How to Claim GST Refunds?

The Goods and Services Tax (GST) has streamlined India's indirect tax system, and one of its crucial aspects is the provision for claiming GST refunds. GST refunds enable registered taxpayers to recover excess GST payments, and the process is essential for maintaining tax fairness and business competitiveness. In this blog, we will walk you through the steps on how to claim GST refunds in India.

1. Eligibility for GST Refunds:

Before diving into the refund process, it's crucial to understand the scenarios in which you are eligible to claim a GST refund:

Export of Goods/Services: Tax paid on inward supplies of goods or services that have been exported is eligible for a refund. This includes inputs or input services used in goods or services exported.

Unutilized Input Tax Credit: Refunds can be claimed when you have unutilized input tax credit due to output supplies being exports or zero-rated supplies.

Inverted Duty Structure: If the rate of tax on inputs is higher than the rate of tax on output supplies, and you have unutilized input tax credit, you can claim a refund. Note that this does not apply when supplies are NIL rated or fully exempt.

2. Filing an Application for GST Refund:

To initiate the GST refund process, follow these steps:

  • File an application for refund in Form GST RFD-1 on the GST portal.
  • Ensure that you submit the refund application within two years from the relevant date, which varies depending on the type of refund:
  • For goods exported by sea or air: The relevant date is the date the ship or aircraft in which the goods are loaded leaves India.
  • For goods exported by land: The relevant date is the date the goods pass the frontier.
  • For services exported (where the supply of service has been completed prior to the receipt
  • For services exported (where payment has been received in advance, prior to the date of issue of invoice): The relevant date is the date of issue of the invoice.
  • For unutilized input tax credit: The relevant date is the end of the financial year in which the claim for tax refund arises.If you have a balance in the electronic cash ledger, you can claim a refund through the relevant monthly return, such as Form GSTR-3 (for regular dealers) or Form GSTR-4 (for composition dealers).

3. Documents Required for GST Refund:

The documents needed to support your GST refund application vary based on the refund amount:

  • If the claimed tax refund amount is less than INR 5 Lakhs, you need to file a declaration certifying that the incidence of tax or interest being claimed as a refund has not been passed on to another person. This declaration should be based on the documents or other evidence available with you.
  • If the claimed refund amount exceeds INR 5 Lakhs, your application for a refund must be accompanied by.
  • Documentary evidence to establish that the refund is due to you.
  • Documentary or other evidence to establish that the amount was paid by you and that the incidence of the tax or interest has not been passed on to another person.

4. Provisional Refund and Order for Refund Claims:

For GST refunds related to the export of goods and/or services, the authorized officer will typically follow this process:

  • Refund Provisionally: The officer refunds 90% of the total refund amount claimed on a provisional basis in Form GST RFD-4.

Conditions for Provisional Refund:

- No tax evasion prosecution exceeding INR 250 Lakhs in the past 5 years.

- A GST compliance score of at least 5 out of 10.

- No pending appeal, review, or revision on the refund amount.

Order for Final Refund: After verifying the documents provided, the officer will issue an order for the final settlement of the refund claim. This is done by issuing Form GST RFD-5 within 60 days from the date of receipt of the application.

Interest on Delayed Refunds: If the refund is not sanctioned within 60 days, interest on the refund amount will be paid for the period after 60 days until the date of the actual refund of tax.

Read Also This - What is the GST Refund Process

In conclusion, claiming GST refunds in India is a crucial process for businesses to recover excess GST payments. It's important to ensure that you meet the eligibility criteria and submit the required documentation accurately and on time. The GST refund mechanism promotes tax efficiency, export competitiveness, and overall economic growth. Therefore, businesses should be well-versed in the process to make the most of this opportunity.

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