In this mail, we shall discuss Refund claims as envisaged presently.
1. Refund of? [38 (1)/(2)/(6)/(11)]
1.1 A RTP is entitled to refund of:
- GST or
- interest thereon, or
- any other amount
paid by him, upon application to Proper Officer. It is subject to:
- A claim thereof within two years from Relevant date, as per specified procedure (if payment under protest, limitation period will not apply) (does it mean that payment shall always be under protest?!?);
- Tax being not passed on or tax is borne by RTP (that is, refund not to result in unjust enrichment); and
- No refund shall be granted, if amount is less that Rs.1000/-.
1.2 It includes:
- refund of tax on goods and/or services exported out of India, or
- refund of tax on inputs or input services used in goods and/or services exported, or
- refund of tax on supply of goods regarded as deemed exports, or
- refund of unutilized input tax credit being inverted credit (that is, accumulation of credit on account of input tax rate higher than outward supply tax rate).
1.3 Apart from above,
RTP may be entitled to refund of balance in cash or credit ledger after payment of tax, interest, penalty, fee or any other amount and to that extent amount collected as CGST or SGST would be stand reduced. Application thereof should be made through return for relevant Tax period [in form GSTR 3 or GSTR-4 or GSTR-5]. [Rule 1]
Mistaken Payment
If RTP has paid IGST or CGST/SGST mistakenly as an intrastate / Interstate supply, but the nature of which is subsequently clarified, he will have to pay the appropriate tax and claim refund of the wrongly paid. [(IGST Sec.30 and Sec.53].
1.4 Application for refund [Section 38(3)]
- It shall be in prescribed form [Form GST RFD-1 or Return, as the case may be];
- must be accompanied by prescribed documentary evidence to establish claim;
- must be accompanied by "documentary or other evidence" that GST and/or interest and/or other amount (claimed as refund) is not passed on by him to any person (Procedure considered later.)
1.5 Unutilized Input tax credit refund [section 38 (2)]
Unutilised ITC refund is given in following cases:
- (i) Exports of goods on which export duty is not payable (if goods exported outside India are subjected to export duty, refund of unutilised ITC will not be allowed)
- (ii) Exports of services; and
- (iii) inverted credit.
Accordingly, it appears that in other circumstances, ITC may be carried forward.
1.6 Refund of tax purchases made by Consulates or Embassies or UNO [Section 38(6)(d)]
Their purchases will be taxed. They can claim refund of GST paid. (They are required to take a Unique Identity Number and purchases made by them will be reflected against their number in return of outward supplies of supplier and refunds of taxes can be granted.)
1.7 Refund, if tax is passed on to Consumer Welfare Fund [section 38(4)]
Yes, but, amount will be credited to Consumer Welfare Fund.
However, following refunds may be credited and/or paid to RTP [Section 38 (6)]:
- GST on goods and/or services exported; or
- GST on inputs used in goods /services exported out of India; or
(Unjust enrichment and exports or deemed exports
Principle of unjust enrichment is not applicable to actual exports of goods or services as recipient is located outside taxable territory.)
- unutilised ITC, being inverted ITC; or
- tax on interest or other amount, if not passed on to any other person; or
- tax or interest borne by notified class of applicants (on recommendation of Council) (may be consumers or others? Prima facie UN offices / Emphasis Consulates)
2. Withholding of refund in certain cases [section 38(8), (9), (10)]
Refund can be withheld:
- If RTP has not submitted return(s), till he does so;
- If RTP is required to pay any tax, interest or penalty which has not been stayed by Appellate authority/Tribunal/ court, till he pays such tax, interest or penalty [Proper Officer can also deduct unpaid taxes if any of RTP from refundable amount];
- Commissioner/Board can withhold refund, if, Refund Order is under appeal and in his opinion grant of refund will adversely affect revenue [Sec.38(9)].
If RTP as per appeal or further proceeding is entitled to refund, he shall be entitled to interest.
3. Interest on delayed refund [section 39]
GST refundable, if not refunded within three months from date of receipt of application, would be eligible for interest at specified rate (recommended by Council).
Period of interest: date succeeding due date for sanction of refund to date of refund of tax. If refund order is made by an appellate authority or tribunal or court, such order would be deemed to be an order passed under section for refund, to ascertain due date of refund and delay, if any.
4. Consumer welfare fund (the Fund) [section 40]
4.1 Central or State Government should establish the Fund. Any refund not payable to RTP shall be credited to the Fund. Also income arising from investment of amount credited to the Fund or any other monies received for purpose of the Fund shall form part of it.
4.2 Utilisation [section 41]: it shall be utilised for welfare of consumers.
The government may maintain or specify Authority responsible for maintaining proper and separate account and other records in respect of the Fund, as may be prescribed, in consultation with Comptroller and Auditor General of India.
5. Procedure [Rule 1]:
5.1 A RTP shall apply for any Refund in Form GST-RFD-1, electronically through common portal, subject to following exceptions / modifications:
- Refund application by an exporter (export of goods) should be filed after delivery of Export Manifest or Export report (under section 41 of Customs Act 1962).
- For supplies made to SEZ unit or SEZ developer (regarded as deemed exports): refund application should be filed by SEZ unit or SEZ developer or recipient of deemed export supplies.
5.11 How to prove principle of unjust enrichment does not apply
- Person may furnish with refund claim document(s) or evidence(s) to establish that tax and interest, if any, paid or any other amount paid was not passed on by him to any other person [section 38(3)(b)].
- If refund claimed is less than Rs 5 lakh, a self-declaration will be adequate
5.12 Order for refund and time limit for sanction [section 38(5)]
- Proper Officer, after satisfying about claim and amount refundable, should pass order of refund within 90 days from date of receipt of refund application (complete; containing all prescribed information).
- In case of notified exporters (of goods or services), refund to the extent of 80% of claim (excluding ITC provisionally accepted) may be provisionally granted. Balance 20% may be refunded after verification of documents.
- If refund not sanctioned within specified time, interest thereon, for delay, is payable.
5.13 Relevant date to determine limitation period
| Event enabling refund |
Relevant date |
| Export of goods out of India |
|
| Export by sea or air |
Departure of ship or aircraft, from India, in which goods are loaded |
| Export by land |
Date on which goods pass Frontier |
| Export by post |
Date of dispatch of goods by Post Office to a place outside India |
| Supply regarded as deemed exports |
Date of filing return relating to deemed exports |
| Goods return for remaking, refining, reconditioning or subject to other similar process to any place of business |
Date of entry into place of business for such purpose |
| Export of services |
|
| Supply of service completed prior to receipt of payment |
Date of receipt of payment in convertible foreign exchange |
| Payment received in advance prior to date of issue of invoice |
Date of issue of invoice |
| If tax refundable upon judgement, decree, order or direction of judicial authorities |
Date of communication of such judicial order |
| Refund of unutilised tax credit |
End of financial year in which refund claim arises |
| Tax paid Provisionally under the Act or Rules |
Date of adjustment of tax upon final assessment |
5.2 Documentary evidence
Refund application should be accompanied by documentary evidence (as applicable) to establish that refund is due [Rule 1 (2)]:
| Refund due to |
Documentary evidence |
| Pursuant to Order |
Reference No and copy of order passed by Proper Officer or judicial authority resulting in refund, for refund of pre deposit, also: reference no of pre-deposit claimed as refund |
| Export of goods |
Statement showing number and date of shipping bills or export bills and number and date of relevant export invoices |
| Supply of goods to SEZ unit or SEZ developer |
Statement containing number and date of invoices as prescribed |
| Deemed exports |
Statement containing number and date of invoices |
| Service export |
Statement containing number and date of invoices and relevant BRC (Bank Realisation Certificate) or FIRC (Foreign Inward Remittance Certificate) |
| Supply of services to SEZ unit or SEZ developer |
statement containing number and date of invoices and details of payment along with proof thereof |
| Unutilised ITC (due to export or inverted ITC) |
Statement in Annexure 1 of Form GSTR FD-1 |
| Finalisation of provisional assessment |
Reference number of final assessment order and its copy |
Refund of tax and interest
(if refund claim is less than Rs. 500,000 |
Self- declaration that interest or tax not passed on to any other person
Declaration not required to claim refund of tax on export of goods or services or ITC unutilised by exporter or inverted ITC or notified applicants |
| Refund of tax and interest (if refund claim is more than Rs 500,000) |
Certificate in Annexure 2 of Form GSTR FD-1 of Chartered Accountant or Cost Accountant to the effect that tax and interest claimed as a refund not passed on to any other person
would not apply to claim of refund by exporter for GST paid on goods or services or ITC or inverted ITC or by notified applicants |
5.3 Refund of ITC
Electronic Credit ledger shall be debited by Applicant to the extent of refund claimed.
5.4 Export of taxable goods or services without tax and refund of ITC
In such a case, refund amount shall be calculated as follows:
Refund Amount = (Export turnover of goods + Export turnover of services) x Net ITC Adjusted Total Turnover
Where,-
- (A) "Refund amount" means the maximum refund that is admissible;
- (B) "Net ITC" means input tax credit availed on inputs and input services during the relevant period;
- (C) "Export turnover of goods" means the value of goods exported during the relevant period without payment of tax under bond or letter of undertaking;
- (D) "Export turnover of services" means the value of services exported without payment of tax under bond or letter of undertaking, calculated in the following manner, namely:-
Export turnover of services = payments received during the relevant period for export services + export services whose supply has been completed for which payment had been received in advance in any period prior to the relevant period - advances received for export services for which the supply of service has not been completed during the relevant period;
- (E) "Adjusted Total turnover" means the value of turnover in a State, as defined under subsection (104) of section 2, excluding the value of exempt supplies, during the relevant period;
- (F) "Relevant period" means the period for which the claim has been filed.
Provided that no refund of input tax credit shall be allowed if the supplier of goods and / or services avails of drawback allowed under the applicable Drawback Rules or claims rebate of tax paid under the Act or the IGST Act, 201_ in respect of such tax.
5.4A Refund of advance deposit of tax (by casual taxable person or non-resident) [Rule 1 (5)]
Casual taxable person or non-resident should claim refund either in last return to be filed by him or after filing last return.
5.5 Acknowledgement for refund from Electronic Cash Ledger [Rule 1 (6)]
Application for refund from Electronic Cash Ledger shall be acknowledged in Form GST RFD-2, through common portal electronically indicating date of filing refund claim.
5.6 Process by Proper Officer [Rule 1 (7)]
- Application for refund (other than from Electronic Cash Ledger) shall be forwarded to Proper Officer;
- he shall scrutinise it for completeness within 15 days of filing Application;
- if found complete, acknowledgement in Form GST RFD-2 through Common Portal electronically indicating date of filing refund claim
- if any deficiency noticed, he shall communicate it to applicant in Form GST RFD-3, electronically, through common portal for filing application after rectification of deficiency (if deficiency has been communicated under State law, it should also be considered as communicated under Central law and vice versa) [Rule 1 (8)/(9)]
5.7 Grant of refund
5.71 Provisional refund [Rule 2]
In case of refund on account of export of goods/services, provisional refund may be granted, if:
- Claimant is not prosecuted for any offence under the Act or earlier law (for tax evaded exceeding Rs 250,000) during five years immediately preceding tax period of refund;
- GST compliance rating is not less than 5 on scale of 10; and
- issues forming the basis of refund are not pending in any review or revision and if pending, it is not stayed by appropriate authority or court.
Proper Officer after scrutinising claim and evidence in support and is prima facie satisfied that refund is due, he shall make an order in Form GST RFD-4 sanctioning refund due to applicant on a provisional basis, within a period of seven days from acknowledgement date.
He shall also issue payment advice in Form GST RFD-8 to be electronically credited to Bank account of Applicant mentioned in RC and specified in refund application (however, prima facie, link with the time limit specified for passing the order as well as any other time limit for issue of advice is not provided).
5.72 Order sanctioning refund [Rule 3]
- If on examination of application, Proper Officer is satisfied that refund is due to Applicant, he shall by order in Form GST RFD-5 sanction refund he is entitled to, amount, if any, provisionally refunded and amount adjusted against any outstanding demand under the Act or under earlier law and balance refundable amount.
- If refund is wholly adjusted against outstanding demand, Order giving details shall be in Form GST RFD-6.
- If satisfied (and recording reasons in writing) that refund, wholly or partly, is not admissible or not payable, shall issue notice in Form GST RFD-7 to applicant asking him to furnish reply within 15 days of receipt of notice and after considering reply make order in Form GST RFD-5 sanctioning refund, wholly or partly or rejecting refund; and order shall be made available to applicant electronically. Refund application shall not be rejected without giving a reasonable opportunity of being heard to applicant.
- If satisfied that unutilised ITC and other tax payable is refundable [in terms of section 38 (6)], he shall order in Form GST RFD-5 and issue payment advice in Form GST RFD 8 for refunding amount electronically and credit to applicant's bank account mentioned in RC and specified in refund application.
- If above is not payable to applicant, he should make order in Form GST RFD-5 and issue advice in Form GST RFD-8 for refund to be credited to Consumer Welfare Fund.
5.8 Credit of rejected refund claim [Rule 4]
- If unutilised ITC refund claim is rejected, amount debited to electronic credit ledger should be re-credited.
- If any refund is rejected either fully or partly, amount debited, to the extent of rejection, shall be re-credited to electronic credit ledger by order in Form GST PMT-2 A.
- A claim shall be considered as rejected if appeal is finally rejected or if claimant gives an undertaking, in writing, that he shall not file appeal.
5.9 Order sanctioning interest on belated refund [Rule 5]
- Proper Officer should sanction and make payment of interest by an order and payment advice in Form GST RFD 9 specifying refund amount delayed, period of delay and amount of interest payable.
- Interest shall be electronically credited to applicant's bank account mentioned in RC and specified in refund application.
5.10 Refund of tax to certain persons [Rule 6]
Notified person (that is, Embassies and International organisations) may make an application in Form GST RFD 10 and give particulars of inward supplies in Form GSTR-11.
Tax would be refundable, if:
- Inward supplies of goods/services were received from RTP against tax invoice and price of supply covered under a single invoice exceeds Rs 5000;
- name and GSTIN/UI and, if available, of applicant is mentioned in tax invoice; and
- complies with such other restrictions and conditions as may be notified.
If Rules are inconsistent with any international agreement or Treaty, Agreement or Treaty shall prevail.
6 Impact and Law
6.1 Law envisages administration of routines through Common portal electronically; hence, it is essential that compliance stipulated for refund application including filling up of application and providing information electronically should be done meticulously to avoid any notice for deficiency or delays. Accordingly, necessary steps and checks may be identified and devised as also information collection and providing it should be appropriately organised.
6.2 Refund under earlier law
ITC refund arising under earlier law may be paid under earlier law as per its provisions and not under the Act (as per Transitional Provisions) [Sections 156 to 158].
