Refund provisions are often the most advantageous aspects of any tax system, and the Goods and Services Tax (GST) Act is no exception. Businesses, especially associations, structure their operations to fully leverage these refund provisions under the GST framework.
This article serves as a comprehensive guide for taxpayers, offering a clear overview of the critical considerations when applying for refunds. It covers all relevant Sections, Rules, and Circulars up to 31 March 2020, ensuring that refund application are filed correctly and efficiently.
To facilitate understanding, we will break down the refund process into the following key areas:
When filing GST refund applications, it is essential to be aware of various key considerations and guidelines to ensure a smooth and efficient process. Below are some important points to keep in mind:
The procedure for filing a GST refund application involves several steps, with specific forms required at each stage. Below is an overview of the process and associated forms to ensure compliance and efficient processing:
The application for refund shall be supported by various documents depending upon the category of refund. The online portal provides facility to upload 10 files of 5MB each. The application is transferred to the jurisdiction officer for the purpose of further processing
If any deficiency is noticed in the application submitted by the taxpayer, the jurisdictional officer shall issue deficiency memo in Form RFD-03 within 15 days of submission of application, requiring the taxpayer to file fresh refund application after rectification of deficiencies. Any amount of Input Tax Credit / Cash debited from Ledgers shall be re-credited automatically in the ledgers of the taxpayer. Important point to be noted is that the application filed after Deficiency memo is treated as a fresh application and the limitation period of 2 years shall also apply to the new application
If the refund application is complete in all aspects, acknowledgement in Form RFD-02 shall be issued within 15 days of submission of application. Once an acknowledgement has been issued no deficiency memo on whatsoever grounds can be issued by the officer.
Balance lying in Electronic Cash ledger, which can be on account of excess challan payment or due to excess TDS deduction can be claimed as refund under this category
GST refers to Goods and Services Tax which subsumes all taxes such as Sales tax, Service tax, Excise duty etc. into GST. GST registration is required primarily if your annual sales are more than Rs. 20 Lakh. Even if your sales are less than Rs. 20 Lakh, we suggest that you voluntarily opt for GST registration because:
If the determination of assessee goes wrong i.e. assessee has short paid any taxes or not paid any taxes or has wrong availed and utilized any input tax credit or has erroneously been refunded, then, under such circumstances demand would be raised by the GST officials by way of issuing GST notices - to be called as Show cause notices under taxation parlance.
Cancellation/Surrender of GST registration simply means that the taxpayer will not be a GST registered person any more. He will not have to pay or collect GST.
GST registration amendment maybe required in some cases, wherein wrong information about the taxable person under GST has been updated in the GST Portal. In this article, we look at the procedure for correcting mistakes in GST registration certificate.
Refund has been discussed in section 54 of the CGST/SGST Act.
“Refund” includes
(a) any balance amount in the electronic cash ledger so claimed in the returns,
(b) any unutilized input tax credit in respect of (i) zero rated supplies made without payment of tax or, (ii) where the credit has accumulated on account of rate of tax on inputs being higher than the rate of tax on output supplies (other than nil rated or fully exempt supplies),
(c) tax paid by specialized agency of United Nations or any Multilateral Financial Institution and Organization notified under the United Nations (Privileges and Immunities) Act, 1947, Consulate or Embassy of foreign countries on any inward supply
Refund of unutilized input tax credit is not allowed in cases where the goods exported out of India are subjected to export duty - as per the second proviso to Section 54(3) of CGST/SGST Act.
There is no such provision to allow refund of such unutilized ITC at the end of the financial year in the GST Law. It shall be carried forward to the next financial year.
Supplies to the Embassies or UN bodies will be taxed, which later on can be claimed as refund by them in terms of Section 54(2) of the CGST/SGST Act. The claim has to be filed in the manner prescribed under CGST/SGST Refund rules, before expiry of six months from the last day of the month in which such supply was received.
[The United Nations Organization and Consulates or Embassies are required to take a Unique Identity Number [section 26(1) of the CGST/SGST Act] and purchases made by them will be reflected against their Unique Identity Number in the return of outward supplies of the supplier(s)]
The GST return turnover threshold for filing differs between monthly and quarterly returns. Monthly returns are required for businesses whose annual turnover in the preceding financial year exceeded Rs. 5 crores.
Yes, the amount so refunded shall be credited to the Consumer Welfare Fund - Section 57 of the CGST/SGST Act.
Yes, refund has to be sanctioned within 60 days from the date of receipt of application complete in all respects. If refund is not sanctioned within the said period of 60 days, interest at the rate notified will have to be paid in accordance with section 56 of the CGST/SGST Act. However, in case where provisional refund to the extent of 90% of the amount claimed is refundable in respect of zero-rated supplies made by certain categories of registered persons in terms of sub-section (6) of section 54 of the CGST/SGST Act, the provisional refund has to be given within 7 days from the date of acknowledgement of the claim of refund.
Yes, refund can be withheld in the following
circumstances:
i. If the person has failed to furnish any return till he files such return;
ii. If the registered taxable person is required to pay any tax, interest or penalty which has not been stayed by the appellate authority/Tribunal/ court, till he pays such tax interest or penalty; The proper officer can also deduct unpaid taxes, interest, penalty, late fee, if any, from the refundable amount – Section 54(10) (d) of the CGST/SGST Act
iii. The Commissioner can withhold any refund, if, the order of refund is under appeal and he is of the opinion that grant of such refund will adversely affect revenue in the said appeal on account of malfeasance or fraud committed - Sec.54 (11) of the CGST/SGST Act.
If as a result of appeal or further proceeding the taxable person becomes entitled to refund, then he shall also be entitled to interest at the rate notified [section 54(12) of the CGST/SGST Act].
The registration provided under GST cancellation for specific reasons. The cancellation process can be instigated either by the department on its own initiative or by the registered individual applying for the cancellation of their registration.
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