Refunds Under GST

Introduction:

GST registration is an indirect form of tax where the supplier collects the tax from the purchaser and deposits it with the government. But there are few instances where suppliers are eligible to get a refund from the government. The taxpayers shall be aware of these kinds of instances where they are eligible to take a refund. Under the GST regime, the application form for filing of refund is prescribed, and the procedure to file it is a completely online process.

 

Situations that lead to refund claims are such,

1. Export of goods or services
2. Supplies to SEZs units and SEZ developers
3. Deemed exports
4. Refund of taxes on purchases made by the UN or embassies
5. Refund arising on account of order, decree judgment or order of appellate authority, tribunal or any other court.
6. Refund of accumulated ITC on account of inverted duty structure.
7. Refund of pre-deposit.
8. Finalization of provisional assessment.
9. Excess payment due to a mistake
10. Refund t international tourists on GST paid on goods in India and carried abroad.
11. Refund on account of refund vouchers issued for taxes paid on advances against which goods or services have not been supplied.
12. Refund of CGST & SGST paid on supplies which subsequently held as inter-state supplies, and IGST is supposed to be paid or vice versa.

 

Let us see each instance briefly.

1. Export of goods/services: Exports under GST is to be treated as inter-state supplies, and IGST is to be paid on it. Exports under GST are also termed as Zero rated supplies under GST. Any registered person exporting their goods or services outside India has two options. First, is that they can collect IGST on the supplies made by them by exporting goods/services and get a refund of IGST paid on exports. The second option is to export the goods/services under the LUT (Letter of undertaking) i.e. export under 0% of IGST. That is to say that exports under LUT shall be treated as 0-rated supplies. Exporting under LUT (0 rated) enables the exporter to claim a refund of ITC paid on the purchase of goods or services.
2. Supplies to SEZ units or SEZ developers: Supplies to SEZ or SEZ developers are to be treated as exports only hence IGST shall be applicable in this case also exporter has two options to either collect IGST on outward supplies and get it back as a refund or the to supply as 0 rated and get a refund of ITC accumulated.

Deemed exports:

1. The government may notify certain goods or services as deemed exports where goods do not leave India and payment for such supplies is received either in Indian Rupees or in convertible foreign exchange if such goods are manufactured in India; Such deemed exports are to be treated as exports only, and the procedure to apply for a refund, in this case, remains the same as in the case of exports.      
2. Refund of taxes on purchases made by the UN or embassies: Supplies made to the UN bodies or embassies may be exempted from GST as per international obligations. But this exemption has been given by way of allowing refunds to UN bodies or embassies since they are notified entities under section 55 of the CGST act,2017. Therefore it is good to say that supplies made to UN bodies or embassies are taxable, i.e. supplier is required to charge GST, and UN bodies are eligible to claim a refund for the taxes they have paid.
3. Refund arising on account of order, decree judgment or order of appellate authority, tribunal or any other court:

 

There are a few circumstances where the assessee is in dilemma concerning the taxability of certain goods/services, confusion regarding GST rates, refund applicability in a certain situation and many more such kinds of situations where the sum of money is the subject matter. The sum of money involved in the case shall be refundable to the assessee depending upon the judgment of the case.

 

Refund of accumulated ITC on account of inverted duty structure: Inverted duty structure is a situation where the GST rates for outward supplies are less than the GST rates for inward supplies. For Example, the GST rate on a saree is 5%, whereas the GST rate for ink purchased to print the designs on the saree is 18%.

 

1. Due to such differences in GST rates, ITC gets accumulated in the Electronic credit ledger of the taxpayer. In such a case, a taxpayer can claim the refund of accumulated ITC.  
2. Refund of pre-deposit: Before admitting any case to the tribunal or any other court of law, an assessee is required to deposit a certain sum of money in the name of the pre-deposit. On completion of proceedings, such pre-deposit is refundable, which depends upon the judgment of the case.
3. Finalization of provisional assessment: Provisional assessment gets initiated when the proper officer has a reason to believe that a particular assessee is required to get assessed. During the assessment procedure, an officer can order to pay a certain sum of money to the government based on books of accounts and other documents verified during the assessment. On completion of the assessment certain sum of money may be refunded back to the assessee, as the case may be. 
4. Excess payment due to mistake: If any person pays taxes wrongly if taxes have been paid in the wrong head, then such taxpayers are eligible to claim a refund for that. There are certain situations where a person pays taxes more than what is required to be paid; Such excess payment can be refunded to the taxpayers.
5. Refund to international tourists on GST paid on goods in India and carried abroad: when a tourist visits India who possesses the status as NRI can get the refund of taxes paid on the purchases of goods on leaving India. Here an international tourist has been defined as any person who is not normally resident in India and who enters India for a stay of not more than six months for legitimate non-immigrant purposes.
6. Refund on account of refund vouchers issued for taxes paid on advances against which goods or services have not been supplied: When a person has been issued with refund vouchers, then in that case person can apply for a refund on such supplies for which refund vouchers have been issued.
7. Refund of CGST & SGST paid on supplies which subsequently held as inter-state supplies, and IGST is supposed to be paid or vice versa: Due to confusion in the rules regarding the place of supply many times it happens that those supplies, who have originally been considered, as Inter-state supplies are now be held as Intra-state supplies based on clarifications by issuing notification in official gazette or amendments in place of supply rules and vice versa. In such cases, any person can ask for a refund of taxes paid.

What is the time limit to apply for a refund?

All the refund applications must be applied within two years from the “relevant date.” The term used here “Relevant date,” has a different meaning and different applicability in all the above-mentioned conditions. The time limit of two years is to be computed separately for each refund case.