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GST Refunds in India and its Multiple Facets

Under the former tax structure, refund on the excess of VAT or CST paid by taxpayers could be claimed on an annual basis. The refund paid on the excess of excise duty is made via Duty Drawback Scheme, however, the negative part of the previous system was that the refunds to be made under excise, VAT, and CST were always delayed.

Under GST the refund procedure will be quicker as well as easier. The procedure of calculating the excess tax refund, application for a claim, and processing of the refund will be highly improved. The refunds will be separately calculated for every major head (CGST, SGST, IGST). The claimant must file the application form through the GSTN portal where all the data will be electronically uploaded and even the calculation will be automatically processed.

According to the GST Law, if any tax which is supposed to be refunded (under section 48) to an applicant is not credited within sixty days from when the application receipt was issued (under sub-section (1) of that section), then interest at a rate specified as per the notification issued by the Central or a State Government on the recommendation of the Council shall be payable against the refund amount. The interest will be calculated from the immediate day after crossing sixty days from the application receipt issue day up to the date when the refund is credited to the account of the applicant. The refund amount will be carried forward and adjusted to the next month’s tax payment.

Procedure to Claim Refund of GST for Exporters

There are three ways available for exporters to claim for excess tax refunds on the goods to be exported.

  • By furnishing non-duty paid inputs and then exporting the finalized goods without paying for duty charge.
  • By obtaining duty paid inputs and then claiming for a refund on it during the moment when the goods are exported, without paying for duty charge.
  • By obtaining duty paid inputs, procuring the input tax credit and then exporting the finished goods after duty charge has been paid. Upon utilization of input tax credit, making the claim for rebate of the duty earlier paid against the exported goods.

Page content

  1. Procedure to Claim Refund of GST for Exporters
  2. GST Refund for Tourists
  3. Circumstances for Delay in Refund and Interest
  4. Procedure of Refund Under GST

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GST Refund for Tourists

Under the act of Section 15 of the Integrated Goods and Service Tax (IGST), the refund paid on integrated tax against the supply of goods to tourists leaving India is mentioned.

The integrated tax which will be paid by tourists leaving India for the supply of goods transported out of India by the tourist himself/herself will be refunded. The refund will be made in a manner subjected to specific conditions.

Tourists who visited and stayed in India for less than 6 months on legitimate, non-immigrant purposes will be eligible for claiming a refund on the IGST paid towards the supply of goods which was exported from India to some foreign country.

Circumstances for Delay in Refund and Interest

As per the GST law and the recommendation of the Subramanian Committee, the refund application must be processed within 90 days from the day of the application filing. If the refund application does not get processed within the period, then a 6% interest rate is applicable.

The Commerce and Industry Minister, Nirmala Sitharaman stated in a release that the refunds under GST will be processed within 7 days and if the processing is delayed for more than 2 weeks then the refund will be credited along with an interest.

Procedure of Refund Under GST

Procedure of Refund Under GST

The procedures for claiming refund of GST are as follows

  • File the application form while claiming for a refund through the GSTN portal.
  • The applicant will receive an acknowledgment number via SMS or email after the application has been filed electronically.
  • Any necessary adjustment will be made on the return or the cash ledger which will automatically reduce the carry-forward input tax credit.
  • Within 30 days of the filing of the refund application, the submitted application and documents will be thoroughly inspected.
  • A concept would be followed to examine each refund application and if it does not meet the criteria then the refund would instead be transferred to Consumer Welfare Fund.
  • If the refund exceeds the anticipated amount then it will be put through a pre-audit process so that the refund can be sanctioned.
  • Either via ECS, RTGS or NEFT the refund will be electronically credited to the applicant’s bank account.
  • The application for refund can be submitted at the end of each yearly quarter.
  • On claim amounts less than Rs. 1,000 no refund shall be paid.

The processing timeline for the applications for return in GST will be faster and more precise than the previous tax regime. Due to the fact that all the data will be uploaded in the GST portal automatically, verification and delivery of the excess tax refund will be swifter.

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