Refund Process under GST

The tax authority is required to return the excess amount of tax paid by the taxpayer this system is called refund of tax. Under the previous regime, the procedure of claiming refund was quite cumbersome and time-consuming. Due to delayed refund, the working capital of the business firms get blocked which creates a hindrance in smooth trade.

While under the GST regime the government has taken appropriate measures to streamline and standardize the system of the tax refund. The whole process of claiming the refund and sanctioning of the refund is online which will ensure fast track procedure of claiming of refund.

Eligibility for receiving the refunds

The refund claimed shall be provided to the applicant, only in the cases where such amount is relatable to –

  1. Refund of tax and interest or any other amount paid by the taxpayer. Further, he had not passed such tax and interest to any other person
  2. Tax or interest is borne by such other class of applicants notified by as the Central or State Government on the recommendation of the Council.

In case after the application the proper tax officer is convinced that the whole or part of the amount claimed as the refund is not eligible for the refund then he may make an order accordingly and amount so determined shall be credited to the Consumer Welfare Fund.

Situation under which refunds can be claimed

  • Export and Import of Goods and Services.
  • Deemed Exports of Goods and Services.
  • Refund of accumulated input tax credit on account of inverted tax structure duty.
  • Refund of excess payment made by mistake.
  • Finalization of provisional assessment.
  • Refund on taxes on purchases by UN or embassies etc.
  • Refund of pre-deposit
  • Refund of GST to international tourists charged on goods in India and carried abroad at the time of their departure from India.
  • Refund arising due to the Judgment or decree by any appellant authority, appellant tribunal or court.
  • Credit accumulation due to output being tax exempt or nil rated.

Procedure for claiming refund

  1. Initially, an applicant is required to file an application form for claiming the refund through the GSTN portal.
  2. As soon as the application is filed electronically, an acknowledgment number would be shared with applicant via SMS or email.
  3. “The carry forward input tax credit” will be reduced automatically and adjustment would be made to return and cash ledger.
  4. With the period of 30 days, the application of refund and documents submitted shall be scrutinized.
  5. For each application of refund the concept of “unjust enrichment” would be examined. In case it does not qualify, then the refund would be transferred to CWF(consumer welfare fund).
  6. The amount of Refund granted will be credited electronically to the account of the applicant via ECS, RTGS or NEFT.
  7. The application for refund shall be made at end of each quarter.
  8. No refund shall be provided for an amount of less than Rs 1000.

Penalty for delay in refunds

Under the GST regime, a refund application is to be processed within a period of 90 days. If the refund application is not processed within said period then an interest at the rate of 6% will be levied.

 

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