Introduction to GST Refund

Predominantly, any taxpayer can become eligible for a refund on their GST payment if the tax paid is more than the GST liability . The process for GST refund is standardised and done online in order to avoid confusion .GST refund includes refund of tax on goods and/or services exported out of India or on inputs  or input services used in the goods and/or services which are exported outside India, or refund of tax on the supply of goods regarded as deemed exports, or refund of underutilised input tax credit as provided under section 38(2).

GST Payments

Before we delve into the details of the GST refund procedure, let’s quickly recap the type of payments a taxpayer has to make under the rules of GST.

The GST is basically divided into 3 Categories:

  • CGST – The tax which goes to the central government in case of supply of goods and services in the same state.
  • SGST– Part of the tax levied which goes to the state government for the supply of goods and services within the state.
  • IGST – Tax levied on the delivery of goods and services across state boundaries.

You can go ahead and take a look at the Difference between CGST, SGST, IGST

In addition to this, under GST a taxpayer has to make the following payments.

  • TDS– TDS or Tax deducted at source is a method of tax deduction in which the tax is deducted before making payment.
    Learn more about – TDS
  • TCS– TCS or Tax Collected at Source is essentially a method of tax collection from e-commerce aggregators. Basically, e-commerce sellers will receive payments after a deduction of TCS of 2 %.
    Learn more about TCS.
  • Reverse Charge- This is fundamentally a situation in which the liability to pay the tax falls on to the receiver instead of the supplier. Check out Reverse Charge under GST.
  • Interest, Penalty, Fees 

The current GST return procedures dictate that monthly sales report should be furnished in the GSTR-1. Once this procedure is done,  GSTR 3-B needs to be filed in order to claim Input Tax Credit. In addition to this, if a GST refund has to be claimed, the taxpayer can claim the same using the forms for the refund under GST.

When to make GST payments?

In general, the payments for GST have to be made by the 20th of the next month from the date of availing the goods and/or services.

Electronic Ledgers

Electronic Ledgers are basically the account of payments made by the taxpayer. It is basically the e-passbook for GST payments. The e-ledgers are available to all taxpayers who apply for GST on the GST portal backed by the GSTN (Goods and Services Tax Network). There are three types of ledgers under the GST rules and regulations.

Cash Ledger–  Information about the tax deposited to the government in cash.

Credit Ledger –  This basically consists of the Information about the Input Tax Credit

Liability Ledger-  The tax liability of the taxpayer (net)  for that particular month will be displayed in this ledger.

Making GST Payments

The procedure for making payments towards the GST can be done via 2 methods:

Payment through Credit Ledger– The credit ledger containing the credit of the ITC can by contributed towards the payment of GST payment. The credit can only be utilised for the payment of taxes . Interest  payment, Late fees and interest can not be paid via the credit ledger.

Payment through Cash Ledger–  The cash ledger can be utilised for payment of GST via both the online or the online methods. All a taxpayer has to do is to make the payment and generate/ acquire the challan for payment.

Tax liabilities in excess of ₹ 10,000 have to be paid via the online method only.

You can also use third-party GST Software for making payments and GST return filing.

Late-Payment Penalty

In case a taxpayer fails to pay the due gst liability, they have to pay an interest of 18% on the tax value. In addition a penalty might be imposed on the defaulter. Penalty is either 10% of unpaid tax or ₹ 10,000 whichever is higher.

What is GST Refund?

In a nutshell GST refund is a process to claim the excess GST paid by taxpayer. Whenever a tax paying entity pays taxes greater than their liability they become eligible for a refund. Claiming refund under GST has been a welcome change from the Manufacturing, and exports sector of India especially 100% Export Oriented Units and Special Economic Zones .The GST refund process is simple and  done online.

The GST refund application has to be drafted via the Form RFD -01.  Below are the types of GST Refund (s)

gst refund

Types of GST Refund

GST Refund Eligibility

Here are the conditions under which a taxpayers  become an eligible for refund under the GST regulations.

  • Exports in cases where there is a cumulative balance of ITC with regards to such exports or under a claim of rebate.
  • Extra Payment of tax due to an error
  • Accumulation of Credit where the output tax is zero or the output tax is exempted
  • Declaration for eligibility after a provisional assessment
  • Appeals meant for a respondent , deposits made for holding an appeal will be refunded to the appellant.
  • Investigation by  adjudicating officer reveals that taxpayer is entitled to a refund.
  • Foreign Embassies or United Nations Bodies are eligible for a GST refund for purchases made by them.
  • When credit gets accumulated because the output tax rate is lower than the input tax rate.
  • Suppliers  who receive discounts via credit notes are eligible for refund
  • GST paid by international tourists can be refunded

GST Refund Procedure

As discussed above, the GST refund can be done by submitting the RFD-01 form. A certified and in practise chartered accountant (CA) has to certify this form in order to complete the GST refund process.  The application for the refund can be submitted within 2 years of the relevant date.

Relevant Date Criteria

The definition for the relevant date for filing for the tax refund under GST can vary according to the situation . Here are the criteria for deciding the relevant date for claiming the refund.

  • Goods exported through air or sea will have a relevant date of the departure of the vehicle from India.
  • Supply Goods carried via land vehicles will have a relevant date when the goods crossover the land frontier of India.
  • Goods sent via post will be relevant for a refund on GST on the date of dispatch of goods from the post office
  • When supply constitutes the delivery of services where services are completed before reciept of payment, the relevant date will be the payment receipt date .
  • If services are performed on the basis of receipt of an advance, relevant date becomes the invoice date.
  • Where the claim for refund under GST is made in lieu of underutilised excess ITC, relevant date becomes the end of the financial year for which the claim for refund has been made

  • Goods which are supplied  for deemed exports, i.e. supplies to SEZ  or 100% Export Oriented Units the relevant date is return filing date for such deemed products.
  • For the refund arising due to an order passed in favour of a person making an appeal,  the relevant date becomes date of the order.
  • If a tax is adjusted after payment of tax followed by provisional assessment which gives rise to a refund, the relevant date becomes the date of adjustment of the tax.
  • When person claiming the GST refund is not the supplier relevant date will be the date on which products are received
  • In every other cases, relevant date is the date of payment of tax.

Filing RFD-01

Here are the consolidated steps to to file the RFD-01 Form to apply for a refund.

Step 1: Login to the GST Portal with your GSTIN (GST Identification Number)

Login to GST portal for gst refund claim

GST Login Page

Step 2:  Click on Services >>>Refunds>>> Application for Refund

GST refund procedure

Login to GST Portal

Step 3 : Select the Refund Type and Click CREATE

Select Refund Type

Select Refund Type

Step 4:  A screen  reflecting all the electronic ledger balance amount eligible for refund  will be in front of you assoon as you click CREATE.
Step 5: Select a bank for the credit of refund amount.
Step 6: Click the declaration given in the checkbox and select the Authorized Signatory . Depending on the type of organisation it will either be “Submit with DSC” or “Submit with EVC”

The GST refund process PDF (ARN  Reciept) will be generated. A GST officer will inspect the refund claim and GST refund process will be initiated and the amount will be credited in the account.

In addition to this,

  •  Form RFD-02 will be auto-populated  for future references and will be sent via SMS and mail.
  • Form RFD-03 will be sent to the taxpayer i f there are some deficiencies in the GST refund application.
  • Additionally,  there are a few documents to be added to the e-refund application .
  • If the refund amount is below ₹ 5 lakhs, taxpayer has to make a declaration stating that refund amount has not been transferred to another person.
  • If GST refund amount is in excess of ₹ 5 lakhs, taxpayer also has to attach a proof of payment of tax.
  • If refund claiming entity is a Foreign Embassy/Consulate, United Nations body,  refund application has to be given within 90 days from the end of quarter in which the goods/ services were procured. This application will be made in the form RFD-10

Review of GST Refund Application

GST Refund Order

Form RFD-04: Is basically a provisional refund order . This GST refund order is for 90% of the amount of the refund claim. This provisional will be issued to all taxpayers with:

  • No prosecution record for tax evasion for amounts in excess of ₹ 250 Lakhs over a period of 5 years
  • GST compliance rating higher than 5 /10
  • No appeal or pending reviews w.r.t to refunds.

Refund application will be processed within 60 days . If the officer deems the refund to be true, they will pass a final order  in the Form RFD-05.  In case no final order is passed within 60 days, taxpayers receives an Interest of 6% Per-Annum  for the time period in the excess of 60 days.

Form RFD-06 will be passed when the refund  has to be adjusted against  taxable amount.

Form RFD-07:  Show cause notice for complete rejection of refund application

Form RFD-08: Payment Advice

Form RFD-09: In case of delayed payments , order for late payment interest

GST Refund of Input Tax Credit (ITC)