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GST Refund

GST Refund

The Goods and Services Tax (GST) framework in India has been designed to streamline the taxation process, ensuring transparency and efficiency. A pivotal aspect of this system is the GST refund mechanism, which allows taxpayers to claim refunds for various reasons, thereby preventing the cascading effect of taxes and ensuring liquidity.


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        AspectDescription
        PurposeTo claim refunds on taxes paid due to various reasons like exports, excess ITC, etc.
        Eligible Scenarios– Export of Goods/Services (Zero-rated)
        – Accumulated ITC (Inverted duty structure)
        – Excess balance in Electronic Cash Ledger
        – Provisional Assessment Finalization
        – Refunds to International Tourists
        Forms Used– GST RFD-01 (Application for Refund)
        – GST RFD-02 (Acknowledgment)
        – GST RFD-03 (Deficiency Memo, if required)
        – GST RFD-05 (Payment Advice)
        – GST RFD-06 (Refund Sanction/Rejection Order)
        Procedure1. Filing application (GST RFD-01) through GST portal.
        2. Acknowledgment within 15 days (GST RFD-02).
        3. Provisional refund (90%) for zero-rated supplies within 7 days.
        4. Refund order (GST RFD-06) within 60 days of complete application.
        5. Payment advice generated (GST RFD-05).
        Documentation Required– Statement of relevant invoices.
        – Export-related documents (Shipping Bills, Invoices).
        – Bank Realization Certificates.
        – Declarations/Undertakings as per GST rules.
        Time LimitRefund applications must be filed within 2 years from the relevant date.
        Interest on Delayed Refunds6% per annum if the refund is not processed within 60 days of receiving a complete application.
        ConclusionAdhering to proper procedures ensures timely refunds and optimized working capital for businesses.

        Scenarios Eligible for GST Refund

        Refunds under GST can be claimed in several situations, including:

        • Export of Goods or Services: Supplies that are zero-rated, either with payment of Integrated GST (IGST) or under bond/LUT without payment of IGST.
        • Accumulated Input Tax Credit (ITC): Occurs due to the inverted duty structure, where the tax rate on inputs is higher than that on outputs.
        • Excess Balance in Electronic Cash Ledger: When there is an unutilized balance after tax payments.
        • Finalization of Provisional Assessment: Refunds arising from assessments finalized at a lower liability than provisionally assessed.
        • Refunds to International Tourists: GST paid on goods purchased in India and carried abroad at the time of departure.

        Procedure to Claim GST Refund To claim a GST refund, taxpayers should follow these steps:

        • Filing the Refund Application: Submit Form GST RFD-01 electronically through the GST portal within two years from the relevant date.
        • Acknowledgment: Upon submission, an acknowledgment in Form GST RFD-02 is issued within 15 days. If there are discrepancies, a deficiency memo in Form GST RFD-03 is provided.
        • Provisional Refund: For certain cases like zero-rated supplies, a provisional refund of 90% may be granted within seven days of acknowledgment.
        • Refund Sanction/Rejection: The proper officer reviews the application and issues an order in Form GST RFD-06 within 60 days from the date of receipt of the complete application.
        • Payment Advice: Upon sanction, a payment advice in Form GST RFD- 05 is generated, and the refund amount is credited electronically to the claimant’s bank account.

        Documentation Required Essential documents for processing a GST refund include:

        • A statement of relevant invoices.
        • Export-related documents like shipping bills and export invoices.
        • Bank realization certificates for export proceeds.
        • Declarations or undertakings as specified under GST rules.
        • ITC Register
        • Other

        Time Limit for Filing Refund Claims

        Refund applications must be filed within two years from the relevant date, which varies based on the nature of the refund claim. For instance, in the case of exports, the relevant date is the date of shipment or provision of services.

        Interest on Delayed Refunds

        If a refund is not processed within 60 days from the date of receipt of a complete application, interest at a rate of 6% per annum is payable to the applicant from the expiry of the 60-day period until the refund is granted.

        Conclusion

        The GST refund process is integral to maintaining the flow of funds for businesses, ensuring that excess taxes paid do not become a financial burden. By adhering to the prescribed procedures and timelines, taxpayers can efficiently manage their refunds, thereby optimizing their working capital and contributing to a more robust economic environment.

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