GST Refund An Overveiw

 

                                Refund Process under GST

1.     Introduction

The provisions pertaining to refund contained in the GST law aim to streamline and standardise the refund procedures under GST regime. Thus, under the GST regime there will be a standardised form for making any claim for refunds. The claim and sanctioning procedure will be completely online and time bound which is a marked departure from the existing time consuming and cumbersome procedure. It has been decided, however, that since the online refund module is not available immediately, the refund process would be handled manually and Circular No. 17/17/2017- GST dated 15.11.2017 and Circular no. 24/24/2017-GST dated 21.12.2017 prescribing the detailed procedure have been issued.

2.     Situations Where Refund Can Claim

Following are the situations where GST Refund can be claim:-

·         Expenses payment of tax due to mistake & inadvertence.

·         Export of Goods & Services (With Payment Of IGST).

·         Export of Goods & Services (Without payment Of Tax).

·         Refund on account of ITC accumulated due to Inverted Tax Structure.

·         On Account of refund by receipt of Deemed export.

·         On account of assessment/Provisional Assessment/Appeal/Any other order

 

3.     Time Period For Filing Of Refund And Relevant Date

It is recommended that a period of one year from the relevant date may be allowed for filing of refund application. Relevant date for filing of each kind of refund needs to be defined separately. The following dates are recommended as relevant dates for different type of refund cases:

i)                    Date of payment of GST when the refund arises on account of excess payment of GST due to mistake or inadvertence.

ii)                   Date on which proper officer under the Custom Act gives an order for export known as “LET EXPORT ORDER ” for the purpose of refund filed on account of export of goods under claim of rebate of GST paid on exported goods or refund of accumulated input credit of GST when goods are exported.

iii)                 Date of BRC in case of refund on account of export of services under claim of rebate of GST paid on exported services or refund of accumulated input credit of GST when services are exported. Page 26 of 49

 iv) Date of the finalization order where refund arises on account of finalization of provisional assessment. (May not be required if the GST law does not provide for provisional assessment)

iv)                 Date of communication of the appellate authority’s order where the refund arises in pursuance of an appellate authority’s order in favor of the taxpayer.

v)                  Date of communication of adjudication order or order relating to completion of investigation when refund arises on account of payment of GST during investigation, etc. when no/less liability arose at the time of finalization of investigation proceedings or issuance of adjudication order.

vi)                 Date of providing of service (normally the date of invoice) where refund arises on account of accumulated credit of GST in case of a liability to pay service tax in partial reverse charge cases.

vii)               Date of payment of GST for refund arising out of payment of GST on petroleum products, etc. to Embassies or UN bodies or to CSD canteens, etc. on the basis of applications filed by such persons.

viii)              Last day of the financial year in case of refund of accumulated ITC on account of inverted  duty structure.

 

4.     Documents Required For GST Refund   

 

As per circular no 125/44/2019-GST following are the documents required for GST refund:-

A.      Declaration under second and third proviso to section 54(3).

B.      Undertaking in relation to sections 16(2) and section 42 (2).        

C.      Statement 3 under rule 89(2)(b) and rule 89(2)(c).

D.      Statement 3A under rule 89(4).

E.       Copy of GSTR-2A on relevant period.

F.       Statement of invoices ( Annexure B).

G.     Copy of BRC/FRC

H.      And any other documents prescribe under circular no 125/44/2019-GST dated 18-11-2019.

 

5.      Procedure for GST Refund

It is recommended that the State Tax authorities shall deal with the SGST refund and Central Tax authorities shall deal with refund of CGST and IGST. Following are the steps to be followed while filling GST refund:-

A.      Form GST RFD-01 shall be filled on the common portal by applicant seeking refund under any of the category mentioned above. All the documents and annexure mention above are the part of this application.

B.      The Application References Number (ARN) will be generated only after the applicant has completed the processing of  RFD-01.

C.       It is recommended that the preliminary scrutiny may be carried out within 30 common working days.

D.      A Deficiency Memo shall be issued within 15 days from the date of generation of ARN.

E.      If all the things are found right the proper officer will issued RFD-06.

F.       Payment order will be issued in form of  RFD-05.

 

6.     Verification And Control

 

A.      Process of review:- Every refund that is sanctioned would need to go through a higher authority in order to ensure the correctness of the decision of refund sanctioning authority.

B.      Pre Audit:- Besides this, for refund amounts exceeding a pre-determined amount a provision for pre-audit of refund application

C.      Show Cause Notice: If the refund is not found to be legal or correct for any reason, then the jurisdictional authority should issue Show Cause Notice (SCN) to the applicant.

D.      Consumer Welfare Fund: In case, the refund application is found to be in order but does not satisfy the test of unjust enrichment, the refund amount, after sanction, would be credited to the Consumer Welfare Fund.

E.       Minimum Limit: It is recommended that an amount in the range of Rs. 500-1000/- may be fixed below which refund shall not be granted.

 

7.     Interest

 

Ø Time limit: The GST Law may provide for a prescribed time limit of 90 days from the date of the system generated acknowledgment of refund application after which interest clause will start automatically.

Ø Issue of incomplete application (and related time limit) may be dealt by provisions in GST law

Ø Rate of interest: The Committee recommends that the rate of interest in case of refund may be around 6%

Ø The GST Law may also provide that the interest will accrue from the last date when refund should have been sanctioned even when the refund is ordered to be paid by the order of the appellate authority in the appeal filed by the applicant against order of rejection passed by the refund sanctioning authority.

 

8.     Adjustment:-  In some cases, the taxpayer may have outstanding demand under GST Act. The GST Law may provide for adjusting the refund claim against any amount of un-stayed confirmed demand lying beyond the appeal period. The refund order may clearly state the amount so adjusted and particulars of the adjusted demand may also be stated in the annexure to be attached with the order. Format of Application for refund and Refund order can be designed accordingly.

 

9.     Recovery Of Wrong Refund

It is recommended that the GST law may provide for the provisions for recovery of erroneously granted refunds along with interest.

 

Prepared By :-

Team U G Tax Consultancy

Email Id:- Yourstaxconsultant007@gmail.com

Website:- https://Yourstaxconsultant.blogspot.com