Manual or Automatic Route for GST Refunds

May 25, 2022 | Blog | 0 comments

Claiming GST refund automatically from Custom Authorities

Advantages:

  1. Automatic Refund: Refund will be processed after the filing of GSTR 1 and GSTR 3B within 60 days (Approx.)
  2. Automatic Validation: ICEGATE will validate details as per GSTR 1, shipping bill, and tax payment details in GSTR 3B. If the same details match, then a refund will be processed.

Disadvantages:

  1. EGM must be filed, otherwise, a refund will not be processed: For getting a refund, EGM must be filed by the shipper otherwise refund will not be processed. Therefore, there is the dependency upon the Shipper as well for the processing of refunds
  2. Refund granted on a piecemeal basis: Refund will be processed by GST Authorities on a piecemeal basis i.e. Refund will be released by authorities only on the basis of shipping bills. The company needs to prepare a reconciliation to check whether refund of all shipping bills has been received or not? In case, refund has not been received then need to check reason for not getting refund from ICEGATE portal on regular basis which can be a cumbersome task
  3. Automatic Refund will not be processed for exports to Land lock country: In case of goods exported to Nepal, automatic refund will not be processed due to non-filling to EGM and manual billing of shipping bill at custom port need to be done
  4. Non-processing of refund due to mismatch between shipping bill and GSTR 1: In some situation there is mismatch between shipping bill details, GSTR 1 and tax paid in GSTR 3B which resulted in blockage or issues in processing of refund. The company should rectify such details in subsequent month return and post the same refund will be Therefore, time duration for getting refund will be increase accordingly. Please note, a particular invoice can be amended only once and if the error has not been resolved then such refund will not be process through automatic refund.
  5. Risk based Assessment by custom Authority: Custom authorities will review the vendors against whom the GST refund of Input Tax Credit (ITC) has been claimed and any situation which gives the doubt to the custom authorities on wrongful availment of credit or wrongful passing of credit, may lead to an Investigation by the DRI / DGGI/ Investigation cell without considering the fact that whether the refund claimed is genuine.

Claiming GST refund manually from GST Authorities

Advantages:

  1. Monthly or quarterly refund application: The Company can file monthly or quarterly refund applications to avoid blockage of working capital
  2. 90% refund within 7 days from the date of issuance of acknowledgment: Refund of accumulated ITC will be processed within 7 days from the issuance of acknowledgment and the remaining 10% will be processed after detailed scrutiny
  3. Regular Assessment by authority: Documents related to GST refund need to be regularly submitted to the authority for review. Therefore, this may help the company at the time of regular assessment
  4. No need to prepare reconciliation for shipping bills: Calculation of refund is based on export and domestic turnover. Therefore, no need to prepare shipping bill-wise details as required in the export of goods with payment of tax
  5. No Involvement of custom authority: Refund will be processed by GST Authorities and no involvement of customs would be there. Therefore, the company needs to interact only with the GST authority which reduces the litigation cost
  6. No separate application for refund in case of exports to Land locked country: In case of export of goods with payment of tax, a separate refund application needs to be filed for export of goods to Nepal. However, in case of a refund of accumulated ITC, no separate refund application is required.

Disadvantages:

  1. Human Intervention: In the case of manual filing of GST refunds, there is a direct human intervention with the GST officers which becomes a time-consuming activity for processing GST refund
  2. ITC Denial, If Payment Is Not Made To Supplier within 180 Days: If payment to the supplier is not made within 180 days from the date of issue of invoice, the refund of GST ITC is denied by the Authorities
  3. No facility To revise the GST Refund application: In case of any error or omission is made while filing the application, there is no way to rectify it. The applicant needs to file a fresh GST refund application and that also within the specified time period of two years.

 

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