Goods and Services Tax (GST) is an indirect tax that allows taxpayers to claim refunds under specific conditions as per the GST Act. Businesses should structure their financial books efficiently to optimize cash flow and maximize GST refunds. This guide provides a comprehensive understanding of the various categories, procedures, and requirements for claiming GST refunds in India.
GST refunds can be claimed under the following circumstances:
Exports, including supplies to Special Economic Zone (SEZ) units, are eligible for a GST refund.
Exporters can opt for either:
a. Paying IGST and claiming a refund.
b. Exporting under a Letter of Undertaking (LUT) without IGST payment and claiming a refund of unutilized Input Tax Credit (ITC).
Entities with a Unique Identification Number (UIN), such as embassies and UN bodies, can claim a refund on GST paid on purchases in India.
If the tax rate on inputs is higher than that on output supplies, the taxpayer can claim a refund of the unutilized ITC.
Foreign tourists can claim a refund on GST paid for goods carried abroad at the time of departure.
Refunds can be claimed if GST is erroneously paid under the wrong tax head (CGST/SGST/IGST).
If a refund is due as per a court or appellate authority ruling, the taxpayer can claim it under the applicable provisions.
The refund process involves the following steps:
• Application for GST refund is made online using Form GST RFD-01 on the GST portal.
• Supporting documents, including invoices and payment proofs, must be uploaded.
• On submission, an Application Reference Number (ARN) is generated.
Deficiency Memo (GST RFD-03)
• If any errors are found, the tax officer issues a deficiency memo in Form GST RFD-03.
• The taxpayer must refile the application within 15 days.
Acknowledgment (GST RFD-02)
• If the application is complete, the officer issues an acknowledgment in GST RFD-02 within 15 days.
• Once acknowledged, no deficiency memo can be issued later.
• 90% of the refund can be issued provisionally in Form GST RFD-04 for zero-rated supplies.
• Alternatively, a full refund can be processed directly under Form GST RFD-06.
Once approved, a payment order is issued in Form GST RFD-05, and the amount is credited to the taxpayer’s bank account.
If the taxpayer has pending dues, the tax officer can adjust the refund in Form GST RFD-07.
• If the officer finds the claim inadmissible, a notice is issued in Form GST RFD-08.
• The taxpayer can reply in Form GST RFD-09 to contest the rejection.
• Refund applications must be filed within two years from the relevant date.
• If re-filing due to a deficiency memo, the limitation period resets from the fresh filing date.
• Delays in processing: Applications may be delayed due to scrutiny by tax officers.
• Incomplete documentation: Lack of proper supporting documents leads to rejections.
• Mismatch in ITC claims: Discrepancies in GSTR-2A and actual ITC claims may cause rejection.
• Errors in refund calculations: Incorrect computation may lead to partial refunds or denials.
• Maintain accurate and organized records of invoices and transactions.
• Regularly reconcile ITC claims with GSTR-2A.
• Ensure timely filing of refund applications.
• Seek professional assistance for complex refund claims.
By understanding and following these GST refund procedures, businesses can ensure compliance while optimizing their cash flow. If you require assistance with GST refunds, professional support can streamline the process and maximize efficiency.
For professional assistance, reach out to us on email: info@returnfilings.com or on whatsapp: https://wa.me/919910123091 to ensure all statutory obligations are met on time.
