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GST Refund: What is it and How to Claim it?

gst refund

More often than not, registered GST entities or individuals end up paying their Goods and Service Tax more than what is liable to be paid. This situation could arise due to the excess payment of tax in various situations explained below. As such, the amount paid is more than the liable amount leading to a discrepancy which is then returned to the business as a GST Refund. 

In course of time, the government and body governing over GST rules and regulations have tried to standardise the GST refund process. The individuals asking for a refund will be required to fill a form claiming for the refund. The process is entirely online and time-bound. 

What is GST Refund? 

On various occasions, the tax paid by an entity is more than the tax that the entity is liable to pay. When Tax Paid > Tax Liability, the registered user is entitled to a refund which is the difference between the Tax Paid and Tax Liability. Therefore, 

GST Refund = Tax Paid – Tax Liability
And the payment needs to be done by the governing GST body to the registered users. 

The claim for refunds can sometimes be a tedious process due to the rules and regulations that have been implemented by the governing bodies. Users are required to ensure they keep all the documentation safe and in one place before they file for their GST Refund.

Due to the current scenario, there is a delay in receiving GST Refund, so ensure you keep that in mind while filing for your refunds. 

Situations when GST Refund arises 

The relevant information of when a GST Refund situation can arise is mentioned in Section 54 of the CGST Act 2017, and provisional information is contained in Section 77 of the CGST Act 2017. A GST Refund claim can be submitted over the following occasions: 

  • Export of Goods and Services under claim of rebate or refund 
  • Refund on unutilized Input Tax Credit on account of exports without payment of tax
  • Supplies to Special Economic Zones, SEZ developers 
  • Refund on taxes made on purchases by the United Nations (UN) or embassy bodies 
  • Refund on unutilized Input Tax Credit on account of the inverted tax structure 
  • Refund on pre-deposit 
  • Refund on excess payment of tax 
  • Refund on supplier of tax paid on deemed export supplies
  • Refund on excess balance of electronic cash ledger 
  • Refund for ‘any other reason’ deemed necessary 

Situations when the GST Refund cannot be claimed or is rejected 

  • Refunds cannot be claimed when the goods exported out of India are subjected to Export Duty. 
  • If the supplier of goods and services avails of drawback or refund of IGST paid on such goods and services, then the claim for GST Refund is not admissible. 
  • In case of closing stock accumulated on account of Input Tax Credit, due to low volume or other reasons, the closing stock is not eligible for GST Refund. 

How to Calculate GST Refund? 

As mentioned above, the calculation of GST Refund is the difference between the tax paid and the tax liability. The difference could arise due to various reasons mentioned above. 

Let’s take, for example, Sridhar Enterprise is liable to INR 2,00,000 in taxes but due to advance tax paid and some other reasons, the taxes paid by them are INR 3,00,000. This leads to a discrepancy, and the situation of GST Refund arises. 

Hence,
GST Refund = Tax Paid – Tax Liability
                    = 3,00,000 – 2,00,000
                    = 1,00,000

Hence, Sridhar Enterprises need to fill a claim for GST Refund for an amount of INR 1,00,000. This is the most basic way to calculate the GST Refund amount that you are due to receive. 

How to file for GST Refunds? 

GST Refunds need to be filed within 2 years of the relevant date of the refund required on those particular goods and services eligible for refund. The relevant date is different during different circumstances and it’s always wise to cross-check the relevant date for your goods.

Once you have figured out your timeline, the form that needs to be filled in regards to the GST Refund is GST Form RFD 01. You can fill this form with the help of your tax advisor, chartered accountant or through the means of cloud accounting software. 

The form needs to be filled on the GST portal. Once the form has been filled correctly, the registered taxpayer will get a notification via the means of an SMS and email id on the registered mobile number and email id. 

The GST Refund form will make changes to the return and cash ledger, and it will decrease the carry forward input credit automatically. 

Post that, the relevant documents that are required to back the GST Refund are required and the taxpayer should ensure they have kept all the documents and invoices regarding those transactions safely. The GST refund application will take around 30 days to process. 

Once the application has been reviewed successfully, the GST Refund amount will be electronically credited to the registered taxpayers’ bank account directly via RTGS or NEFT.

How to track the GST Refund Application 

In case you wish to know the status of your GST Refund application you can also track your GST Refund. You can do this by logging onto the GST portal. Go to Services and then click on Track Application Status. Select the details such as the financial year for the GST Refund you are tracking or enter the ARN of the Refund. Once you have entered the details, you can track the status of the application. Whether it is still in process by the government or whether the amount has been credited and is yet to reflect in your registered bank account. 

In case you wish to update your bank account details, you may also do the same under this window. This option is possible when the bank account validation has failed. Once you have updated your bank account details, an OTP will be sent to the registered number to confirm these changes. 

Please note: An amount for less than INR 1000 is not eligible for GST Refund. 

Frequently Asked Questions(FAQs) about GST Refund 

  1. If I missed filing for GST Refund in a particular month can I file for them later on in the subsequent months to come?
    Yes. GST Refund is valid for a time period of 2 years from the relevant date. However, the relevant date is different in different situations and it is always wise to cross-check the relevant date from either your tax advisor or an online portal.
  2. What forms need to be filled to claim the GST Refund?
    Ideally, GSTR 2 and GSTR 3 needs to be filed to claim the GST Refund. However, if the registered taxpayer has already filed GSTR 1 and GSTR 3B forms, then no additional forms need to be filled for the GST Refund.
  3. How do you calculate the GST Refund amount?
    GST Refund is the difference between the tax that the registered taxpayer is liable to pay and the tax that has already been paid. If the tax paid is more than the tax liability, a situation of GST Refund arises and the amount is the difference between the Tax Paid and Tax Liability.
  4. How long does the government or the governing body take to pay the GST Refund?
    During general circumstances, the GST Refund process is quite seamless and the refund is credited to the registered taxpayers account in time. The GST Refund application takes around 30 days to process and once the process and application has been approved, it usually takes up to 7 days from the government’s end to disburse the GST Refund amount. However, lately due to the global situation and pandemic, GST Refunds for the year 2020 were delayed.
  5. Why is there a delay in GST Refund payments?
    Many times due to various reasons, the government can delay the GST Refund payments. The latest has been due to the pandemic and COVID-19, many of the GST Refund payments have been delayed on months end. However, just recently, the body governing GST has issued a statement saying all pending GST Refund payments will be cleared during a period from 15th May 2021 to 31st May 2021.

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