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What is Refund of GST?

The taxpayer may have excess balance in Credit ledger or cash ledger due to certain reasons like:
  • The rate of tax on input is higher than rate of tax on output i.e. he is covered under inverted duty structure. In such situation, credit gets accumulated.
  • Ex: In case of textile industry, Yarn (Input) is purchased at the rate of 12% whereas fabric (output) is chargeable at the rate of 5%. So any person engaged in business of weaving may get refund of this accumulated credit on account of inverted duty structure.
  • The taxpayer engaged in Export of goods or services or both may export without payment of tax under LUT/BOND. Under such situation, Input tax credit charged on purchases made by him gets accumulated in his credit ledger.
  • Any other reason, as may be specified in GST law.
  • Question arises here is that can he get refund of such accumulated credit or excess payment of taxes? The answer is YES! The taxpayer can convert such accumulated credit to his bank balance! The GST law permits refund of the same. Timely refund mechanism is essential in tax administration, as it facilitates trade through release of blocked funds for working capital, expansion and modernization of existing business.

    In GST, refund of taxes is allowed in certain circumstances which are as follows:

  • Export of Goods or services
  • Supplies to SEZs units and developers
  • Refund of accumulated Input Tax Credit on account of inverted duty structure i.e. Tax paid on input is higher than tax liability on output
  • Excess payment of tax by mistake
  • Tax paid on advances received but later on goods or services were not supplied
  • Refund of CGST & SGST paid by treating the supply as intra-State supply which is subsequently held as inter-State supply and vice versa.
  • Deemed Export supplies
  • Refund of taxes on purchase made by UN or embassies etc.
  • Refund arising on account of judgment, decree, order or direction of the Appellate Authority, Appellate Tribunal or any court
  • Finalization of provisional assessment
  • Refund of pre-deposit
  • Refunds to International tourists of GST paid on goods in India and carried abroad at the time of their departure from India

  • What is process of filing refund application?

  • The process of filing refund application is online. The form RFD-01 is to be submitted along with various documents, certificates, declarations etc. The application is then examined by jurisdictional officer and acknowledgment is served, if application is found to be complete in all respect.
  • Then after application is verified, documents are checked and refund amount is calculated by the jurisdictional officer. If any information is found incomplete or not found, notice is served upon the taxpayer and he has to submit reply. Finally, Jurisdictional officer sanctions the refund order and payment advice is issued by the department. The whole process is lengthy and involves large amount of paper work.

  • Frequently Asked Questions

    Q. Can refund application be filed any time or is there any restriction of time limit?

    A. Refund application can be filed within 2 years from the relevant date. The relevant date is different for different situations of refund such as:

  • In case of refund under Inverted duty structure, due date of filing GSTR-3B for that particular month
  • In case if the goods are exported by sea or air, the date on which the ship or the aircraft in which such goods are loaded, leaves India.
  • In case if the goods are exported by land, the date on which such goods pass the frontier.
  • In case if the goods are exported by post, the date of dispatch of goods by the Post Office concerned to a place outside India.
  • Q. Is there any condition of minimum amount below which refund application cannot be filed?

  • A. Refund application cannot be filed if the amount of refund to be claimed is less than Rs 1000. This limit of Rs 1000 is applicable to CGST, SGST and IGST separately.

  • Q. Is there any time limit prescribed for Department to issue refund?

  • A. The refund should be paid to taxpayer within 60 days of filing refund application. Failure to comply with this time limit attracts interest at the rate of 6% p.a. from expiry of 60 days till actual date of credit in taxpayer’s bank account.