GST Refund

What is GST refund?

GST aims to streamline fund flow and compliance, fostering a business-friendly environment in India. An integral aspect of achieving this objective is the implementation of an efficient and hassle-free refund processing system. The current tax structure is intricate, leading to prolonged delays, sometimes extending to months or even years, in receiving refunds from the Government.
GST introduces an effective and dynamic invoice-based tracking system that meticulously validates every transaction, ensuring a systematic check on each one. This development proves to be particularly beneficial for manufacturers and exporters, especially those operating in 100% Export Oriented Units or Special Economic Zones. These entities often face challenges related to blocked working capital due to the time-consuming nature of the refund process.
In simpler terms, GST serves as a significant relief for businesses, simplifying refund procedures through a robust invoice tracking system. This is especially advantageous for manufacturers and exporters operating in specialized zones, as it addresses the issue of blocked working capital, contributing to a more efficient and business-friendly tax regime. 

 GST Refund Application Services:

1) Complete Documentation Preparation for Refunds:

Compiling and organizing all necessary documents essential for the refund process.

2 Declaration of Non-Passing of Tax Incidence:

Drafting declarations confirming that the burden of tax has not been transferred to any other entity.

3 Certifications by a Chartered Accountant:

Providing all requisite certifications from a Chartered Accountant, ensuring compliance and credibility.

4 Representation Before Tax Department:

Acting as representatives before the tax department on behalf of clients during the refund process.

5 Follow-ups with Tax Department:

Regularly liaising with the tax department, engaging in follow-ups to expedite the refund process and ensuring timely disbursement.

Refund of Input Tax Credit 

Refunding Input Tax Credit (ITC) is facilitated under certain circumstances in the GST framework. Firstly, for exports of goods or services conducted under a Letter of Undertaking (LUT) or Bond, where GST is not paid during the transaction, businesses are eligible for ITC refund. Similarly, when supplying goods or services to Special Economic Zone (SEZ) units and developers under LUT or Bond, without GST payment, ITC refund provisions come into play.

Refund of IGST on Zero-Rated Supply

The refund of Integrated Goods and Services Tax (IGST) on zero-rated supplies is a crucial aspect of the GST framework, particularly applicable to international transactions and supplies to Special Economic Zones (SEZ). In the case of export of goods or services, where GST is paid during the transaction, businesses are eligible for a refund of the IGST paid, ensuring competitiveness in the global market. Similarly, when supplying goods or services to SEZ units and developers with the payment of GST, a provision for the refund of IGST is in place. This mechanism supports businesses engaged in cross-border trade and transactions with SEZ entities, promoting a seamless and efficient flow of goods and services while maintaining compliance with the GST regulations. The refund of IGST on zero-rated supplies underscores the government’s commitment to facilitating international trade and bolstering economic activities in designated zones.

Other Refunds

Several other scenarios warranting refunds are integral to the Goods and Services Tax (GST) framework. Firstly, refunds may arise as a consequence of judgements, decrees, orders, or directions issued by the Appellate Authority, Appellate Tribunal, or any court, emphasizing the importance of adhering to legal rulings. Additionally, when a provisional assessment concludes, refunds become applicable, ensuring a fair and accurate taxation process.

Refunds are also granted for an excess balance in the electronic cash ledger, rectifying instances where more funds have been deposited than required for tax liabilities. Furthermore, in cases of overpayment resulting from errors or mistakes, a mechanism is in place to refund the excess tax paid.

Refunds are also granted for an excess balance in the electronic cash ledger, rectifying instances where more funds have been deposited than required for tax liabilities. Furthermore, in cases of overpayment resulting from errors or mistakes, a mechanism is in place to refund the excess tax paid.
Refunds are also granted for an excess balance in the electronic cash ledger, rectifying instances where more funds have been deposited than required for tax liabilities. Furthermore, in cases of overpayment resulting from errors or mistakes, a mechanism is in place to refund the excess tax paid.

* The list provided above is only indicative and not exhaustive.

The list presented earlier serves as an indicative rather than an exhaustive compilation of refund scenarios within the Goods and Services Tax (GST) framework. It is noteworthy that the GST department does not automatically initiate refunds; instead, taxpayers are required to proactively claim them. To facilitate this process, a systematic procedure is in place.

What is the process of refund under GST?

The process for claiming a refund under the Goods and Services Tax (GST) system involves several key steps to ensure a systematic and transparent procedure. Firstly, taxpayers are required to submit a refund application using Form GST RFD01. Upon submission, an acknowledgment in Form GST RFD-02 is generated, serving as a reference for the applicant and communicated through email and SMS.

If the system identifies deficiencies in the refund application, the proper officer issues Form GST RFD-03 (deficiency memo) within 15 days, pointing out the issues. The applicant is then required to rectify these deficiencies and submit a fresh refund application.
After examining the refund claim and supporting documents, if the proper officer is satisfied that the amount claimed is due, a provisional refund order is issued in Form GST RFD-04, sanctioning the refund within 7 days from the acknowledgment date. A payment advice in Form GST RFD-05 is subsequently issued, and the sanctioned amount is electronically credited to the designated bank account mentioned in the applicant’s registration particulars.
Upon thorough examination, if the proper officer finds the refund request in order, the refund claim is sanctioned in Form GST RFD-06. This approval must be granted within 60 days from the date of receiving a complete and valid application. Failure to do so within the stipulated timeframe attracts an interest rate of 6% per annum, as per Section 56 of the CGST Act, 2017.

* Can refund be rejected?

A refund claim under the Goods and Services Tax (GST) can be rejected if the proper officer determines that the claim is not appropriate or is not payable to the applicant. The rejection process involves specific steps outlined in the GST laws.

Once the proper officer reaches a conclusion that the refund claim is not suitable for approval, a notice is issued to the applicant in Form GST RFD-08. The notice requires the applicant to provide a response within 15 days, using Form GST RFD-09. The applicant has the opportunity to furnish additional information, explanations, or clarifications to address the concerns raised by the proper officer.

After considering the applicant’s response, the proper officer has the authority to either accept or reject the refund claim. The decision is communicated through an official order. If the claim is rejected, the reasons for rejection are typically provided in the order.