The GST (Goods and Service Tax) regime in India has made filing and the monthly payment of your company’s taxes easy. Since business transactions take time to process, you might end up paying more taxes than you owe. When this happens, you can claim a refund on your GST from the government.
Here is a simple case of excess tax payment –
Mr Avinash is liable to pay an amount of INR 50,000 as GST for the month of August. Due to a mistake, he ended up paying INR 5 lakh. Now, he has made an excess GST payment of INR 4.5 lakh, which can be claimed as refund.
The time limit of claiming the refund is 2 years from the date of payment.
When can you claim a refund?
A proper refund procedure is necessary for effective tax administration. The following situations could lead you to claim GST refund
• Exports of services and commodities
• Deemed exports
• Tax refunds when embassies make a purchase
• Supplies to units and developers in special economic zones
• Pre-deposit refund
• Accrued input tax credit refund on account of inverted duty structure
• Refund arising from judgement, order, a decree or any law court
• Excess payment due to an error
• Finalisation of provisional assessment
• Refunds due to the issuance of refund vouchers for advance payment of taxes, for which services or commodities have not been supplied.
• Refund to foreign tourists on GST paid for commodities within the country and carried abroad on departure.
• Refund of CGST and SGST paid by considering the supply in the course of interstate trade or commerce.
How to Claim Refund on GST
Once you find yourself eligible to file a claim for GST refund, you will need to file your claim through GST Refund Form RFD-01. A certified Chartered Accountant should preferably prepare the form. You must claim the GST refund within 2 years of the relevant date of the refund application. The different ‘relevant date’ is defined for different scenarios, which can be checked on the online tax site.
If you fail to raise a claim within the mentioned timeline, your credits may get blocked permanently and you may never get the GST refunds. Once you submit the GST refund form, you will receive an auto-generated acknowledgement form GST-RFD-02. This will assess you in the future for your GST claims.
If there are any discrepancies in the claim process, a GST-RFD-03 form will be generated and sent to the taxpayer for corrections in the application form.
While filing the GST refund, the taxpayer needs to submit a declaration that the refund amount will not be transferred or utilized to an entity or any third person. If the refund amount exceeds INR 5 lakh, the taxpayer will have to provide additional documents as evidence confirming that he/she is paying the amount.
Processing of GST Refund Claim
Normally, GST refunds are processed with a month of filing the claim. However, the duration varies depending on the GST refund amount that needs to be processed. The application may undergo either an audit or scrutiny. Provided the application form is free from any error, the amount will be credited to the account of the taxpayer. On the contrary, if the adjudicating body finds you falling under the category of being unjustly enriched, the said refund amount will be transferred to the Consumer Welfare Fund.
In case of GST refund process arising out of export of services and goods, the authorized officer has the right to issue a provisional refund order claiming 90% of the refund through GST-RFD-04 form. This type of provision is only possible if –
• The taxpayer holds a clean record for not evading taxes for amounts exceeding INR 250 lakh over a period of 5 years.
• The taxpayer’s GST compliance rating is five or more out of a score of ten.
The new GST refund process is effective and thorough. The procedure is designed considering the ease of both manufacturers and exporters and follows a series of invoices to process the GST claim. Tax refund, which earlier used to take years to pass, is now being processed within 60 days.