Process for Claiming the GST Tax Refund

What is a tax refund?

A tax refund is any amount returnable to a tax payer, by the government. Dealers and businessmen alike can claim refunds on specific events such as when excess tax has been paid, there is unutilized input tax credit available, or in case of inverted duty structure where the rate of tax on inputs are higher than the rate of the tax on outputs.

Under the erstwhile indirect tax regime, tax refunds were allowed in the following ways –

	Refund allowed as
Excise	Tax paid on exported purchase of goods Tax paid on inputs that are used for manufacturing goods for exporting Accumulation of input tax credit because of output supplies being either exports or zero rate supplies
VAT	Tax paid on exported purchase goods When the input tax credit exceeds tax payable on the sales (in a particular month) the credit in excess can be carried forward to be used in the subsequent month, and so on. When the financial year ends, such amount so carried forward may be used as refund or carried forward as input ax credit.
Service Tax	Service tax is paid in excess Tax paid cannot be adjusted against future tax liabilities that may arise Input tax credit (accumulated) has been used for provision of output services that were exported without paying service tax

Under the GST regime, tax refunds are allowed similarly as under the erstwhile regime as follows –

On tax paid on any inward supply of exported goods or services;
On tax paid on the input goods or services used for exporting goods or services (unless such goods are subject to export duties on which refund cannot be claimed);
On any unutilized input tax credit, due to both export output supplies and zero rated supplies;
Inverted duty structure leading to non-utilization of input tax credit – in the GST regime, when the rate of tax on input supplies is higher than such rate on output supplies, one may claim tax refund as opposed to under the erstwhile regime where a refund could not be claimed on such amount. Nonetheless, refunds cannot be claimed when such supplies are completely exempt or rated as nil.

What is the process for claiming such GST tax refund?

We have provided a brief snapshot of the entire process as follows –

Process

Description

Relevant Form Filings

Time

Applying for Refund

Such application must be filed on or before the relevant date. The relevant date is as follows –

The date on which the vessel (air or sea) leaves India for goods exported by air or sea
The date on which the goods pass the frontier for goods exported by land
The date on which the goods are dispatched from the post office for goods exported by post
The date of receipt of the payment for services exported when the supply of such service has been completed before receiving the payment
The date of invoice issued for services exported when the payment has been received in advance before generation of the invoice
The end of the financial year in which the claim arises for any unutilized input tax credit

Form GST RFD-1
Form GSTR-3 to be filed by a regular dealer for filing monthly returns for claiming the refund of balance in the electronic cash ledger
Form GSTR-4 for filing by a composite dealer

Before 2 years from the expiry of the relevant date

If the tax refund claimed does not exceed INR 5 lakhs, then the taxpayer is required to file a declaration based on all material evidence that he has for the purpose of certifying that such incidence of tax or interest that he is claiming as a refund, has not already been claimed or passed on to another taxable person. If the tax refund claimed exceeds INR 5 lakhs, then the taxpayer is required to accompany documents such as all material documentary evidence of refund due, and evidence to ascertain that he paid the tax amount and the same has not been passed onto another person, along with the refund application.

Process	Description	Relevant Form Filings
Ordering for Refund – Export	Refund on export goods or services is done on a provisional basis to the extent of 90% of the amount so claimed. Post that the officer verifies the documents and evidence furnished and issues a final settlement on the refund claim by way of an order. Provisional claim is only permitted when the person claiming the refund has not been prosecuted for tax evasion of any amount higher than INR 250 lakhs in the last 5 years from the date of making such claim; when the GST compliance rating of such person is a minimum 5 out of 10; and when there is no appeal, review or revision pending on such refund.	Form GST RFD-4
Ordering for Refund – all other cases	In the event the officer is satisfied with all the information, he will issue an order for refund of such claim amount within 60 days from receiving the application. In the event the refund has not been initiated within 60 days, interest will be paid on the entire period after expiry of the 60-day period until the refund has been actuated. In case the amount of refund claimed is less than INR 1,000, no refund shall be made.	Form GST RFD-5

GST refund is also allowed in some exceptional cases such as –

supply of goods or services to a Special Economic Zone or Export Oriented Unit as such tax on the supply of these goods is termed as a deemed export – the refund is given on the date on which the return pertaining to the export is filed for deemed exports.

as a consequence of a judgment, decree, order, direction of an appellate tribunal / authority or any court – the refund is given from the date of communication of such judgment, order, decree or direction;
tax paid on a supply that has not been provided / nor has an invoice been issued (either wholly or partially);
tax collected incorrectly and deposited with the State or Central government (in case CGST, SGST or IGST has been paid incorrectly, in which case the person will be eligible to receive refund when the requisite tax has been remitted in a correct manner);
when goods are taken out of the country, then the IGST paid on the supply of such goods to tourists.

From the date of communication of such decree

Some more relevant dates of obtaining tax refunds are as follows –

On the date of adjustment of the tax liability upon final assessment, when the tax is provisionally paid;
On the date of receipt of the goods or services by a person in case of a supplier;
On the date of payment of the tax in any other case.

For these scenarios, the tax refund claim process is also the same as explained above.