GST Refund Policy in India

GST Refund Policy in India
GST Refund Policy in India

After the successful implementation of GST all over the country, it is time to understand the various compliances of GST refunds under its regime. Timely refunds are of greater importance under GST because it will facilitate trade through the release of blocked funds for working capital, expansion and modernization of existing business.

GST Refund Policy in India

The new provisions provided in the GST Law aims at streamlining and standardizing the refund procedures. Hence, under the GST regime, there will be a standardized form to make any claim for refunds. In order to curb time consuming and cumbersome process, the new process under GST has been made completely online and time-bound

Let’s understand the situations which lead to refunds under GST.

A claim for refund may arise on account of any of the following:

  • Export of goods and services, including deemed export.
  • Excess payment of tax in cases of mistakes or inadvertency.
  • Supplies to SEZs units and developers.
  • Finalization of provisional assessment.
  • Refunds of pre-deposit to file an appeal including refund arising in respect of an appellate authority’s order (if the appeal has been decided in favor of the appellant).
  • Refund of taxes on purchase made by UN or embassies or any accumulated Input Tax Credit on account of inverted duty structure.
  • Refund of CGST & SGST paid by treating the sale/supply as intrastate supply which is subsequently held as inter-state supply and vice versa.            

Procedure for Claiming Refunds Under GST

  • An application form must be filed to claim a refund through GSTN Portal.
  • An acknowledgment number will be given to the applicant either via SMS or email after successfully filing the application electronically.
  • The adjustment would be made to return and cash ledger which will result in a reduction of the “carry-forward input tax credit” automatically.
  • Within a period of 30 days of filing the refund application, the refund application and the relevant documents presented must be scrutinized and adhered accordingly.
  • For each refund application, the concept of “unjust enrichment” will be considered and in the case of disqualification, the refund will be transferred to CWF (Consumer Welfare Fund).
  • If the amount of refund claimed exceeds the predetermined refund amount then the application will go through the pre-audit process for sanctioning of the refund.
  • Refund will be credited electronically to the account of an applicant via ECS, RTGS or NEFT.  
  • The applicant can file for the application of refund on a quarterly basis.
  • Refund of less than Rs. 1,000 shall not be granted.

What happens in the case of Delay in refund and Interest?

According to the recommendations of the Subramanian Committee, along with the GST Law and regulations, the application of the refund must be processed within a period of 90 days. In case the application is not entertained within the said period, then interest at the rate of 6% is recommended in addition to the refund amount.

The Minister of Commerce and Industry of India also stated that under GST, the refunds shall be processed within a period of 7 days and in the case of delays of more than 2 weeks, the refund will be provided along with interest.

It is being stipulated that since under GST Refund all the processes are being automated, hence it is expected that the process of the refund will be faster and smoother than earlier.

All the data will be available online on the portal which will result in faster verification and scrutinization of the refund applications and hence, will decrease the refund time dramatically.

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