Refund is a very important term used under GST for the person who is eligible to claim the refund and for the GST Authority who issues the refund order. Both persons i.e. the person who claims the refund as well as the one who issues the refund should be fully conversant with the provisions and laws of refund under GST.
As we all know that GST is an Indirect Tax in which the tax burden is ultimately passed on to the customer. Similarly, if any refund arises on some transaction, then it can be passed on to the customer, however, it is not possible for the government to identify and provide a refund to the customer.
Thus, the government has given authority to the supplier to claim the refund but the supplier is also not required to collect tax on such transactions. This is called the Doctrine of Unjust Enrichment which means “NO PERSON CAN BE UNJUSTLY ENRICHED AT THE EXPENSE OF ANOTHER PERSON”.
Following are the cases where a Refund is required to be claimed:
- Goods or Services are exported or supplied to SEZ developer/unit, with payment of IGST and the refund of the IGST paid shall be claimed as per the provision of Section 16(3)(B) of IGST ACT.
- Unutilized ITC in case of the following Cases:
- A) Zero Rated Supplies
- B) Accumulated ITC on account of inverted duty structure.
- Tax paid on the supply of goods regarded as deemed exports claimed by the recipient.
- Refund of any balance in the Electronic Cash Ledger after payment of tax, interest, penalty, fee, or any other amount payable under this Act or the rules made under may be claimed as per provision of Section 46(6) of CGST Act, 2017.
- Refund on account of issuance of Refund Vouchers for the taxes paid on advances against which goods or services have not been supplied may be claimed as per provision of Section 31(3) of CGST Act,2017.
- Refund of the tax wrongly collected and paid to the government [i.e. CGST & SGST paid by treating a supply as Intra-state and subsequently transaction is held as Inter-state supply and vice versa]
- The IGST paid by tourists leaving India on any supply of goods taken out of India by him as per Section 15 of IGST Act,2017.
- Tax becomes refundable as a consequence of judgment, decree, order, or direction of the Appellate Authority, Appellate Tribunal, or any court.
- On finalization of provisional assessment, if any tax becomes refundable to the assesses (on a/c of assessed tax on final assessment is less than the tax deposited by the assesses) as per Section 60 of CGST Act,2017.
- Refund of taxes on purchases made by UN bodies or embassies as per Section 54(2) of CGST Act,2017.
Procedure for application to claim Refund:
After the introduction of GST from 01/07/2017 on account of the unavailability of electronic refund module on Common Portal, the application had to be made manually and gradually temporary mechanism has been introduced in which Form GST RFD-01 was required to be filed from the common portal but the physical copy with evidence was supposed to be submitted to the jurisdiction officer.
With effect from 26 Sept 2019 as per circular no. 125/44/2019-GST, GST Refund process is fully digitalized & the necessary capabilities for making the refund procedure is fully electronic, in which all steps of submission and processing shall be undertaken electronically, have been deployed on the GST Portal.
The Refund applications shall be filed in the form GST RFD-01 on the GST Portal along with supporting documents as attachments. A list of the supporting documents as per the category of the GST refund is also given in circular no. 125/44/2019 itself.
Refund sanctioned shall be disbursed through the PFMS (Public Financial Management System) after validating the bank detail of the registered person.
The following modalities shall be followed for all refund applications filed in FORM GST
RFD-01 on the common portal with effect from 26.09.2019:
1. FORM GST RFD-01 shall be filled on the common portal by an applicant seeking a refund under any of the categories mentioned above. This shall entail filing of statements/declarations/undertakings which are part of FORM GST RFD-01 itself, and also uploading of other documents/invoices which shall be required to be provided by the applicant for processing of the refund claim*.
A comprehensive list of such documents is provided at Annexure-A and it is clarified that no other document needs to be provided by the applicant at the stage of filing the refund application. The facility of uploading these other documents/invoices shall be available on the common portal where four documents, each of a maximum of 5MB, may be uploaded along with the refund application.
Neither the refund application in FORM GST RFD-01 nor any of the supporting documents shall be required to be physically submitted to the office of the jurisdictional proper officer.
*However, as per Section 54(4) where the amount claimed as refund is less than Rs.200,000 it shall not be necessary for the applicant to furnish any documentary or other evidence but he may file a declaration based on the evidence available with him, certifying that the incidence of tax had not been passed on to any other person.
2. The Application Reference Number (ARN) will be generated only after the applicant has completed the process of filing the refund application in FORM GST RFD-01, and has completed the uploading of all the supporting documents/ undertaking/statements/ invoices and, where required, the amount has been debited from the electronic credit/cash ledger
3. As soon as the ARN is generated, the refund application along with all the supporting documents shall be transferred electronically to the jurisdictional proper officer who shall be able to view it on the system. The application shall be deemed to have been filed under sub-rule (2) of rule 90 of the CGST Rules on the date of generation of the said ARN and the time limit of 15 days to issue an acknowledgment or a deficiency memo, as the case may be, shall be counted from the said date.
This will obviate the need for an applicant to visit the jurisdictional tax office for the submission of the refund application and /or any of the supporting documents. Accordingly, the acknowledgment for the complete application (FORM GST RFD-02) or deficiency memo (FORM GST RFD-03), as the case may be, would be issued electronically by the jurisdictional tax officer based on the documents so received from the common portal.
4. If a refund application is electronically transmitted to the wrong jurisdictional officer, he/she shall reassign it to the correct jurisdictional officer electronically as soon as possible, but no later than three working days, from the date of generation of the ARN. Deficiency memos shall not be issued in such cases merely on the ground that the applications were received electronically in the wrong jurisdiction.
5. It may be noted that the facility to reassign such refund applications is already available with the Commissioner or the officer(s) authorized by him.
Recommended Read: GST: FAQs on form GSTR-10
Order of Refund [Section 54(5)]
If the officer is satisfied that the amount of refund claimed is refundable, he may make an order accordingly and the amount claimed shall be credited to the Consumer Welfare Fund as per Section 57.
However, in the following cases, the amount of refund shall be deposited in the account of the applicant and not in the Consumer Welfare Fund.
- (a) refund of tax paid on zero-rated supplies for export of goods or services or both or on inputs or input services used in making such zero-rated supplies for exports
- (b) refund of unutilized input tax credit under sub-section (3);
- (c) refund of tax paid on a supply which is not provided, either wholly or partially, and for which invoice has not been issued, or where a refund voucher has been issued;
- (d) refund of tax in pursuance of section 77 which is Tax wrongfully collected and paid to Central Government or State Government;
- (e) 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; or
- (f) the tax or interest borne by such other class of applicants as the Government may, on the recommendation of the Council, by notification, specify.
All the documentary evidence as per Annexure A circular no. 125/44/2019 are required to be submitted online on the GST Portal. In case of Export of services, BRC is necessary to be submitted. After the submission of RFD-01 the jurisdiction officer after verification and generation of ARN issue Acknowledgement in RFD-02 or Deficiency Memo in RFD-03 within 15 days from the date of submission of application.
- After the Deficiency memo is issued the refund application will not be processed further and a fresh application needs to be filed. ITC will be re-credited automatically to the credit ledger.
- If everything is found in order the provision refund sanction order is passed in RFD-04 for 90% of the total refund amount.
- The payment order finally will be issued in RFD-05 and the final sanction order shall be issued in RFD-06.
- As per circular No. 125/44/2019 – GST any refund claim for a tax period may be filed only after furnishing all the returns in FORM GSTR-1 and FORM GSTR-3B which were due to be furnished on or before the date on which the refund application is being filed. However, in case of a claim for refund filed by a composition taxpayer, a non-resident taxable person, or an Input Service Distributor (ISD) furnishing of returns in FORM GSTR-1 and FORM GSTR-3B is not required.
Instead, the applicant should have furnished returns in FORM GSTR-4(along with FORM GST CMP-08), FORM GSTR-5, or FORM GSTR-6, as the case may be, which were due to be furnished on or before the date on which the refund application is being filed
Recommended Read: How can I create and file details in Form GSTR-10 (Final Return)?
As per Section 54(7), the proper officer shall issue the refund orders within 60 days from the date of receipt of application.
As per Section 54(14), Refund cannot be claimed if the refund amount is below Rs.1000, however, the limit is not applicable in case if the refund is to be claimed for excess balance in Electronic Cash Ledger.
Role of CMA or CA under Refund:
- A declaration has to be filed by the applicant which is to be certified by Chartered Accountant or Cost Accountant in case the refund claimed exceeds Rs. 200000.
No Certificate is required to be furnished in respect of the following cases
- Refund of tax paid on export of goods or services or both or on inputs or input services used in making such exports.
- Refund of unutilized ITC in case of Zero-rated supplies or accumulated ITC on A/c of inverted duty structure.
- Refund of tax paid on a supply which is not provided either wholly or partially and for which invoice has not been issued or where a refund voucher has been issued
- Refund of tax in pursuance of Section 77 i.e. tax paid on a transaction of Intra-state supply but which is subsequently held to be Inter-state supply or vice-versa.
- The tax or interest is borne by such other class of applicants as the government may on the recommendation of the council.
Recommended Read: I am a Deductor. How can I view Form GSTR-7A?
The relief provided due to impact of Covid-19 Pandemic:
- The time limit of two years u/s. 54(1) of CGST Act, 2017 for making the refund application falling from 20th Mar 2020 to 30th Aug 2020 has been extended till 31/08/2020.
- In cases where a notice has been issued for rejection of refund claim in full or in part and where the time limit of sixty days for passing the order in terms of Sec. 54(5) read with Section 54(7) of the CGST Act, 2017 falls during 20th March 2020 to 29th June 2020, then the time limit for passing such order has been extended to 15 days from the receipt of the reply to such notice or 30th June 2020, whichever is later.
- The time limit for filing LUT for the year 2020-21 is 30/06/2020.
- It has been decided by the government to issue all pending GST and Custom refunds which would provide benefit to around 1 lakh business entities, including MSME. The total refund approximately will be Rs.18000 Crores. Which is a good initiative by the government to provide liquidity to the small businesses in such a crucial time.