When the refund of the GST Registered Dealer is pending, it means such amount is blocked for GST Registered Dealer, which he could use it in his business, if it was received to him within time. Hence the timely refund to the GST Registered Dealer will release his blocked funds. With regards to this, the provisions of the refund become more transparent as compared to the previous indirect tax laws. Section 54 to Section 58 of the CGST Act and section 15 of IGST Act, covers the refund provisions in GST.
In this article we shall discuss all the sections of the CGST Act in simple language and understand the Procedure to get GST Refund with examples:
Section 54: Refund of tax
There are only 2 situations has been defined under which the GST Registered Dealer can claim a refund of GST and this situation is as follows:
- Export or supply made to SEZ: If the taxable person is making a supply as an export or supply to SEZ then it shall be treated as zero-rated. In this case, the taxable person has 2 options
- To pay IGST and then claim a refund, in this case, the taxable person didn’t require to file any separate form for claiming the refund. On the basis of the shipping bill filed by the exporter, he shall be entitled to the refund.
- Under Bond or letter of undertaking: If the taxable person is making a supply to export or to SEZ under bond or letter of undertaking (LUT), then he shall not charge the GST on such exports or supply to SEZ. As per section 54(3) of the CGST Act read with rule 89(1), if, in this case, the taxable person is eligible for a refund of the unutilized ITC pending at the end of the financial year, he may file an application in form GST RFD-01.
- Refund of unutilized ITC: There are situations when the taxable person’s input is more than his output liability, in these cases he can claim the refund of unutilized ITC. This can be possible in the following:
- Zero Rated supply without payment of IGST: This point is similar to the above point in which if the taxable person is supplying the goods or services as export or to the SEZ under bond or letter of an undertaking then he shall not charge GST in his invoice. In this case, if his total output supplies are exports or supply to SEZ then his ITC on the purchases or other capital or revenue expenditure shall be accumulated. On such accumulation, the taxable person can apply for the refund by filing an application in form GST RFD-01.
- Inverted duty structure: If the taxable person is engaged in supplying the goods or services in which the rate of tax on input is higher than the rate of tax in output supply, then also he shall have the accumulated credit for which either he can carry forward such ITC or can claim the refund.
Note: The refund amount shall be debited in the E Credit ledger of the GST Registered Dealer.
Now, we will discuss the exceptions to the above section, that means in the following points, GST Registered Dealer cannot claim the unutilized Input Tax Credit (ITC):
- If the goods exported or supplied to SEZ, were subjected to export duty then refund of unutilized ITC shall not be available.
- No refund of ITC shall be allowed if the supplier has avails the drawback of central tax or claim refund of IGST paid on such supplies.
- No refund can be claimed which stands out in the E-cash ledger of the GST Registered Dealer.
- Where any amount is pending for refund who has made a default in filing of return or payment of tax and no case has been pending before any court or tribunal or appellate authority then the department may hold the refund amount for the specified period.
There are other situations also exist under which the GST Registered Dealer can claim the refund. Now we will see those situations along with the time limit within which the GST Registered Dealer shall have to file the application for claiming the refund. GST Registered Dealer shall have to make an application for refund within 2 years from the date of following relevant dates:
|1||Where the goods have been exported by any of the following mode and GST Registered Dealer is claiming the refund of the amount of IGST paid|
|By Sea or Air||The date on which the ship or aircraft leaves India|
|By land||The date on which goods pass the frontier|
|By Post||The date on which goods have dispatched outside India|
|2||Where the services have been exported and GST Registered Dealer is claiming the refund of the amount of IGST paid|
|Where the services have been provided before the receipt of payment||Date of receipt of payment in convertible foreign exchange|
|Where the payment has been received before the provision of services||Date of issue of invoice|
|3||Where the supply of goods has regarded as deemed exports and GST Registered Dealer is claiming the refund of the amount of IGST paid||The date on which the return relating to such deemed exports has been filed|
|4||Where the tax becomes refundable as per the order of the court or Appellate Authority or Appellate Tribunal||Date of communication of such order or decree or direction|
|5||Unutilized ITC due to inverted tax rate structure or zero-rated supply without payment of tax||End of the financial year in which the claim for such refund arises|
|6||Tax paid provisionally which becomes refundable at the time of finalization||Date of the final assessment|
|7||Any other case||Date of payment of tax|
If the refund amount falls in any of the following categories then the refund shall be given to the applicant otherwise such refund shall be transferred to the consumer welfare fund:
- Refund on Zero Rated Supply
- Refund of Unutilized ITC
- Refund when supply not made and any advance payment is refunded
- Incidence of tax has not been passed on other people
- Refund due to inter/intra confusion as per section 77 of CGST Act, 2017.
The consumer welfare fund has been defined in section 57 and 58 of CGST Act, 2017.
If any registered person wants to claim a refund of the amount standing in his E-cash ledger as per the section 49(6) of the CGST Act, then he shall have to claim the refund in GSTR-3b as specified in section 39.
Special Case: Any outward supply made by Special agency of United Nation Organisation or Consulate or Embassy of foreign countries as defined in section 55, is exempted and they shall be eligible for the refund on the tax paid in any inward supply received to them. For them, the time limit for making the application of refund is 6 months from the last day of the quarter in which the supply was received.
For Example: if the supply has been received in February, then the last day of the quarter would be 31st March and GST Registered Dealer shall have 6 months from 31st March for filing of refund application i.e. 30th September.
Supporting’s to be attached with the application for claiming the refund
If the amount of refund is less then Rs. 2 Lakh rupees then there is no need to attach any supporting evidence for claiming the refund. Although, he shall have to file a declaration which states that the incidence of tax has not been passed further to any other person.
However, if the amount of refund is Rs. 2 lakh or more, then the application shall be accompanied by the documentary evidence that the refund has been due to him.
If the application has completed in all respects, then the proper officer from the department shall have to issue the refund orders within 60 days from the date of receipt of application.
As per section 56 of the CGST Act, if the refund has not given within 60 days from the date of receipt of application then the applicant shall be eligible for the interest @ 6% from the end of 60 days from the receipt of application till the actual payment of the refund.
If the refund has been decided by any order of the court or tribunal or appellate Authority and such refund has not been received within 60 days from the date of application then he shall be eligible for the interest @ 9% for the period as specified above i.e., from the end of 60 days from the receipt of application till the actual payment of refund.
Special Case: In case of casual taxable person or non-resident taxable person, if any refund is due from the advance tax deposited by them, such refund shall not be given to them unless they have filed all the returns as specified under section 39 i.e. GSTR-3b and until their registration certificate remains in force.