Understanding GST Refunds Available on The Export of Goods (all criteria & claim procedure)

A Goods and Services Tax (GST) refund holds significant relevance in exporting goods. It operates as a mechanism allowing exporters to recuperate the taxes they have paid for the inputs used in the production of goods intended for exportation. This reimbursement system is strategically designed to avert the issue of double taxation and to uphold the competitive pricing of exported goods in the global market.

The importance of GST refunds in the export of goods can be delineated through several key points. Under the GST framework, businesses can claim Input Tax Credit (ITC) for the GST they have paid on the input goods, such as raw materials and services used in manufacturing. This mitigates the accumulation of taxes at various production stages, which could otherwise escalate costs. Additionally, exported goods are typically subjected to a GST rate of 0%, termed “zero-rating,” to enhance their market competitiveness by reducing the tax burden.

The streamlining of GST refunds is also linked to its impact on export-oriented economies. Streamlined and efficient refunds foster increased exports, which positively influence a nation’s economic landscape through increased foreign exchange earnings, job creation, and overall economic growth. However, it’s important to acknowledge that the specifics of the GST refund procedure can differ among jurisdictions, mandating exporters to adhere to varying documentation and compliance requirements.

Read in-Depth:- Types of GST refunds

Refund process of IGST paid on goods exported (with tax payment)

Exports are categorized as ‘Zero-rated supplies’ under the Goods and Services Tax (GST) framework. This implies that the taxes paid, such as Integrated Goods and Services Tax (IGST) and any applicable cess, are qualified for reimbursement by the exporter. Due to the potentially large volume of transactions for exporters, the GST portal has streamlined the process for obtaining GST refunds, eliminating the need for a separate application using Form RFD-01 in this scenario. However, the exporter must meet certain conditions to be eligible for a GST refund.

To begin with, the exporter must populate Table 6A within the GSTR-1 form with details from the shipping bill connected to export transactions, including tax payments. This must be done and filed by the specified deadline. Additionally, item 3.1 (b) of Table 3.1 within the GSTR-3B form should include a summary of these details. The corresponding tax should be settled, and the return should be filed by the deadline stipulated in GST regulations.

When inputting export invoice data into Table 6A of Form GSTR-1, it is essential to provide accurate and complete information about the shipping bill number, date, and port code details. It’s important to note that export transactions conducted within a specific tax period must be reported in GSTR-1 and GSTR-3B for the same corresponding tax period. Care should ensure that the sum of IGST and cess in Table 3.1 of GSTR-3B is equal to or higher than the combined total from Table 6A of GSTR-1 (Table 6A) and Table 6B of GSTR-1.

The GST authority treats the shipping bill as an application for a refund. The GST portal transmits export specifics from GSTR-1 to the ICEGATE system, as indicated in the return. Moreover, confirmation of the filing of GSTR-3B for the relevant tax period is conveyed. Subsequently, the Customs system cross-references the data in GSTR-1 with information in the shipping bill and Export General Manifest (EGM) to initiate the refund process.

Upon the refund payment being credited to the exporter’s account, the ICEGATE system communicates the payment details to the GST portal. The GST portal, in turn, notifies the exporter of this information through SMS and email.

RFD-01 must be filed for the mentioned GST claims scenarios:

• Excessive surplus of funds in the digital credit ledger or overpayment of taxes.
• Payment of IGST for services exported (with tax settlement).
• Accumulated Input Tax Credit (ITC) resulting from tax-free exports of goods and services.
• Accumulated ITC due to supplies made to Special Economic Zone (SEZ) units or SEZ developers without tax payment.
• Accumulated ITC due to an imbalanced tax structure where the tax on inputs is higher than that on outputs.
• If a recipient of items treated as in-country exports has settled the tax for inward supplies qualifying as such exports and has utilized ITC for the paid tax in their digital credit ledger, they can claim a refund for the tax amount paid (given the condition that the supplier of these deemed exports does not seek a refund).
• Taxes paid for supplies to SEZ units/developers (with tax payment).
• Taxes paid for an intrastate supply that is later classified as an interstate supply and vice versa.
• If a supplier of items treated as in-country exports has paid taxes for these supplies without charging or collecting taxes from the recipient, they can seek a refund (with the stipulation that the recipient or buyer of these deemed exports does not claim a refund).
• In situations involving assessment, provisional assessment, appeals, or other orders.
• There’s also a provision for claiming a refund based on ‘Any other grounds’ in the RFD-01 form.

Procedure to follow for filing refund application in RFD-01:

• Log in to GST portal – Services – Refunds – Application of Refund
• After this, select the type of refund or reason for refund and click on the ‘Create refund application’ tab.
• You will be asked for the period for which you are filing a refund; select the period, and you will get a dialogue box asking, ‘If you want to file a nil refund,’ select yes or no as per your convenience.
• Fill in the information requested on the page based on the type of refund selected in the previous step.
• Enter bank details for the refund. Also, upload supporting documents and declarations in reference to your refund. Please note you can upload 10 documents, each size not more than 5 MB. Save the application. This saved draft will remain for 15 days for further action. Click on ‘proceed’ once the undertaking and self-declaration boxes are ticked.
• Lastly, you need to sign the application digitally. For filing, you can use EVC or DSC.
• ARN, i.e., application reference number, will be generated, and taxpayers can use this to track their refund. ARN is also sent via email and registered mobile number.

Read also:- Relevant Date to Claim Refund under GST

GST refunds process for embassies and International organizations:

Refunds can be requested through two methods:

1. Initiate a refund application using GSTR-11 to generate form RFD-10.
   
   – Go to GSTR-11 already file by selecting tax period. Click on ‘generate RFD-10’
   
   – Select the relevant embassy or organization and click on Create. After this, you will get all the details of the tax paid/received auto-calculated for the specific return. It can also be edited.
   
   – Preview the application and submit it using EVC or DSC.
   
2. Access the RFD-10 form on the portal’s dashboard upon logging into the GST portal.
   
   – Log in to GST portal – Services – Refunds – Application of Refund
   
   – Select Embassy/International Organization and click on ‘Create.’
   
   – This is to show you the auto-calculated tax paid eligible for a refund, which can also be edited.
   
   – Preview the application and submit it using EVC or DSC.

The future prospect of GST Refunds in India:

The future of GST refunds in India, particularly pertaining to exports, holds promising avenues for efficiency and facilitation. Technological advancements and continuous improvements in the GST portal are set to streamline the process, simplifying forms and lengthy processing times. Automation and integration between the GST, customs, and banking systems are anticipated to minimize manual interventions, ensuring faster and more accurate refunds. The government’s commitment to ‘Ease of Doing Business’ could lead to defined refund timelines and simplified procedures, alleviating the compliance burden on exporters.

Strengthened data analysis capabilities accelerate the validation of valid claims, while the possibility of a centralized refund system promotes consistency in the process. Improvements in communication and transparency, combined with a policy framework supportive of exports, may amplify the ease of securing refunds, ultimately nurturing a favorable export environment. In summary, the outlook for GST refunds in India’s export sector seems primed for a significant evolution, marked by heightened efficiency, transparency, and swift processing, driven by technological advancements and forward-thinking policy measures.