Know all about Refund Eligibility, Forms, Time limit, Interest Provisions under GST Law

Introduction

When one hears the word ‘refund’, we feel fortunate that we are going to be united with our funds which were once paid as taxes. There are many situations where a refund arises on GST. Understanding the refund norms and criteria’s is extremely important so that we do not excessively partake with our money. Let us learn more about refund in GST.

Who is eligible to  get Refund under GST?

A claim of refund may arise on account of:-

1. Export of goods or services with payment of tax
2. Supplies to SEZs units and developers with payment of tax
3. Tax paid by supplier on deemed exports
4. Taxes on purchase made by UN or embassies etc
5. On account of judgment, decree, order or direction of the Appellate Authority, Appellate Tribunal or any court
6. Unutilised Input Tax Credit (ITC) on account of inverted duty structure
7. Finalisation of provisional assessment, final assessment, appeal or any other order
8. Refund of pre-deposit
9. Excess payment of tax due to mistake
10. GST paid by international tourists on goods in India and carried abroad at the time of their departure from India
11. Issuance of refund vouchers for taxes paid on advances against which goods or services have not been supplied
12. Tax paid on intra-State supply which was subsequently held as inter-State supply and vice versa. [for instance if CGST/SGST was paid instead of IGST, then a person can claim refund of CGST/SGST]
13. Excess balance in the electronic cash ledger

What are zero rated supplies?

“Zero rated supply” under Section 16 of the IGST Act, 2017 means:-

1. export of goods, services or both

or

2. supply of goods, services or both to a SEZ developer or a SEZ unit

How are zero rated supplies treated under refund provisions?

1. Supplier will be entitled to claim ITC in respect of goods, services or both used for zero rated supplies even though they might be non-taxable or even exempt supplies.
2. Every person making claim of refund on account of zero rated supplies has two options.
3. Export Options available for claiming refund:-

i. Either he can export under Bond/ LUT and claim refund of accumulated ITC

Or

ii. He may export on payment of integrated tax and claim refund thereof as per provisions of Section 54 of CGST Act, 2017.

4. Thus, the GST law allows the option to the supplier to claim refund upfront as integrated tax or export without payment of tax by executing a Bond/LUT and claim refund of related ITC of taxes paid on inputs and input services used in making zero rated supplies.

Is provisional refund available w.r.t zero rated supplies?

1. GST law provides for grant of provisional refund of 90% of the total refund claim, in case the claim relates for refund arising on account of zero rated supplies.
2. The provisional refund would be paid within 7 days after giving the acknowledgement, through GST form GST RFD-04.
3. The acknowledgement of refund application is usually issued within a period of 15 days.
4. The provisional refund would not be granted to such supplier who was, during any period of 5 years immediately preceding the refund period, prosecuted.

What refund provisions are applicable to Casual persons and Non Resident Taxable Persons?

1. A casual/Non-resident taxable person has to pay tax in advance at the time of registration.
2. Refund may become due to such persons at the end of the registration period if the tax paid in advance exceeds the actual tax liability on the supplies made by them.
3. The amount of excess advance tax shall not be refunded unless such person has filed all the returns during the time their registration was effective.

What refund provisions are applicable to the United Nations (UN) and other notified bodies?

1. Supplies made to UN bodies and embassies are exempted from payment of GST.
2. This exemption is being followed by way of a refund mechanism.
3. A taxable person making supplies to such bodies would charge the tax due and remit the same to government account.
4. However, the UN bodies and other entities notified under Section 55 of the CGST Act, 2017 can claim refund of the taxes paid by them on their purchases.
5. The claim has to be made within 6 months from the last day of the quarter in which such supply was received.

What is the Doctrine of Unjust Enrichment w.r.t Refund of GST

1. Under GST, a presumption is always drawn that the businessman will shift the incidence of tax to the final consumer, as GST is an indirect tax whose incidence is to be borne by the consumer.
2. Therefore, every claim of refund if sanctioned should pass the test of ‘Unjust Enrichment’ and is first transferred to the Consumer Welfare Fund.
3. This is not applicable in case of :-

i. refund of accumulated ITC

ii. refund on account of exports

iii. refund of payment of wrong tax (integrated tax instead of central tax plus state tax and vice versa)

iv. refund of tax paid on a supply which is not provided

v. refund of tax paid on a supply for which refund voucher is issued

vi. if the applicant shows that he has not passed on the incidence of tax to any other person:

I. If the refund claim is less than Rs.2 Lakhs, then a self-declaration of the applicant to the effect that the incidence of tax has not been passed to any other person will suffice to process the refund claim.

II. For refund claims exceeding Rs. 2 Lakhs, a certificate from a Chartered Accountant / Cost Accountant will have to be given.

In what cases will refund not be granted?

1. No refund of unutilised ITC shall be allowed where the goods exported out of India are subjected to export duty
2. No refund of ITC shall be allowed, if the supplier of goods or services or both avails of drawback in respect of central tax or claims refund of the integrated tax paid on such supplies
3. Defaulted in furnishing any return;
4. Defaulted in payment of any tax, interest or penalty
5. The Proper Officer is authorised to deduct from the refund due, any tax, interest, penalty, fee or any other amount which the taxable person is liable to pay but which remains unpaid under this Act or under the existing law.
6. Where an order giving rise to a refund is the subject matter of an appeal / further proceedings / pending proceedings and the Commissioner is of the opinion that grant of such refund is likely to adversely affect the revenue on account of malfeasance or fraud committed, he may, after giving the taxable person an opportunity of being heard, withhold the refund till such time as he may determine.
7. The amount of advance tax deposited by a casual taxable person or a non-resident taxable person shall not be refunded unless such person has furnished all the returns required under section 39.
8. No refund shall be paid to an applicant, if the amount is less than Rs 1000.

What forms are required to be filed for claiming refund?

Applicant	Form
Person other than the person (UNO etc.) notified under section 55	GST RFD-01
Person notified under section 55 (UNO etc.)	GST RFD-10

What is the time limit for application of refund?

Applicant	Time Limit
Person other than the person (UNO etc.) notified under section 55	Before the expiry of 2 years from the relevant date
Person notified under section 55 (UNO etc.)	Before the expiry of 6 months from the last day of the quarter in which such supply was received

If the refund amount is not been credited to the bank account of the Applicant within 60 days from date of receipt of application, interest @ 6% is payable on the refund amount starting from the date immediately after the expiry of sixty days from the date of receipt of application till the date of refund of such tax.

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