. Tax paid on advance payment against which supply was not made and invoice was also not issued.
8. Refund of tax wrongly collected and paid to government. For e.g. CGST & SGST paid to the government instead of IGST.
9. Tax becoming refundable as a consequence of judgement, decree and order of any court.
10.  On finalization of provisional assessment, if any tax becomes refundable.
11. Refund of tax on purchases made by UN bodies or Embassies etc.

Read Also: Interest on Net GST liability payment made in cash : Notification released

What are the cases where GST refund of Unutilized ITC is available?

There are many cases where Application can be filed. However, the two main cases where refund of unutilized credit available are:

1) Zero rated supplies without payment of tax

Such supplies include supply of goods/ services to an SEZ unit/ developer or export of goods/ service under bond or LUT without payment of tax.

2) Inverted Duty Structure

It refers to situation where rate of tax on inputs is higher than rate of tax on output supplies.

Read Also: How to Pass GST Accounting Entries in GST Regime

How refund amount is calculated for refund of zero-rated supply of goods or service?

It is calculated as under :

Refund amount = Net ITC X (turnover of zero-rated supply of goods & service / Adjusted total turnover)

Where, Net ITC means Input Tax Credit availed on input and input services other than ITC for which refund is claimed. Adjusted total turnover means total turnover excluding value of exempt supply but including zero rated supply and value of supplies on which refund is claimed.

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How refund amount is calculated for Inverted Duty Structure?

It is calculated as under :

Refund amount = Net ITC X (Turnover of inverted rated supply / Adjusted total turnover) – tax payable on such inverted rated supply

What is the refund application forms?

There are different forms for different refund categories which are mentioned below:

1. An application has to be filled in form GST RFD-01 electronically through GST common portal in general cases.
2. In case of refund of IGST on export of goods, there is no need to file form GST RFD-01 since shipping bill filled by exporter is itself treated as a refund claim.
3. Any person claiming refund of any balance in electronic cash ledger, may claim such refund through return furnished in form GSTR-3b / GSTR-4 /GSTR-7 as the case may be.

What is the time limit within which refund claim can be filled?

Any person claiming refund of any tax, may make an application before expiry of 2 years from ‘Relevant date’.

What do you mean by ‘Relevant date’?

Following are the cases showing relevant date.

Sr. No.	Cases	Relevant date
1	Goods exported by sea or air	Date on which such vessel or aircraft leaves India
2	Goods exported by land	Date on which goods pass the frontier
3	Goods exported by post	Date of dispatch of goods by Post office
4	Supply of service completed before receipt of payment	Date of receipt of payment in convertible foreign exchange or in Indian rupees
5	Payment of service had been received in advance prior to date of issue of invoice	Date of issue of Invoice
6	Deemed Exports	Date on which return relating to such deemed exports is furnished.
7	Refund on basis of Judgement, decree or order of court	Date of communication of such judgement, decree or order.
8	Inverted duty structure	Due date of furnishing return under section 39
9	Tax paid provisionally	Date of adjustment of tax after final assessment
10	In case of person other than supplier	Date of receipt of goods or service or both
11	Any other case	Date of payment of tax

Read Also: GST Input Tax Credit (ITC) Set-off Rules – Simplified with examples

What is the minimum amount for claiming the refund?

No refund shall be paid to applicant if the amount of refund is less than Rs. 1000. The limit of Rs. 1000 shall be applied to each and every tax head separately and not cumulatively. Further, this limit would not apply to balance available in electronic cash ledger.

What are the cases where refund of ITC is not allowed?

Following are the 2 cases where refund of ITC is not allowed:

1. Refund of Unutilized ITC shall not be allowed if goods exported out of India is subject to Export duty.
2. Refund of ITC shall not be allowed if supplier of goods/services avails of drawback in respect of CGST or claims refund of IGST paid on such supplies.

In short, a supplier availing drawback of inly basic customs duty shall be eligible for refund of unutilized ITC.

Read Also: GST on Purchase and Sale of second hand used goods – Margin Scheme

What are the provisions related to Interest on delayed refunds?

Interest on delayed refunds has been bifurcated into 3 parts as follows:

• Interest on amount refundable as a result of Order passed by Proper officer:

Interest @ 6% p.a. has to be paid if the amount is not refunded within 60 days from date of receipt of application. And the period for such interest would be from the date immediately after 60 days to the date of refund.

• Interest on amount refundable as a result of Order passed in an appeal or further proceedings:

Interest @ 9% p.a. has to be paid if the amount is not refunded within 60 days from date of receipt of application. And the period for such interest would be from the date immediately after 60 days to the date of refund.

• Any Order which sanctions Interest on delayed refunds

Any order which specifies amount of refund being delayed, period of delay and amount of interest payable then such amount has to be paid to the applicant.

Read Also: GST Input Tax Credit Calculator

Is documentary evidence required for filling refund claim?

Yes, documentary evidences are required while filing claim for refund. However, if the amount of refund is less than Rs. 2 lakh then no evidence is required but he may file a declaration certifying that there is no unjust enrichment (no one should be unjustly enriched at the expense of another) and if the amount is more than Rs. 2 lakh then certificate in form GST RFD-01 has to be given. Further, no such declaration or certificate is required in following cases.

1) Refund of tax paid on export of goods/service or input/input services used for making such export.

2) Refund of unutilized ITC in case of Zero-rated supplies which are made without payment of tax or on account of inverted duty structure.

3) Refund of tax on supply which is not made and for which invoice is also not issued.

4) Refund of tax paid on supply treating it as intra state and vice versa.

Does law provide for provisional grant of refund?

In case of refund arising on Zero rated supplies, law provides for 90% provisional refund of total refund amount which is to be paid within 7 days after giving the acknowledgement. The balance amount shall be refunded after due verification of documents.

For any questions, you may reach us at Discussion Forum

The author of the above article is CA Rahul Gaur.

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