Refund Under GST 2024 – Rules and Procedures

Overview/Introduction to GST Refund

Refund Under GST : The rules for getting a refund under GST are designed to make the process smoother and more consistent. Now, there’s a standardized form for requesting a refund. The entire process, from making a claim to getting it approved, is done online and has strict timelines. This is a big change from the old, slow, and complicated procedure

Situations Leading to GST Refund

1. Export of Goods or services
2. Supplies to SEZs units and developers
3. Deemed Export supplies
4. Refund of taxes on purchase made by UN or embassies etc
5. Refund arising on account of judgment, decree, order or direction of the Appellate Authority, Appellate Tribunal or any court
6. Refund of accumulated Input Tax Credit on account of inverted duty structure
7. Finalisation of provisional assessment
8. Refund of pre-deposit
9. Excess payment due to mistake
10. Refunds to International tourists of GST paid on goods in India and carried abroad at the time of their departure from India
11. Refund on account of issuance of refund vouchers for taxes paid on advances against which goods or services have not been supplied
12. Refund of CGST & SGST paid by treating the supply as intra-State supply which is subsequently held as inter-State supply and vice versa

Time Limit for GST Refund

If we talk about Refund of Excess balance in E Cash Ledger, then there is no time limit for applying GST Refund of Excess balance in E Cash Ledger.

In Rest of the all cases The GST law requires that every claim for refund is to be filed within 2 years from the relevant date.

Relevant Date for GST Refund

Export of Goods

• If Goods are Exported by Ship/ Aircraft – Date on Which Ship/ Aircraft leaves India will be treated as Relevant Date
• If Goods are Exported by Land – Date on which Goods pass the Custom Frontier will be treated as Relevant Date
• If Goods are Exported by POST – Date of dispatch of Goods by the Post Office will be treated as Relevant Date

Export of Services

• Payment realized after Supply THEN Date of receipt of Payment will be treated as Relevant Date
• PAYMENT RECEIVED IN ADVANCE THEN Date of Issue of Invoice will be treated as Relevant Date

Supply to SEZ Unit/ SEZ Developer

Due date for Furnishing of Return under Section 39 in respect of Such Supplies

Inverted Duty Structure

The due date for furnishing of return under Section 39 for the period in which such claim for refund arises

Deemed Export

The date on which the return relating to such deemed exports is furnished (Actual Date)

Please note that in both scenarios, where either the supplier or the recipient is eligible to claim a refund for a supply made, the relevant date for determining the time limit, Actual Filing date of the return with respect to such supplies will be the RELEVANT DATE.

Tax refundable as a consequence of Judgement, decree order

Date of communication of such judgment, decree, order or direction will be considered Relevant date

Provisional Assessment

The date of adjustment of tax after the final assessment thereof will be considered Relevant date

Residuary Category

Recipient – The date of receipt of goods or services or both by such person

Other Case – The date of payment of tax

Procedure for GST Refund Claim

Applicant shall file Refund Application online in the Form of GST RFD-01

If the refund is related to unused Input Tax Credit (ITC), the amount claimed as a refund will be deducted from the electronic credit ledger.

If the refund is related to an excess balance in the E-Cash Ledger, the amount claimed as a refund will be deducted from the electronic cash ledger

Once Application is filed by the Applicant then Application to be forwarded to Proper Officer for scrutinize for the completeness (Preliminary Processing)

• If PO found the Application Complete in All respect then Refund Acknowledgement i.e. GST RFD-02 clearly indicating date of filing of Claim shall be issued within 15 days of Refund Application and will be taken up for the Final Processing
  
  
• If PO found any deficiencies in Refund Application Then PO will Issue Deficiency Memo within 15 days i.e. GST RFD-03
  
  (The person applying needs to submit a new refund application then E Credit Ledger which was debited at the time of Refund Application filed should be Recredited to the Applicant)
  
  (The time period, from the date of filing of the refund claim in FORM GST RFD-01 till the date of communication of the deficiencies in FORMGST RFD-03 by the proper officer shall be excluded from the period of two years as specified in respect of any such fresh refund claim filed by the applicant after rectification of the deficiencies)

Grant of Provisional GST Refund (Zero Rated Supply)

Provisional refund provisions, conditions, and process

The proper officer after scrutiny of the claim and the evidence submitted in support thereof and on being prima facie satisfied that the amount claimed as refund shall make an order in FORM GST RFD-04, Sanctioning 90% of the Refund amount on a provisional basis within seven days from the date of the acknowledgement i.e. GST RFD-02

The order issued in FORM GST RFD-04 shall not be required to be revalidated by the proper officer

The proper officer shall issue a payment order in FORM GST RFD-05  for the amount sanctioned and the same shall be electronically credited to any of the bank accounts of the applicant mentioned in his registration particulars and as specified in the application for refund on the basis of a consolidated payment advice.

Payment order in FORM GST RFD-05 shall be required to be revalidated where the refund has not been disbursed within the same financial year in which the said payment order was issued.

Exception for Provisional Refund

Person Supplies ZERO Rated Should not be prosecuted for Any Offense under GST law/ an existing law with tax evasion charge of greater than 250 lakhs in last 5 years immediately preceding the Tax period for which refund is claimed

Proper Officer has to rely on declaration being filed by the Applicant that the Applicant has not prosecuted for Any Offense under GST law/ and existing law with tax evasion charge of greater than 250 lakhs in last 5 years immediately preceding the Tax period for which refund is claimed

For Example –

Upon filing a refund application for zero-rated supplies, refund amounted of Rs. 100,000, a provisional refund order was issued, granting 90% of the claimed amount, equating to Rs. 90,000, based on the applicant’s initial eligibility assessment.

Subsequently, upon thorough examination during the final processing of the application, the proper officer determined that the applicant is eligible for only Rs. 60,000 instead of the initially claimed Rs. 100,000.

Consequently, the proper officer will issue a Show Cause Notice in form GST RFD-08, prompting the applicant to provide justification regarding the following:

1. Explanation as to why the claimed amount of Rs. 40,000 should not be rejected in accordance with the relevant provisions of the law.
2. Justification as to why the erroneously refunded amount of Rs. 30,000 should not be recovered under Section 73/74, along with associated interest and penalty charges.

Doctrine of Unjust Enrichment in GST Refund

Doctrine of Unjust Enrichment – No person can be allowed to enrich inequitably at the expense of another

Talking about Unjust enrichment, a presumption is always drawn that the businessman may have shifted the incidence of tax to the final consumer. This is because GST is an indirect tax whose incidence is to be borne by the consumer.

It is for this reason that every claim of refund except few cases needs to pass the test of unjust enrichment. And every such claim if sanctioned is first transferred to the Consumer Welfare Fund.

Exceptions where Test of Unjust Enrichment does not apply

• Accumulated ITC
• Refund on account of exports
• Refund of payment of tax which was paid in Wrong head
• Refund of tax paid on a supply which is not provided or which refund voucher is issued or if the applicant shows that he has not passed on the incidence of tax to any other person
• Refund of Excess balance in E Cash Ledger (Circular no. 166/22/2021-GST dated 17/11/2021)

In all other cases the test of unjust enrichment needs to be satisfied for the claim to be paid to the applicant.

Refund Amount <= 2 lakhs  – Self Declaration
Refund Amount > 2 lakhs  – Declaration from CA(Chartered Accounant or Cost Accountant)

Refund to Casual Taxpayers

When casual or non-resident people register for taxes, they have to pay taxes upfront. If they’ve paid more tax than they actually owe during their registration period, they might get a refund later. But, they’ll only get this refund if they’ve filed all the necessary tax returns during their registration time. So, they need to make sure they’ve met all their filing requirements before they can get any refund.

Documentation for GST Refund

The Refund application shall be accompanied by documentary evidences in Annexure 1 in FORM GST RFD-01  to establish that a refund is due to the applicant

• Export of Goods – A statement containing the number and date of shipping bills or bills of export and the number and the date of the relevant export invoices
• Export of Services – A statement containing the number and date of invoices and the relevant Bank Realisation Certificates or Foreign Inward Remittance Certificates
• (As Realization of Sale Proceed is mandatory in case of Export of Services to qualify the definition of Export of Services in Section 2(6) of IGST Act)
• Supply of Goods to SEZ Unit/ SEZ Developer – A statement containing the number and date of invoices along with the evidence regarding the Endorsement by Specified Officer
• Additionally A declaration to the effect that tax has not been collected from the SEZ Unit or SEZ Developer
• Supply of Services to SEZ Unit/ SEZ Developer – A statement containing the number and date of invoices, the evidence regarding the Endorsement by Specified Officer and the details of payment, along with the proof thereof made by the recipient to the Supplier
• AdditionallyA declaration to the effect that tax has not been collected from the SEZ Unit or SEZ Developer
• Endorsement by Specified officer
• Supplier of goods – Endorsement That Such goods have been admitted in full in the Special Economic Zone for authorized operations as endorsed by the specified officer appointed in the Zone
• Supplier of services  – Endorsement That Receipt of services for authorised operations as endorsed by the specified officer appointed in the Zone
• Specified officer means a “Specified Officer” or an “Authorised officer” as defined under rule 2 of the Special Economic Zone Rules, 2006
  As per Rule 46 The invoice shall carry an endorsement
  “SUPPLY MEANT FOR EXPORT/SUPPLY TO SEZ UNIT OR SEZ DEVELOPER FOR AUTHORISED OPERATIONS UNDER BOND OR LETTER OF UNDERTAKING WITHOUT PAYMENT OF INTEGRATED TAX”
• Inverted Duty Structure – A statement containing the number and the date of the invoices received and issued during a tax period.
• Deemed Export – A statement containing the number and date of invoices along with such other evidence.
• Provisional Assessment – The reference number of the final assessment order and a copy of the said order in a case.
• Considered Intra State Supply Instead of Inter State Supply & Vice versa – a statement showing the details of transactions considered as intra-State supply but which is subsequently held to be inter-State supply
• Excess Payment of Tax – A Statement showing the details of the amount of claim on account of excess payment of tax Refund by Unregistered person where Contract cancelled in case of supply of Service – A statement containing the details of invoices viz. number, date, value, tax paid and details of payment, in respect of which refund is being claimed along with copy of such invoices, proof of making such payment to the supplier, the copy of agreement or registered agreement or contract, as applicable, entered with the supplier for supply of service, the letter issued by the supplier for cancellation or termination of agreement or contract for supply of service, details of payment received from the supplier against cancellation or termination of such agreement along with proof thereof, in a case where the refund is claimed by an unregistered person where the agreement or contract for supply of service has been cancelled or terminated

Compliance with Natural Justice in GST Refund

In case the claim is sought to be rejected by the proper officer, a notice has to be given online to the applicant stating the ground on which the refund is sought to be rejected.  The applicant needs to respond online within 15 days from the receipt of such notice.  Thus no claim can be rejected without putting the applicant to notice.

Threshold Limit for GST Refund

Refund of Excess balance in E Cash ledger
Minimum Threshold Limit – Not Applicable
Maximum Threshold Limit – Not Applicable

In Other Cases
Minimum Threshold Limit – The Amount of Refund Should not be less than 1000 INR
Maximum Threshold Limit – Not Applicable

Withdrawal of GST Refund

Conditions and procedures for withdrawing a refund application

After the submission of the Refund Application If any of the below mentioned action has not been taken by the officer, then Refund application can be withdrawn by the Applicant by filing GST RFD-01W

1. Provisional refund sanction order in FORM GST RFD-04 
2. Final refund sanction order in FORM GST RFD-06 
3. Payment order in FORM GST RFD-05 
4. Refund withhold order in FORM GST RFD-07  

On submission of application for withdrawal of refund in FORM GST RFD-01W , any amount debited at the time of filing Refund Application from electronic credit/ cash ledger shall be credited back to the E Credit/ Cash ledger.

Adjustment of GST Refund

Provisions for adjustment of refund amounts

Where any refund is due to a registered person who has defaulted in furnishing any return or where there is confirmed Demand of any TAX, Interest & Penalty Against Registered Person and That Demand has not been stayed by any court, Tribunal or Appellate Authority by the specified date(Last date for filing an appeal) The proper officer may Adjust/ deduct GST Refund  against GST Dues or Dues under Existing Law (Section 54(10) of CGST Act)

GST Dues can be adjusted against GST Refund Where any amount payable by any person under CGST Act/ Rules is not paid, Then Proper Officer may deduct such amount from ANY MONEY OWING TO SUCH PERSON (Section 79 of CGST Act)

Dues under Existing laws can be adjusted against GST Refund Recovery of any tax, Interest, fine, Penalty or any other amount recoverable under the existing law (Excise, Service Tax & VAT) as an arrear of tax under GST (Section 142 of CGST Act)

SECTION 79 & SECTION 142 ARE MORE WIDER THAN  SECTION 54(10) applicability

Withholding of GST Refund

Withholding By Proper Officer

Where any refund is due to a registered person who has defaulted in furnishing any return or where there is confirmed Demand of any TAX, Interest & Penalty Against Registered Person and That Demand has not been stayed by any court, Tribunal or Appellate Authority by the specified date(Last date for filing an appeal) The proper officer may Withhold GST Refund by issuing Order for Withholding Refund in GST RFD-07 PART A

Release of Refund Withhold – Where Proper Officer is satisfied that Registered Person has furnished the Return AND pay the GST Dues, Hence Refund is no longer liable to be withheld he may pass an order for release of withheld refund in Part B of FORM GST RFD- 07

Withholding By Commissioner

If there’s an order for a refund that’s under appeal or Department is considering challenging the Refund Order in Appeal or there are ongoing proceedings related to it or , and if the Commissioner believes that granting the refund could harm the revenue due to fraud or misconduct, they can Withhold and Issue Order for Withholding Refund in GST RFD-07 Part A

Where a refund is withheld by Commissioner then If Refund arise as a result of the Appeal of further proceeding to the Applicant, Then In any case Interest shall not be paid to the applicant more than 6%

Period of Withholding – As decided by the Commissioner

Release of Refund Withhold – Where Commissioner is satisfied that the refund is no longer liable to be withheld he may pass an order for release of withheld refund in Part B of FORM GST RFD- 07

Where an order giving rise to a refund is the subject matter of an appeal or further proceedings or where any other proceedings under this Act is pending and the Commissioner is of the opinion that grant of such refund is likely to adversely affect the revenue in the said appeal or other proceedings on account of malfeasance or fraud committed, he may, after giving the taxable person an opportunity of being heard, withhold the refund till such time as he may determine.

Approval/Rejection of GST Refund

DUE & PAYABLE TO APPLICANT

Where The proper officer is satisfied that a refund is due and payable to the applicant , he shall make an order in FORM GST RFD-06 sanctioning the amount of refund LESS The amount of Provisionally Refunded, if any LESS The amount Adjusted against his outstanding demand, if any.

Proper Officer will issue a payment order in FORM GST RFD-05 for the amount of refund and the same shall be electronically credited to any of the bank accounts of the applicant mentioned in his registration particulars and as specified in the application for refund on the basis of a consolidated payment advice

Payment order in FORM GST RFD-05 shall be required to be revalidated where the refund has not been disbursed within the same financial year in which the said payment order was issued.

DUE BUT NOT TO THE APPLICANT

Where the proper officer is satisfied that the amount is refundable but not to the Applicant Then he shall make an order in FORM GST RFD-06 and issue a payment order in FORM GST RFD-05 , for the amount of refund to be credited to the Consumer Welfare Fund.

Not Due at All

Where the proper officer is satisfied  that the whole or any part of the amount claimed as refund is not admissible or is not payable to the applicant, he shall issue a Notice in FORM GST RFD-08 to the applicant, requiring him to furnish a reply in FORM GST RFD-09 within a period of fifteen days of the receipt of such notice and after considering the reply, make an Sanctioning Order/ Rejecting Order in FORM GST RFD-06

(Rejection Order will be Issued Only After giving Opportunity of being heard)

Refund shall be credited to the bank account of the Applicant within 60 days of Refund Application, Else Interest @ 18% p.a shall be paid)

If Rejection Order issued in GST RFD-06 then E Credit Ledger which was debited at the time of Refund Application filed shall be Recredited to the Applicant)

Interest on refunds will begin accruing the day after 60 days from when the refund application is received until the refund amount is deposited into the applicant’s bank account. To ensure timely processing, tax authorities are urged to issue the final sanction order and payment order within 45 days of the Application Reference Number (ARN) generation, so that the refund is completed within 60 days

(CBIC Circular No. 125/44/2019-GST)

Remedy After Rejection of Refund

Rejection Order is an Appealable Order
Rejection Order of Refund claim is an appealable order Under Section 107 of the CGST Act, 2017. The Person aggrieved by the decision or Order of the adjudicating authority may appeal to the Appellate Authority with in 3 Months (6 Months by the department) from the date on which the said decision or order is communicated to such Person.

Disbursement of GST Refund

The refund claim, wherever due, will be directly credited to the bank account of the applicant. The applicant need not come to the authorities to collect the cheques or for any other issues relating to the refund claim.

Consolidated Payment Advice is issued by Common Portal Then Disbursement is made by PFMS (Public Financial Management System (Rule 91 CGST Rules)

If Disbursement is not done in same Financial year then Payment Order i.e. GST RFD-05 needs to be Revalidated (Rule 91 CGST Rules)

Interest on Delayed Refund

Calculation and provisions related to interest on delayed refunds

GST Refund Credited to bank account beyond 60 Days

If any Tax ordered to be refunded is not refunded within 60days from the date of receipt of application for refund claim Then interest at such rate not exceeding 6% shall be payable to the applicant

(Interest shall be calculated From the Date of Expiry of 60 days from the ARN (Application Reference Number) of Refund Application filed TO the Date of Actual Credit into Bank)

GST Refund arise from an Order passed by an Adjudicating Authority or Appellate Authority

In case of refund arises from an order passed by an adjudicating authority or Appellate Authority or Appellate Tribunal or court which has attained finality and the same is not refunded within sixty days from the date of receipt of application filed consequent to such order, Interest shall be paid by Rate not exceeding 9% p.a (Notification No. 13/2017 CT)

Now Applicant shall file a fresh application (125/244/2019-GST)

Relevant Date – 2 Years from DATE OF COMMUNICATION OF JUDGEMENT/ ORDER

Interest shall be paid by Rate not exceeding 9% p.a (Notification No. 13/2017 CT)

Conclusion

In summary, GST refunds are crucial for businesses to maintain liquidity and fairness in the tax system. While various scenarios can lead to refunds, such as exports or excess tax payments, it’s essential to understand the rules and procedures for each case.

Ultimately, GST refunds reflect the government’s commitment to supporting businesses and ensuring a level playing field. By navigating refund procedures diligently, businesses can access the funds they’re entitled to, contributing to their growth and the overall economy.

For any further queries or assistance regarding the Haryana One Time Settlement Scheme for Recovery of Outstanding Dues, feel free to contact us at [Taxationteam@gmail.com] We’re here to help!