GST Refunds: Understand All Types & Turns

Introduction:

Goods and Services Tax (GST) was brought into effect on 1st July 2017. GST was introduced to develop a new framework and give the Indian economy a systemized face towards the Indian Taxation System. The new GST regime subsumed 17 different taxes and surcharges – 8 from the Centre and 9 from the States to combine into a single tax base. Now GST is levied based on the nature of supply, either in the form of CGST + SGST (Central Goods and Service Tax + State Goods and Services Tax) for intrastate transactions or in the form of IGST (Integrated Goods and Services Tax) for interstate transactions.

When tax is paid to the government in access to the liability incurred, then the difference of the access amount can be claimed as a GST refund. As per Section 54 of the CGST Act, a refund includes a refund of ITC, a refund on tax paid on zero-rated supplies, a refund of tax on deemed exports, etc. There are various segments under which a registered person can claim refunds under GST. 

Types of GST refunds:

The GST regime has different types of refunds under different categories listed below

1. Refund of GST paid on Exports.
2. Refund of GST paid on supplies made to SEZ units.
3. Refund of GST paid on excess tax amount/provisional assessment.
4. Refund of GST paid on purchases made by UN bodies. 
5. Refund of unutilized ITC on account of export.
6. Refund on account of “any other” ground or reason.

1. Refund of GST paid on exports:

The Indian economy relies heavily on exports. The government has taken a number of steps to encourage exports. One such step is to provide a refund on the GST paid on goods or services provided. The manufacturer can claim a refund of GST on the inputs used to manufacture the exported goods. Exports include all types of zero-rated supplies, and export is done on LUT bond /concessional GST, also known as deemed exports. We will understand the eligibility criteria and the documents required to submit to the department for the Claim in order to claim the refund of GST paid on exports.

a. Eligibility Criteria:

• The supplier must be registered under the new GST regime.
• The goods or services must be exported outside India within 3 months from the invoice date.
• A shipping bill for exported goods should be filed per the Customs Act of 1962. 
• The supplier should have paid GST on the goods supplied.
• GST returns for the relevant period should have been filed. 

b. Documents required for the Claim:

• Copy of export invoice.
• Copy of shipping bill filed with customs.
• Copy of Bill of Lading or the Airway bill.
• Copy of export declaration filed with customs.
• Bank Reconciliation Certificate (BRC) or Foreign Inward Remittance Certificate (FIRC).
• Copy of GST returns (GSTR 3B) filed for the relevant periods.
• Any other document if required or asked by the tax authority.
• Copy of Form GSTR-2A of the relevant period for which the refund claim is filed.

c. Time Limit to claim a refund:

Refunds in case of GST paid on exports can be claimed at the end of any financial year/tax period.

2. Refund of GST paid on supplies made to SEZ units:

SEZ units are special economic zones that are designated areas set up separately by the government to promote exports and attract foreign investments. There are a total of 265 SEZs in India. These SEZs include Free Trade, Export Processing, and Free Economic zones. 64% of the major SEZs are in Maharashtra, Andhra Pradesh, Karnataka, Telangana and Tamil Nadu. If a supplier has supplied its goods or services to the registered SEZ units, he can claim the refund of tax paid on such supplies. He should fall within specified criteria for claiming tax, and the supplier must submit a few documents justifying the supply.

a. Eligibility Criteria:

• The supplier must be registered under the new GST regime.
• The goods must be supplied to SEZ units or an SEZ developer.
• A tax invoice must be generated for the supply made to the SEZ unit.
• The supplier should have paid GST on the goods supplied.
• GST returns for the relevant period should have been filed. 

b. Documents required for the Claim:

• Copy of tax invoice issued to the SEZ units.
• Copy of receipt of payment made by the SEZ unit. 
• Copy of shipping bill or e-way bill.
• Bank Reconciliation Certificate (BRC) or Foreign Inward Remittance Certificate (FIRC).
• Copy of GST returns (GSTR 3B) filed for the relevant periods.
• Any other document if required or asked by the tax authority.
• Copy of Form GSTR-2A of the relevant period for which the refund claim is filed.
• Self-declaration relating to non-prosecution under rule 91(1) of the CGST Rules for availing provisional refund.

c. Time Limit to Claim Refund:

Refunds in case of GST paid on supplies made to SEZ units can be claimed at the end of any financial year/tax period.

3. Refund of GST paid on excess tax amount:

The GST paid on the goods or services provided is accumulated in the e-cash ledger of your registered GST account. Pre-paid taxes or GST paid reflects on your GST portal account. In case of uncertainty in determining the value of tax or tax rate, sometimes the supplier pays the tax provisionally and later claims the excess tax refund in the final assessment. Any excess payment or GST paid by mistake can be claimed from the portal by submitting relevant documents. 

All the balance of GST will be shown in the Electronic cash ledger from where you can claim the refund. Refunds of excess balance in the electronic cash ledger can be filed, while the GSTR 3B form is used for filing the yearly return. 

a. Eligibility Criteria:

• In order to claim a refund, the taxpayer must have paid GST either an excessive amount or paid by mistake.
• GST returns for the relevant period should have been filed. 
• The taxpayer must not have claimed ITC for the excess GST paid. 

b. Documents required for Claim:

• Copy of tax invoice against which excess GST has been paid.
• Copy of payment receipt for the excess tax paid.
• Any other document if required or asked by the tax authority.

c. Time Limit to Claim Refund:

Refund of GST paid on excess tax can be claimed within 2 years from the relevant date.

4. Refund of GST paid on supplies made to UN bodies:

UN bodies are the international organizations operating in India. They are exempted from paying GST on any purchases made. Along with UN bodies, consulates and Embassies are exempted from paying GST. The finance ministry states, “The sale or supply to UN bodies or foreign diplomats should be treated like any other business-to-consumer sale, and no additional effect should be reflected on the supplier’s tax liability”. The suppliers should add foreign diplomats to Unique Identity Number (UIN) records.

Hence as per the finance ministry, foreign and international bodies can also claim GST, and below mentioned are the eligibility criteria for the same:

a. Eligibility Criteria:

• The supplier must be a registered person under the new GST regime.
• Goods or services must be provided to a UN body.
• The supplier must have charged GST on the supply of goods or services to a UN body.
• The particular UN body must be exempted from paying GST.
• The taxpayer/supplier must not have claimed ITC for the excess GST paid. 

b. Documents Required for Claim:

• Copy of the tax invoice issued by the supplier.
• Copy of receipt of payment made by the UN body.
• Copy of purchase order issued by the UN body.
• Copy of filed shipping bill or bill of lading.
• Any other document if required or asked by the tax authority.

c. Time Limit to Claim Refund:

Refunds of GST paid on supplies made to UN bodies should be filed before the end of the quarter.

5. Refund of unutilized ITC on account of export:

Input Tax Credit is the balance of tax paid on sales over purchases. If there is an excess of tax, it is accumulated in the electronic cash ledger. One can claim a refund of ITC if a business practices an inverted tax structure, exported goods without tax payment under a Letter of Understanding (LUT) or Bond, supplies are made to an SEZ unit without paying tax and goods or services are provided to foreign embassies or international organizations. 

a. Eligibility Criteria:

• The supplier must be registered under the new GST regime.
• Goods or services must be provided to any SEZ unit or foreign embassy under a LUT bond.
• The supplier must have charged GST on the supply of goods or services.
• The particular SEZ unit/UN body must be exempted from paying GST.
• The taxpayer/supplier must not have claimed ITC for the excess GST paid. 

b. Documents required for Claim:

• Copy of tax invoice issued by the supplier.
• Copy of signed letter of undertaking in case export is done under LUT terms.
• Copy of receipt of payment made.
• Copy of filed shipping bill from customs.
• Copy of Bill of Lading or the Airway bill
• Copy of export declaration filed with customs
• Bank Reconciliation Certificate (BRC) or Foreign Inward Remittance Certificate (FIRC).
• Copy of GST returns (GSTR 3B) filed for the relevant periods.
• Copy of Form GSTR-2A of the relevant period for which the refund claim is filed.
• Any other document if required or asked by the tax authority.

c. Time Limit to Claim Refund:

The time limit to claim a refund of unutilized ITC on account of export is at the end of any tax year/financial year.

6. Refund on account of “any other” ground or reason:

Apart from the reasons mentioned earlier, if the taxpayer does not fall in any category and still has a refund, he can claim on the grounds of “any other”. 

a. Eligibility Criteria:

• Refund on excess tax paid.
• Refund on taxes paid on provisional assessment, i.e., if the supplier is not confirmed about the GST rate, he can provisionally pay more tax and then claim a refund.
• Refund of tax paid on an intra-state supply that was supposed to be held as an inter-state supply or vice-versa.
• A refund based on “any other” grounds.

b. Documents required to claim a refund:

• Copy of tax invoice against which excess GST has been paid.
• Copy of payment receipt for the excess tax paid.
• Copy of GST returns (GSTR 3B) filed for the relevant periods.
• Any other document if required or asked by the tax authority.

c. Time Limit to Claim Refund:

The time limit to claim a refund on “any other” ground is within 2 years from the relevant date.

Conclusion:

The robust system implemented by the government for processing GST refunds should be used to its optimum, which shall help suppliers to maintain their cash flow and optimize their tax liability. Hence in order to claim refunds under any category, one must follow a procedure and submit a relevant set of documents. Any business must submit true and valid documents to claim refunds. Any refund claimed on the false ground will be subject to punishment and penalty, and if found more guilty, even prosecution charges may apply. 

Frequently Asked Questions:

1. What is the form on which one can file a refund claim?

Refunds on the above categories can be filed in application Form GST RFD 01.

2. How can I calculate the amount of refund of accumulated unutilized ITC on account of the inverted tax structure?

3. Can I file a nil refund for multiple tax periods in one application?

Yes, you can file a refund for multiple tax periods in one application. 

4. What are the cases under which one cannot claim utilized ITC?

• If the exported goods attract excise duty, the accumulated ITC left unutilized cannot be refunded.
• If the exporter has claimed the duty drawback applicable for the exported goods or has claimed the refund of IGST paid is not accountable for claiming a refund.

5. How does one go about requesting a refund?

Login into https://www.gst.gov.in/ > Services > Refunds > Application for refund > Select type of refund > Select tax period > Click on ‘create refund application’ > Refund application form GST RFD-01 will be available > Enter refund amount > Select your bank account number > Upload all requested documents > Click the applicable ‘Undertaking’ and ‘Self-Declaration’ >Select authorized signatory and submit the refund application. 

An Application Reference Number (ARN) will be generated, which will help you to track your refund application.