GST Refunds and Policy: All You Need to Know about

gst refund and policy

Goods and Services Tax (GST) is an indirect tax (or consumption tax) used in India on the supply of goods and services. It is a comprehensive, multistage, destination-based tax: comprehensive because it has subsumed almost all the indirect taxes except a few state taxes. Multi-staged as it is, the GST is imposed at every step in the production process, but is meant to be refunded to all parties in the various stages of production other than the final consumer and as a destination-based tax, it is collected from point of consumption and not point of origin like previous taxes.

Goods and services are divided into five different tax slabs for collection of tax - 0%, 5%, 12%, 18% and 28%. However, petroleum products, alcoholic drinks, and electricity are not taxed under GST and instead are taxed separately by the individual state governments, as per the previous tax system.There is a special rate of 0.25% on rough precious and semi-precious stones and 3% on gold. In addition a cess of 22% or other rates on top of 28% GST applies on few items like aerated drinks, luxury cars and tobacco products. Pre-GST, the statutory tax rate for most goods was about 26.5%, Post-GST, most goods are expected to be in the 18% tax range.

Most countries with a GST have a single unified GST system, which means that a single tax rate is applied throughout the country. A country with a unified GST platform merges central taxes (e.g., sales tax, excise duty tax, and service tax) with state-level taxes (e.g., entertainment tax, entry tax, transfer tax, sin tax, and luxury tax) and collects them as one single tax. These countries tax virtually everything at a single rate.

India established a dual GST structure in 2017, which was the biggest reform in the country's tax structure in decades. The main objective of incorporating the GST was to eliminate tax on tax, or double taxation, which cascades from the manufacturing level to the consumption level.

The previous system with no GST implies that tax is paid on the value of goods and margin at every stage of the production process. This would translate to a higher amount of total taxes paid, which is carried down to the end consumer in the form of higher costs for goods and services. The implementation of the GST system in India is, therefore, a measure that is used to reduce inflation in the long run, as prices for goods will be lower.

GST Refunds and Policy

Numerous exporters are facing problems in claiming ITC (Input Tax Credit) as the government made it compulsory to match GST Invoices for the claim. Experts say that the situation is the result of late fees waiver of certain forms for companies and suppliers. Under several cases, exporters were unable to claim ITC as forms were not submitted. A corresponding invoice is to be uploaded on the  GST portal claiming ITC. All the invoices should be reflected in form GSTR- 2A.

Situations For GSt Refunds:

  Excess amount payment of tax accumulated due to mistake or misinterpretation

  Export (also deemed export) of goods/services within the claim of rebate or Refund of collected input credit of duty/tax when goods/services are exported

  Finalization of provisional assessment

  Refund of Pre-deposit for filing appeal assimilating refund coming in pursuance of an appellate authority’s order

  Payment of duty/tax during the investigation but no/ less liability arises in the event of finalization of investigation/adjudication

  Refund of tax paid on purchases done by Embassies or UN bodies

  Credit collection due to output being tax exempt or nil-rated

  Credit collection due to inverted duty structure i.e. due to tax rate differential between output and inputs

  Year-end or volume based incentives provided by the supplier through credit notes.

Scrutiny of Refund Application

As per norms, it would take about 30 days to process a refund application. Where the refund claim exceeds a prescribed amount, then the same shall be subjected to an audit process. If the same qualifies for a refund, then an order shall be passed to that extent, or if it meets the criterion for being “unjustly enriching” the taxpayer, then the amount shall be transferred to the Consumer Welfare Fund. The above declaration may be required to be certified by a Chartered Accountant.

How to Track GST Refunds?

  Log into the CBIC GST Portal using valid credentials.

  Then, go to Services, choose Refunds and later Track Application Status.

  Choose the right fiscal year, or enter your refund application number.

  The search results will come up.

Steps for GST Refund

Step 1: Login to the GST portal.

Step 2: Go to 'Services' > 'Refunds' > 'Application for Refund'

Step 3: Select 'Refund of Excess Balance in Electronic Cash Ledger' and click on 'CREATE'.

Step 4: Once you click on 'CREATE' in the above step, the balance amount available in Electronic Cash Ledger will be auto-populated in the form.

Step 5: You can enter values of the refund to be claimed in the editable 'Refund Claimed' table. The refund amount can be less than or equal to the amount available in Electronic Cash Ledger.

Click on "Click to view Electronic Liability Ledger" to get details of liabilities/dues relating to returns/other demands.

Step 6: Click on "GO BACK TO REFUND FORM" after viewing the outstanding demand.

Step 7: Select the bank account (in which you want the refund to be credited) from the drop-down.

Step 8: To upload the supporting documents, please follow the steps below:

1. Give the description to the document

2. Click on "Choose File" to add the document

3. Click on "Delete" icon to delete the uploaded document

Click on "SAVE" after completion of uploading the document

Step 9: Click on "PREVIEW" to download the form in PDF.

After reviewing the draft, click on "PROCEED" to submit the form.

Step 10: Select the checkbox in the declaration. Select the name of the 'Authorised Signatory' from the drop-down.

Based on the type of your organisation click on "SUBMIT WITH DSC" or "SUBMIT WITH EVC".

In case of DSC, select the certificate of the authorised signatory and click on 'SIGN' button.

In case of EVC, enter the OTP received on the mail ID or mobile number of the authorised signatory and click on 'VERIFY'.

Step 11: Once RFD-01 is filed ARN will be generated and "Refund ARN Receipt" can be downloaded as PDF document from 'Services'> 'Refunds'> 'My Saved/ Filed Applications'.

Filed applications can be tracked using the "Track Application Status" under Refunds.

After inspection by a GST authorities refund amount will be credited to the applicant bank account.

For Further Reading and Understanding:

  GST Payment and Refunds

  Check Balance in E-Ledgers

  GST Returns

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