Jan 182017

Refunds of Tax paid under GST

What is refund under GST?

As per explanation 1 to section 48 of the revised GST model law- “refund” includes refund of tax on goods and/or services:

  • Exported out of India or
  • On inputs or input services used in the goods and/or services which are exported out of India, or
  • Refund of tax on the supply of goods regarded as deemed exports, or
  • Refund of unutilized input tax credit as provided under sub-section (3).

Refund may be allowed on certain specific aspects of taxable turnover and that too subject to certain conditions. This may be analyze from the below table:

Taxable turnover for which refunds shall be allowed:1)    Refund of any balance in the electronic cash ledger.2)    Unutilized input tax credit accumulated due to:

a)    Exports including zero rated supplies

b)    Credit has accumulated on account of difference rate of tax on inputs and output supplies.

3)    Purchases made by Embassies or UN be taxed or exempted – Sec 49 and etc..

Taxable turnover for which refunds shall be not allowed at all:

1)    Refund amount is less than 1000/- rupees.2)    ITC of goods lying in stock at the end of the financial year. ITC related to such goods can be carry forward.

Conditions subject to which refunds shall be allowed:1.     Refund of unutilized input tax credit may be claim at the end any tax period subject to conditions mentioned in sec 48(10).2.     No refund shall be allowed in cases:

2.1.   Where goods exported out of India are subjected to export duty.

2.2.   Supplier of goods or services claims refund of output tax paid under IGST Act, 2016.

Process to be followed for claiming refunds of GST paid:

Step 1: Any person can make application in prescribed from and manner for refund of following amounts:

  1. GST
  2. Interest, if any, paid on such GST
  3. Any other amount paid by himStep 2: The above application shall be made before the expiry of two years from the relevant date.Step 3: Refund of any balance in the electronic cash ledger may be claimed in refund filled by him. No separate application for this is required.

    Step 4.    Application shall be accompanied by:
    a.    Such documentary evidence to established (In case claim amount is more than rupees five lacs):
    i.     Refund is due to applicant
    ii.    The amount of tax, interest or other amount was collected from or paid by him
    iii.    Incidence of such tax, interest and has not been passed by him.
    b.    In case claim amount is less than rupees 5 lacs, it is sufficient if he file a declaration to the effect that the incidence of tax and interest had not been passed on to any other person.

    Step 5: If proper officer is satisfied the whole or any part of tax / interest / amount as claimed is refundable – he may make an order and the amount so determined shall be credited to the fund.

    Step 6: Order of refund in step 5 shall be made within 60 days from the date of receipt of complete application.

In what situations refundable amount be paid to applicant?

  • Refund of tax on goods and/or services exported out of India or
  • Refund of tax on inputs or input services used in the goods and/or services which are exported out of India;
  • Refund of unutilized input tax credit under sub-section (3)
  • Refund of tax paid on a supply which is not provided, either wholly or partially, and for which invoice has not been issued;
  • Refund of tax in pursuance of section 70, i.e., Tax wrongly collected or deposited with Central or State government
  • The tax and interest, if any, or any other amount paid by the applicant, if he had not passed on the incidence of such tax and interest to any other person
  • Other class of applicants as the Central or a State Government may notify.

What is refund on provisional basis?

  1. The proper officer may refund on a provisional basis, 90% of the total amount so claimed in the manner and subject to such conditions, limitations and safeguards as may be prescribed
  2. This facility will be available – in the case of any claim for refund on account of export of goods and/or services made by registered taxable persons, other than such category of registered taxable persons as may be notified in this behalf,
  3. Thereafter make final settlement of the refund claim after due verification of documents furnished by the applicant.