GST Refund for Exporters & Application Time Limit

GST Refund for Exporters & Application Time Limit

Introduction - GST Refunds

The word refund, in simple terms, means an amount of money that is given back to a person upon happening or occurring of some event. In taxation parlance, refund refers to any amount that is due to the taxpayer from the tax administration due to excess payment of taxes or any other reason.


Usually when the GST paid is more than the GST liability a situation of claiming GST refund arises. Refunds under GST are nowadays an open issue which is a problem for almost all class of taxpayers, majorly exporters which is directly impacting their working capital.

The cash flow and working capital requirements of manufacturers and exporters could be adversely affected if a refund is delayed. As a result, one of the intentions of the implementation of GST is to ensure that the refund process is smoother so that manufacturers and exporters do not face issues due to delays. By ensuring that the refund process is facilitated quickly, tax administration becomes more effective. Therefore, a standardised form has been created to make claims for refunds. The procedure for making claims can be completed online in a timely manner.


Situations that can lead to Refund Claims

There are certain events where refund arises. Let us check out the transactions in details.
  1. Exports of goods or services (including deemed export) goods/services under claim of rebate or Refund
  2. Refund of tax paid on purchases made by Embassies or UN bodies
  3. Supplies to developers and units in special economic zones
  4. Refund of accrued input tax credit on account of inverted duty structure
  5. Refund of pre-deposit
  6. Refund arising from order, judgment, direction or decree of the Appellate Tribunal, Appellate Authority or any court of law
  7. Refund of taxes when embassies make purchases
  8. Finalisation of provisional assessment
  9. Excess payment of tax is made due to mistake or omission
  10. Refund due to issuance of refund vouchers for taxes paid on advances against which commodities or services haven’t been supplied
  11. Tax Refund for International Tourists
  12. Refund of SGST and CGST paid by considering the supply in the course of inter-state commerce or trade

Types of GST Refunds

There are several types of GST refunds namely refunds on account of: 
  1. Excess payment of tax due to mistake or inadvertence
  2. Excess balance in Electronic Cash Ledger
  3. Export with payment of IGST or under Bond/LUT
  4. Supplies made to SEZ unit/developer on payment of IGST or under Bond/LUT
  5. Inverted duty structure
  6. Deemed Exports
  7. Persons holding UIN
  8. Miscellaneous refunds

Documents Required for GST Refund

Applicants who wish to make a refund claim will have to file elaborate documents in addition to the refund claim. The documents that have been prescribed for the same are standard. Therefore, for each claim, the primary document that has to be submitted is a statement of relevant invoices relating to the claim. If the refund is made on account of export of services, not including the statement of invoices, the relevant bank realisation certificates verifying receipt of payment in overseas currency should also be furnished. In case a claim is made by the supplier to the Special Economic Zones (SEZ) unit, the authorised officer will have to make an endorsement verifying the receipt of such commodities or services in the SEZ and submit the same along with the other documents. Moreover, the SEZ unit will also have to provide a declaration stating that ITC of the tax paid by the supplier has not been availed.


Refund Process under GST

A person claiming refund of tax or interest or any other amount paid must file an application for refund in Form GST RFD - 01 before the expiry of 2 years from the date of payment. This means that if excess GST is paid in the month of November 2017, GST refund application can be submitted until November 2019.




Here is a Step by Step Guide to File RFD – 01 on GST Portal:

Step 1: Login to the GST portal.

Step 2: Go to ‘Services’ > ‘Refunds’ > ‘Application for Refund’



Step 3: Select ‘Refund of Excess Balance in Electronic Cash Ledger’ and click on ‘CREATE’.



Step 4: Once you click on ‘CREATE’ in the above step, balance amount available in Electronic Cash Ledger will be auto-populated in the form.



Step 5: You can enter values of the refund to be claimed in the editable ‘Refund Claimed’ table. The refund amount can be less than or equal to the amount available in Electronic Cash Ledger.
Click on “Click to view Electronic Liability Ledger” to get details of liabilities/dues relating to returns/other demands.



Step 6: Click on “GO BACK TO REFUND FORM” after viewing the outstanding demand.



Step 7: Select the bank account (in which you want the refund to be credited) from the drop-down.



Step 8: To upload the supporting documents, please follow the steps below:
  1. Give the description to the document
  2. Click on “Choose File” to add the document
  3. Click on “Delete” icon to delete the uploaded document
Click on “SAVE” after completion of uploading the document



Step 9: Click on “PREVIEW” to download the form in PDF.
After reviewing the draft, click on “PROCEED” to submit the form.



Step 10: Select the checkbox in the declaration. Select the name of the ‘Authorised Signatory’ from the drop-down.
Based on the type of your organisation click on “SUBMIT WITH DSC” or “SUBMIT WITH EVC”.



In case of DSC, select the certificate of the authorised signatory and click on ‘SIGN’ button.
In case of EVC, enter the OTP received on the mail ID or mobile number of the authorised signatory and click on ‘VERIFY’.

Step 11: Once RFD-01 is filed ARN will be generated and “Refund ARN Receipt” can be downloaded as PDF document from ‘Services’> ‘Refunds’> ‘My Saved/ Filed Applications’.



Filed applications can be tracked using the “Track Application Status” under Refunds.
After inspection by a GST authorities refund amount will be credited to the applicant bank account.

Note: There shall be no refunds where the amount of refund is less than Rs. 1,000/-.


Scrutiny of the refund application

As per norms, it would take about 30 days to process a refund application. Where the refund claim exceeds a prescribed amount, then the same shall be subjected to an audit process. If the same qualifies for a refund, then an order shall be passed to that extent, or if it meets the criterion for being “unjustly enriching” the taxpayer, then the amount shall be transferred to the Consumer Welfare Fund. The above declaration may be required to be certified by a Chartered Accountant.


Refund Order

When the taxpayer claims refund of monies arising out of exports of goods or services, then an authorised officer can issue a provisional refund order in Form RFD-04 of an amount of 90% of the refund claim. Such a provisional refund can be made when the taxpayer:
  1. Has not been prosecuted for evading taxes for an amount exceeding Rs. 250 lakhs over a period of 5 years.
  2. Has a GST compliance rating of more than 5 out of 10.
  3. Has no appeal or review pending with respect to refunds.
  4. Where the authorised officer feels that documents are in consonance with law, then he may pass a final order to that effect.



Delay in Refund and Interest

According to the GST law and recommendations, a refund application is to be processed within a period of 90 days. If the refund application is not processed within said period then a interest at the rate of 6% is recommended.

According to Nirmala Sitharaman Ji (Commerce and industry minister) who spoke for the concern of exporters on delay in refund, that the refunds under GST shall be processed within a period of 7 days. If same is delayed more than 2 weeks, then refund will be provided with interest.


Exceptional Scenarios of GST Refund

Following are few exceptional GST refund rules, India might come across:
  1. Tax on supply of goods regarded as deemed exports. E.g.: Supply of goods or services to an SEZ (Special Economic Zone) or EOU (Export Oriented Unit).
  2. Tax is refundable as a consequence of a judgement, decree, order or on the direction of an Appellate Authority, Appellate Tribunal or any court.
  3. Tax has been paid on a supply which has not been provided, either wholly or partially, and for which an invoice has not been issued.
  4. Tax wrongly collected and deposited with the Central or State Government. If a person has paid CGST and SGST on an interstate supply or IGST on an intrastate supply, the person is eligible for refund of the amount once the tax has been remitted correctly.
  5. IGST paid on supply of goods to tourists travelling out of India, if the goods are taken out of India.

Conclusion

Processing of the refund applications under GST is expected to be a faster and smoother process. Since all the data is going to be uploaded electronically , the verification and scrutinization of refund applications would be faster.




For more information on this visit https://www.taxaj.com/





Frequently Asked Questions


1. Which supplies would be considered as zero rated?
In terms of Section 16(1) of IGST Act, following supplies are considered as zero rated
(a) export of goods or services or both; or
(b) supply of goods or services or both to a Special Economic Zone developer or a Special Economic Zone unit.


2. Whether Provisional Refund is allowable for all refunds under GST?
No. Section 54(6) of CGST Act provides for grant of provisional refund of 90% of the total refund claim, in case the claim relates to refund arising on account of zero rated supplies. Thus only refund claims where refund arises on account of zero rated supply will be entitled to provisional refund.


3. What is the time limit within which provisional refund has to be sanctioned by the proper officer?
The provisional refund has to be sanctioned within 7 days from date of acknowledgement.


4. What would happen if exports have been made without submitting any Bond/LUT. Will refund be denied on account of such exports?
No. Substantive benefits of zero rating will not be denied where it has been established that exports in terms of the relevant provisions have been made. The delay in furnishing of LUT in such cases may be condoned and the facility for export under LUT will be allowed on ex post facto basis taking into account the facts and circumstances of each case. Reference may be made to Circular No.37/11/2018-GST dated 15th March 2018.


5. In case of supplies made to Merchant Exporters, will the supplies so made be treated as zero rated for the supplier?
No. Such supplies are considered as normal supplies. However, if the manufacturer makes supplies by fulfilling conditions under notification no. 40/2017-Central Tax (Rate) dated 23.10.2017 (corresponding IGST notification no.41/2017-Integrated Tax (Rate) dated 23.10.2017) and paying tax @ 0.1%, he can claim refund of unutilised ITC on account of inverted duty structure.


6. How to calculate GST refund?
Let’s take a simple case of excess tax payment made.
Mr. X’s GST liability for the month of March is Rs 5000. But due to mistake, Mr. B made a GST payment of Rs 50000.
Now Mr. X has made an excess GST payment of Rs 45000 which can be claimed as a refund by him. The time limit for claiming the refund is 2 years from the date of payment.


7. How to claim GST refund?
The refund application has to be made in Form RFD 01 within 2 years from relevant date. The form should also be certified by a Chartered Accountant.


8. I am an exporter of service and the service is fully exempt from tax but I am paying GST on input service. Can I claim refund of input tax credit?
In case of export, tax paid on the input service can be claimed as refund under GST.


9. Can United Nations Organisation claim refund?
Yes. UNO entities are entitled to claim refund of IGST/CGST/SGST paid on inward supplies of goods and/or services.


10. Is there any condition to claim refund of unutilised ITC?
Yes. No refund of input tax credit shall be allowed if the supplier of goods or services claims refund of the output tax paid under the IGST Act,


11. Can the amount of refund sanctioned be adjusted towards any tax payable by the taxable person?
Yes, the refund due to taxable person can be adjusted towards tax, interest, penalty or any other amount which the taxable person is liable to pay but which remains unpaid under the Act or under any earlier law.


12. Has any minimum amount been specified below which no refund can be claimed?
No. However, it must be noted that if the amount of refund is less than rupees 1,000/-, then no refund can be paid.


13. Who will process/disburse refund of IGST paid on export of goods?
As per Rule 96, the refund of IGST paid on export of goods is processed and disbursed by Customs.


14. Are refunds of IGST on export of goods automated under the GST Law?
Yes. The IGST refund module has an in-built mechanism to automatically grant refund after validating the Shipping Bill data as available in ICES with the GST Returns data transmitted by GSTN. The matching between the two data sources is done at Invoice level and any mis-match of the laid down parameters returns shows error code.


15. How can refunds of excess balance in the electronic cash ledger be claimed?
Excess balance in the cash ledger after making good all liabilities, would be available as refund to the registered person. Presently this refund is also available through RFD-01A procedure. Section 49(6) enables grants of refund of excess balance in the cash ledger.




                                                                                                                                                                               Ramesh Kumar Gupta (Team Taxaj)




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