IGST: Refund process, eligibility, errors and challenges

Under Rule 96 of the CGST rule,2017, an exporter may be eligible for a refund of the tax when they ship goods and services outside of the nation after paying the applicable rate of IGST. the refund process differs for goods and services.

For export of goods:

The exporter need not file a refund application because the shipping bills or bill of export is considered one. Among the three required export documents, a shipping bill is an application for customs clearance. It is filed on the Indian customs website, ICEGATE. An application for an IGST refund is deemed to have been submitted with a shipping bill when:

• The carrier files an Export General Manifest (EGM) or export report with the number and date of the shipping bill. When goods are transported by sea or air, an EGM is filed, whereas an export report is filed for transportation by land. Both documents are considered as proof of shipment and export.
• The exporter furnishes a valid GST return in form GSTR-3B, where a valid return means self-assessed tax has been paid in full for the tax period for which a refund is sought. A monthly summary of exports, that includes information on GST to be paid, input tax credits claimed, and all other details is provided in GSTR-3B. The amount of tax you pay is decided with the help of GSTR-3B.

These are the two conditions for the refund application, remember refunds are granted on the basis of two returns- GSTR-3B and GSTR-1.

For export of services

In order to claim a refund for an input tax credit on exports made under LUT or bond without paying IGST, the exporter must submit a refund application in form GST RFD-01, which is the same as the required form. The application follows the same procedure as one for exports made without payment of tax.

To get a refund for the IGST you paid, you need to understand some points that ensure that real exporting businesses get benefit from the refunds and are not misused by others. So here are those points to consider:

• Goods/Services Export: The exporting goods and services need to physically leave India, whereas the services should be used outside of India.
• Have a GST number: The exporters need to have a Goods and Services Tax Identification Number.
• Keep Records: The records of invoices, shipping bills, and other export-related papers should be carefully maintained.
• Follow Customs Rules: Your export goods should meet customs rules and your export declarations should be spot on.
• No extra Input Tax Credit: Do not pile up the unused input tax credit, having too much could mess up your refund ability.
• Submit GST Returns Regularly: Your GST returns, GSTR-1 and GSTR-3B should be filed on time, any delay or missed filing can cause a refund of IGST troubles.
• Check Bank Details: Accurate and confirmed bank details should be provided for refund payments to avoid any bumps.
• Follow the Law: To be eligible, follow the legal rules and guidelines associated with exports and GST.
• Lawsuits: Exporters should not have any unsettled legal matters or issues connected to the export business or meeting GST rules.
• Meet Document Deadlines: All the export papers should be handed over to the customs office and related spaces on time.

The process of claiming an IGST refund for exports has its highs and lows, at least that is the experience most exporters share. Getting refunds is bound to be an issue that exporters encounter and the following reasons may hinder the achievement of this goal. Let's take a look at a few common roadblocks:

• A lot of paperwork is needed for the refund: This can include things like bills of lading, invoices, and export declarations. These documents can be tough to manage and understand.
• Approval from customs is vital: If the process is delayed, refunds can also be deferred.
• Not all businesses have knowledge about the refund of the IGST roadmap: Mainly if they are on the smaller side, they might not have the eligibility norms.
• The GST digital portal site might face technical issues or be offline: This can disrupt the refund process.
• The GST rules change often: Staying in a loop for business can be hard.
• A business with many supply links can find it tough to keep track of input tax credits: This could complicate the refund process.
• Payment troubles can happen: Giving wrong or unchecked bank details can cause issues with receiving refunds.
• When there is no clear communication between GST authorities and exporters: This can raise doubts about the refund status.
• If any legal issues remain unresolved or disputed about exports or GST rules: This could hinder the refund system.
• Data match-up can become difficult: When the customs system and GST site don't sync up well, it can cause discrepancies.

GSTR - 1

• GSTR 1 contains details of all the sales transactions of a registered dealer for a month: It includes the sales made during the period and must be filed monthly.
• The GSTR 1 filed by a registered dealer is used by the government to auto-populate GSTR 3 for the dealer and GSTR 2A for dealers to whom supplies have been made: This helps streamline the GST filing process.
• Each registered person is required to file GSTR 1 irrespective of whether there are any transactions during the month or not: Even if no transactions have occurred, GSTR 1 must still be filed.
• GSTR 1, once filed, cannot be revised: Mistakes in the return can be corrected in the next month's GSTR 1. For example, errors in September's GSTR 1 can be rectified in October's GSTR 1.
• To assist exporters in claiming GST refunds, Table 6A of Form GSTR 1 has been added as a new tab on the GST portal: This addition helps exporters in claiming refunds more efficiently.
• What is Table 6A from GSTR 1? Table 6A is a section in GSTR 1 that helps exporters report details relevant for claiming GST refunds.

Table 6A of form GSTR 1 has been introduced to help exporters claim GST refunds on goods exported out of India. There is currently no invoice-level data in the GSTR 3B return, which is submitted monthly by all taxpayers. Also, GSTR 1 was not filed, and exporters were finding it hard to claim GST refunds. Therefore, Table 6A of Form GSTR 1 was introduced by the government to speed up the GST process for exporters. The person involved in exporting goods from India to claim a GST refund must file Table 6A of form GSTR 1. Once the details of export invoices are filed on the GST Portal under Table 6A, the details will be matched with the details provided in the shipping bill filed with the customs department and the amount mentioned in the GSTR 3B return. When all the information matches, then the GST refunds on exports will be quickly processed by the government.

What is GSTR 3?

GSTR 3 is a monthly return with summarized details of sales, purchases, and sales during the month, along with the amount of GST liability. This return is automatically produced by using data from GSTR-1 and GSTR-2. the amount of GST liability for a given month will be displayed on GSTR-3. The taxpayer should pay the tax and file the return.

Every registered person is required to file GSTR-3, whether there are any transactions made during the month or not.

GSTR-3, once filed, cannot be revised. Any errors in the return may be corrected in the GSTR-1 and GSTR-2 returns for the following month. Since GSTR-3 is automatically generated and does not allow for editing, direct revision is not possible.

How will GSTR-3 and GSTR-3B be reconciled?

The Central Board of Excise and Customs (CBEC) introduced the GSTR 3B, a simple return form. On filing the GSTR 3, if the actual liabilities are different from those declared in GSTR 3B, the system will update the difference between GSTR 3B and GSTR 3 automatically. If the actual liabilities shown in GSTR-3 exceed the amounts declared and paid in GSTR-3B you will be responsible for paying the additional tax, along with interest. GSTR-3 returns are not considered valid until the full tax liability has been paid, otherwise, they must be filed.