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August 17, 2020

How to calculate GST refund?

by Mahesh Mara in GST, GST Circular Notification

How to calculate GST refund?

Refund under GST includes refund of tax paid on zero rated supply of goods or services or both or on inputs used in making of taxable goods or input services used in making such zero rated supplies, or refund of tax on the supply of goods regarded as deemed exports, or refund of unutilised input tax credit.

Under GST any person claiming the refund of the tax, or the interest paid should make an application within a period of two years from the relevant date using the Form GST RFD-01 electronically.

A registered person may claim the balance available in the electronic cash ledger by filing the return as per the dates mentioned under GST.

What are the circumstances under which the refund is granted to taxpayer?

As per section 54(8) the principle of unjust enrichment is applicable in all cases of refund except in the following cases where the refundable amount shall, instead of being credited to the fund, be paid to the applicant, if such amount is relatable to –

a. Refund of tax paid on export of goods or services or both or on inputs or input services used in making such exports.

b. Refund of unutilized ITC in case of zero-rated supplies or accumulated ITC on account of inverted duty structure.

c. Refund of tax paid on a supply which is not provided, either wholly or partially, and for which involve has not been issued, or where a refund voucher has been issued;

d. The tax and interest, if any, or any other amount paid by the applicant, if he has not passed on the incidence of such tax and interest to any other person; or

e. The tax or interest borne by such other class of applicants as the government may, on the recommendations of the council, by notifications, specify.

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What is the documentary evidence required in case of refund of GST?

The application of refund shall accompany along with the following documentary evidence which establish that a refund is due to the taxpayer or applicant:

a. The reference number of the order and a copy of the order passed by the proper officer or an appellate authority or appellate tribunal or court resulting in such refund or the reference number of the payment of the amount to be deposited at the rime of filing of appeal before appellate authority or appellate tribunal

b. Where the refund is on account of export of goods then a statement containing the number and date of shipping bills of export and the number and the date of the relevant export invoices,

c. Where the refund is on account of the export of services, then a statement containing the number and the relevant Bank realization certificates or foreign realization certificates or foreign inward remittance certificates, as the case may be,

d. Where supply of goods made to SEZ unit or a SEZ developer then a statement containing the number and date of invoices as provided in rule 46 along with the evidence regarding goods admitted in full for authorized operations as endorsed by the specified officer of SEZ.

e. Where the refund is on account of supply of services made to a SEZ unit or SEZ developer then a statement containing the number and date of invoices, the evidence regarding the endorsement by specified officers of SEZ and the details of payment , along with the proof thereof, made by the recipient to the supplier for authorized operations defined under the SEZ act, 2005

f. In case, where the refund is on account of supply of goods or services or both made to a SEZ unit or a SEZ developer then a declaration to the effect that tax has not been collected from the SEX unit or the SEX developer.

g. Where the refund is on account of deemed exports than a statement containing the number and date of invoices along with such other evidence as may be notified in this behalf, till date the following have been notified.

h. Undertaking by the recipient of demand export supplies that no ITC on such supplies has been availed by him.

i. Undertaking by the recipient of demand export supplies that he shall not claim the refund in respect of such supplies and the supplier may claim the refund.

Acknowledgment by the jurisdictional tax officer of the advance authorization holder or export promotion capital goods authorization holder, as the case may be, that the said deemed export supplies have been received by the said advance authorization holder or export promotion capital goods authorization holder or a copy of the tax invoice under which such supplies have been made by the supplier, duly signed by the recipient EOU that the said deemed export supplies have been received by it.

Where the claim pertains to refund of any unutilized input tax credit under section 54(3) i.e. credit in case of inverted duty structure or Where the refund arises on account of the finalization of provisional assessment than the reference number of the final assessment order and copy of the said order

a. A statement showing the details of transactions considered as intra state supply but which is subsequently held to be inter-state supply

b. A statement showing the details of the amount of claim on account of excess payment of tax;

Where the claim of refund does not exceed Rs. 2,00,000 then a declaration to the incidence of tax interest or any other amount claimed as refund has not been passed on to any other person.

How to calculate GST on refund?

Refund of GST is calculated under the following two circumstances:

1. Refund in case of inverted duty structure:

Inverted duty structure means cases where the rate of GST on input goods or services supplied is more than the rate of GST on output goods or services supplied.

The CGSTRules,2017 stipulates that in the case of refund on account of inverted duty structure refund of ITC shall be calculated as per the below formula:

Refund Amount   =Turnover of inverted rated supply of goods and services × Net ITC Adjusted Total Turnover(X) Net ITC  (-)Tax payable on such inverted rated supply of goods and services

Where,

1. “Refund amount” means the maximum refund that is admissible;

2. “Adjusted Total turnover” means the sum total of the value of:

The turnover in a State or a Union territory, as defined under section 2(112), excluding turnover of services and the turnover of zero-rated supply of services determined in terms of clause (D) above and non-zero-rated supply of services,

Excluding:

The value of exempt supplies other than zero-rated supplies and the turnover of supplies in respect of which refund is claimed under sub-rule (4A) or sub-rule (4B) or both, if any, during the relevant period

3. “Relevant period” means the period for which the claim has been filed.

2. Refund of GST paid in case of export of goods or services under bond or Letter of undertaking:

Rule 89(4) stipulates that in the case of zero-rated supply of goods or services or both without payment of tax under bond/LUT in accordance with the provisions of section 16(3) of the IGST Act, 2017, refund of ITC shall be granted as per the following formula:

Refund Amount  =(Turnover of zero-rated supply of goods + Turnover of zero-rated supply of services)    
Adjusted Total Turnover
(X)Net ITC

Where,

1. “Refund amount” means the maximum refund that is admissible;

2. “Adjusted Total turnover” means the sum total of the value of:

The turnover in a State or a Union territory, as defined under section 2(112), excluding turnover of services and the turnover of zero-rated supply of services determined in terms of clause (D) above and non-zero-rated supply of services,

Excluding:

The value of exempt supplies other than zero-rated supplies and the turnover of supplies in respect of which refund is claimed under sub-rule (4A) or sub-rule (4B) or both, if any, during the relevant period

3. “Relevant period” means the period for which the claim has been filed.

Understanding with examples:

Case 1:

Mr. X is having ITC of Rs. 1,00,000 in his electronic credit ledger. Total turnover for the year is Rs. 50,00,000. During the export made under LUT bond is Rs. 30,00,000.

In this case, adjusted turnover is Rs. 50,00,000, Turnover of zero rated supply is Rs. 20,00,000.

Let us calculate the amount of ITC:

Refund amount = 30,00,000 X 1,00,000 = 60,000
50,00,000

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