Circumstances under GST Refund – Conditions and Procedure

Sep 29, 2022 | Blog, Refund Issues | 0 comments

What is GST refund with example?

GST refund is a process in which a registered taxpayer may claim excess input tax credit lying in the electronic credit ledger. Refund of unutilized input tax credit shall be allowed in the following cases:

  1. Zero-rated supplies made without payment of tax
  2. Inverted Duty structure where credit has accumulated on account of the rate of tax on inputs being higher than the rate of tax on output supplies

For example, a taxpayer is purchasing raw materials on which tax is paid at the rate 18%. Further, the finished good is supplied to the customers at the rate of 5%. In this case, an excess input balance gets accumulated with the taxpayer and refund of the same can be claimed by filing an application on the GST Portal.

What are the situations for claim of refund?

There are various situations under which a registered person may claim refund under GST by satisfying certain conditions. This includes:

  • Refund of unutilized ITC on account of exports without payment of tax
  • Refund of tax paid on export of goods and services made with payment of tax
  • Refund of unutilized ITC on account of supplies made to SEZ units/developer with/without payment of tax
  • Refund of ITC unutilized on account of accumulation due to Inverted Duty Structure
  • Refund of tax paid on deemed export supplies
  • Refund of excess payment of tax
  • Refund of tax paid on inter-state supply which is subsequently held to be an intra-state supply and vice versa
  • Refund on account of assessment/provisional assessment/appeal/any other order
  • Refund on any other ground or reason

Can we get GST refund?

Yes, as per the provisions of section 54 of the CGST Act, a taxpayer is eligible to claim the refund of tax under GST. The application shall be accompanied by documentary or other supporting evidence. An application of refund may be filed before the expiry of two years from the relevant date.

What is Rule 89 4A and/or 4B?

As per Rule 89 (4A) of the CGST Rules 2017, refund of input tax credit shall be granted in the following cases as notified by CBIC vide Notification No. 48/2017-Central Tax dated 18 October 2017:

  • Supply of goods by a registered person against Advance Authorization
  • Supply of capital goods by a registered person against Export Promotion Capital Goods Authorization
  • Supply of goods by a registered person to Export Oriented Unit
  • Supply of gold by a bank or Public Sector Undertaking specified in Notification No.  50/2017-Customs dated 30 June 2017 (as amended) against Advance Authorization.

Further, Rule 89 (4B) of the CGST Rules 2017, grants refund for export of goods after fulfillment of the conditions as specified in Notification No. 40/2017-Central Tax (Rate) dated 23 October 2017. It exempts the amount in excess of the rate of 0.05 percent, subject to the fulfillment of following conditions:

  • the registered supplier shall supply the goods to the registered recipient on a tax invoice;
  • the registered recipient shall export the said goods within a period of ninety days from the date of issue of a tax invoice by the registered supplier;
  • the registered recipient shall indicate the GSTIN of the registered supplier and the tax invoice number issued by the registered supplier in respect of the said goods in the shipping bill or bill of export, as the case may be;
  • the registered recipient shall be registered with an Export Promotion Council or a Commodity Board recognised by the Department of Commerce;
  • the registered recipient shall place an order on registered supplier for procuring goods at a concessional rate and a copy of the same shall also be provided to the jurisdictional tax officer of the registered supplier
  • the registered recipient shall move the said goods from place of registered supplier –
  • directly to the Port, Inland Container Deport, Airport or Land Customs Station from where the said goods are to be exported; or
  • directly to a registered warehouse from where the said goods shall be move to the Port, Inland Container Deport, Airport or Land Customs Station from where the said goods are to be exported;
  • if the registered recipient intends to aggregate supplies from multiple registered suppliers and then export, the goods from each registered supplier shall move to a registered warehouse and after aggregation, the registered recipient shall move goods to the Port, Inland Container Deport, Airport or Land Customs Station from where they shall be exported;
  • in case of situation referred to in condition (vii), the registered recipient shall endorse receipt of goods on the tax invoice and also obtain acknowledgment of receipt of goods in the registered warehouse from the warehouse operator and the endorsed tax invoice and the acknowledgment of the warehouse operator shall be provided to the registered supplier as well as to the jurisdictional tax officer of such supplier; and
  • when goods have been exported, the registered recipient shall provide copy of shipping bill or bill of export containing details of GSTIN and tax invoice of the registered supplier along with proof of export general manifest or export report having been filed to the registered supplier as well as jurisdictional tax officer of such supplier.

The registered supplier shall not be eligible for the above mentioned exemption if the registered recipient fails to export the said goods within a period of ninety days from the date of issue of tax invoice.

What are the documents to be enclosed along with the refund claim application?

Application filed for refund has to be accompanied by documentary or other evidence in order to establish that the amount of tax and interest, if any, paid on such tax or any other amount paid in relation to which refund is claimed was collected from, or paid by, him and incidence of such tax and interest had not been passed on to any other person.

Below is the list of documents required to claim refund under GST:

  • Declaration under second and third proviso to section 54(3)
  • Declaration under section 54(3)(ii) (not used for Nil or exempt supply)
  • Undertaking in relation to section 16(2) (c) and section 42
  • Statement 1 under rule 89(5)
  • Statement 1A under rule 89(2)(h)
  • Self-declaration under rule 89(2)(I), if the amount claimed, does not exceed two lakh rupees, certification under rule 89(2)(m) otherwise
  • Copy of GSTR-2A of the relevant period
  • Statement of invoices (Annexures-B)
  • Self-certified copies of invoices entered in Annexures-B whose details are not found in GSTR-2A or 2B of the relevant period

How do I prepare Statement 3 for GST refund?

In order to claim refund under GST, the taxpayer needs to prepare Statement-3 to furnish details of the invoice. An offline utility can be downloaded from the dashboard under the refund section. Below is the format of the same:

In case of goods, Shipping bill no. and date is mandatory to be submitted and in case of services, BRC/FIRC no., date and value is required to be mentioned in order to claim refund. Any error in the utility needs to be corrected by the taxpayer as the portal will not accept the JSON utility.

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