In common language, Refund simply refers to the amount of money given back to the payer on the occurrence of some event. In patois of taxation, Refund means the amount that has to be paid back by the tax department to the taxpayer because of any genuine reason such as extra payment of taxes, mistakenly payment of tax on tax-free products or services, etc. Such circumstances when a need to claim or pay tax refund arises are as follows:
Payment of tax in excess because of mistake or ignorance
Excess balance in Electronic Cash Ledger
Supplies made to SEZ unit/developer under Bond/LUT or with IGST payment
Individuals having UIN
Inverted duty structure
Export under Bond/LUT or with IGST payment
Tax Refund Under GST Law
Section 54 defines the taxes which can be allowed as a refund. These taxes are as follows:
i) Tax (output tax) given on nil/zero-rated supplies or tax-exempted supplied of goods and/or services, or
ii) Tax (input tax) on inputs or input services utilized in producing tax-exempted supplies, or
iii) Tax on the supply of products treated as deemed exports, or
iv) Unutilized ITC (input tax credit) as given u/s 54(3) i.e. because of inverted liability structure.
Form GST RFD-1 — An application for GST Refund
Form GST RFD-1 is an application to be filed by a claimant who wishes to claim a GST refund or any other interest or amount paid by him.
It should be noted that this application in Form GST RFD-1 must be filed before the termination of 2 years from the ‘relevant date’.
Relevant Date w.r.t GST refund
Relevant Date w.r.t refund of tax on goods varies based on the means of transport through which goods have been exported.
The ‘relevant date’ w.r.t refund of tax on goods is mentioned below:
When Goods are exported by sea or air, the relevant date is the date when the ship or aircraft loading such goods leaves India
When Goods exported by land, the relevant date is the date on which the goods crosses the national boundary
When Goods exported by post, the relevant date is the date when goods are dispatched by the respective post office
The ‘relevant date’ w.r.t refund of tax on services when services are exported is mentioned below:
When the services are exported and supplied before receiving the payment, the relevant date is the date when payment is received.
When the services are exported and payment is received in advance before the date when an invoice is issued, the relevant date is the date of issue of invoice
The ‘relevant date’ w.r.t unutilized ITC
When there is an Unutilized input tax credit, the relevant date is the end of the fiscal year in which the tax refund claim originates
Note: Balance in the electronic cash ledger must be claimed via relevant monthly return, i.e. Form GSTR-3 and Form GSTR-4 for a regular dealer and composition dealer, respectively. Also, you can file GST returns online Via Gen GST software.
Exceptional Cases and their Relevant Dates
Tax on supply of goods when the supply is considered as deemed exports. The example includes the Supply of goods & services to EOU (Export Oriented Unit) or SEZ (Special Economic Zone).
The relevant date for deemed exports is the date when the return pertaining to such exports is filed.
Tax Refundable on Direction
Tax is refundable as a result of decree, judgment, order or on the orders of any court, Appellate Authority or Appellate Tribunal.
The relevant date such cases is the date when the judgment, order, decree or direction is given.
Tax paid on a provisional basis
Tax on supply, which was not executed either wholly or partially, has been paid but the invoice for the supply hasn’t been issued.
The relevant date for such taxes that has been paid before the completion of supply is the date when tax is adjusted after the final assessment.
When the person is someone other than the supplier
The tax collected mistakenly and then deposited to the account of Central or State Government. For example, when CGST & SGST has been paid on an interstate supply or IGST has been paid on an intrastate supply, then the taxpayer is eligible to claim & receive a refund of such taxes after the remittance of tax.
Relevant date in such cases is the date when the person receives the goods & services.
IGST on goods supplied to take outside India
IGST given on goods supplied to tourists going out of India and goods is taken outside the boundary of India.
The relevant date for IGST paid on supply of goods to tourists traveling outside India and for any other cases, is the date when tax is paid.
Note: GST Refund process for normal as well as exceptional cases is the same.
Document Requirements for claiming tax refunds
When the amount of tax refund < INR 5 Lakhs
The declaration, based on a documentary or other proof present with him, which confirms that the incidence of tax/ interest claimed as the refund was not passed on to another person.
When the amount of tax refund > INR 5 Lakhs
Following documents needs to attach to Refund application:
- Documentary proof which confirms that the refund is due to the person.
- Documentary or other proof which confirms that the amount was paid by him/her and that the incidence of the tax/ interest claimed as the refund was not passed on to another person.
Order for Refund
An authorized official provides a provisional refund - 90% of the total amount claimed as a refund, when the refund is pertaining to the export of goods and services, followed by thorough verification of documents and ultimate settlement of refund claim.
Provision Refund is given under the following conditions:
The claimant has not been accused on account of tax evasion of more than Rs. 250 Lakhs during the last 5 years.
The claimant has at least 5 ratings on a scale of 10 regarding GST compliance.
A claimant does not have any pending review, revision of appeal on the refund amount.
Refund order in Form GST RFD-5 is granted by an authorized official when the officer is satisfied with either the whole or partial amount claimed in the refund application, within the period of 60 days from the date when the application was received.
When the refund remains unsanctioned within 60 days, interest on the amount of the refund shall be paid for the period - from after 60 days to the date when the tax is refunded. However, no refund is granted for when the refund amount claimed is less than Rs. 1,000.