REFUND UNER MODEL ‘GST’ LAW

[Mr. M. GOVINDARAJAN]

Refund

The term ‘refund’ is defined under Explanation (A) to Section 38 as including refund of tax on goods and/or services exported out of India, or refund of tax on the supply of goods regarded as deemed exports, or refund of unutilized input tax credit.

Type of refunds

The refund that may be got from the Board is the refund of any tax and interest and refund of unutilized input tax credit.

Refund of unutilized input tax credit

A taxable person may claim refund of any unutilized input tax credit at the end of any tax period. No refund of unutilized input tax credit shall be allowed in cases other than exports or in cases where the credit has accumulated of rate of tax on inputs being higher than the rate of tax on inputs. No refund of unutilized input tax credit shall be allowed in cases where the goods exported out of India are subject to export duty.

Time limit

The time limit for claiming any refund is before the expiry of two years from the relevant date.  The limitation of two years shall not apply where such tax or interest or any other amount has been paid under protest.

Relevant date

Explanation (B) to Section defines the term ‘relevant date’ as-

• in the case of goods exported out of India where a refund of tax paid is available in respect of the goods themselves or, as the case may be, the inputs or input services used in such goods-

• if the goods are exported by sea or air, the date on which the ship or the aircraft in which such goods are loaded, leaves India, or
• if the goods are exported by land, the date on which such goods pass the frontier, or
• if the goods are exported by post, the date of dispatch of goods by Post Office concerned to a place outside India;

• in the case of supply of goods regarded as deemed exports where a refund of tax paid is available in respect of the goods, the date on which the return relating to such deemed exports is filed;
• in the case of goods returned for being remade, refined, reconditioned or subjected to any other similar process in any place of business, the date of entry into the place of business for the purposes aforesaid;
• in the case of services exported out of India where a refund of tax paid is available in respect of services themselves or, as the case may be, the inputs or input services used in such services, the date of-

• receipt of payment in convertible foreign exchange, where the supply of service had been completed prior to the receipt of such payment; or
• issue of invoice, where payment for the service had been received in advance prior to the date of issue of the invoice;

• in case where the tax becomes refundable as a consequence of judgment, decree, order or direction of Appellate authority, Appellate Tribunal or any Court, the date of communication of such judgment, decree, order or direction;
• in the case of refund of unutilized input tax credit, the end of the financial year in which sum claim for refund arises; and
• in the case where tax paid is provisionally under this Act or the rules made there under, the date of adjustment of tax after the final assessment thereof.

Refund procedure

The following is the procedure for refund under GST regime-

• The application for claiming refund shall be made-

• in Form No. GST RFD-1 by any registered taxable person claiming refund of any tax, interest, penalty, fees or any other amount paid by him, electronically through the common portal either directly or from a Facilitation Centre, notified by the Board or Commissioner;
• relating to balance in the electronic cash ledger may be made through the return for the relevant tax period in Form No. GSTR – 3, Form No. GSTR – 4 or Form No. GSTR – 7;
• in case of export of goods, only after the export manifest or an export report in respect of such goods is delivered under Section 41 of the Customs Act;
• in respect of supplies made to SEZ unit or a developer, or supplies regarded as deemed exports, by the unit or the developer or the recipient of deemed export supplies;

• The application shall be accompanied by any one of the following documentary evidences, as applicable, to establish that a refund is due to the applicant-

• the reference number of the order and a copy of the order passed by the proper officer or an appellate authority or any competent court resulting in such refund including refund of pre-deposit along with the reference number of the payment of the amount claimed as refund;
• a statement containing the number and date of shipping bills or bills of export and the number and the date of relevant export invoices, in a case where the refund is on account of export of goods;
• a statement containing the number and date of invoices as prescribed invoice rules in case of supply of goods made to an SEZ unit or a developer;
• a statement containing the number and date of invoices, in a case where the refund is on account as deemed exports;
• a statement containing the number and date of invoices and the relevant Bank Reconciliation Certificates or Foreign Inward Remittance Certificates in a case where refund is on account of export of services;
• a statement containing the number and date of invoices and the details of payment, along with the proof thereof, made by the claimant to the supplier for authorized operations in a case where the refund is on account of supply of services made to an SEZ unit or a developer;
• a statement in Annexure I of Form  GST RFD-1 containing the number and date of invoices received and issued during a tax period in a case where the claim pertains to refund of any unutilized input tax credit where the credit has accumulated on account of rate of input tax being higher than the rate of output tax;
• the reference number of the final assessment order and a copy of the said order in a case where the refund arises on account of finalization of provisional assessment;
• a decision to the effect that the incidence of tax and interest claimed as refund has not been passed on to any other person, in a case where the amount of refund claim is less than ₹ 5 lakhs;
• a certificate in Annexure 2 of Form No. GST RFD-1 issued by a Chartered Accountant or a Cost Accountant to the effect that the incidence of tax and interest claimed as refund has not been passed on to any other person, in a case where the amount of refund claimed is ₹ 5 lakhs or more;

• If the refund claim relates to input tax credit, the electronic credit ledger shall be debited by the applicant in an amount to the amount to the refund so claimed;
• Where any taxable goods or services are exported without payment of tax, under bond or letter of undertaking refund of input tax credit shall be granted as per the following formula-

Refund amount= (Export turnover of goods + Export turnover of services) x net ITC

Adjusted total turnover

• The application for refund of any amount, after adjusting the tax payable out of the advance tax deposited by the applicant shall be claimed either in the last return required to be filed by him or only after filing of the said last return;
• Where the application relates to a claim for refund from the electronic cash ledger, an acknowledgement in Form GST RFD-2 shall be made available to the applicant through the common portal electronically, clearly indicating the date of filing of the claiming of the refund;
• The application for refund, other than claim for refund from electronic cash ledger, shall be forwarded to the proper officer;
• The proper officer shall, within 15 days of filing of the application, scrutinize the application for its completeness;
• Where the application is found to be complete, an acknowledgement in Form GST RFD – 2 shall be made available to the applicant through the Common Portal electronically, clearly indicating the date of filing of the claim for refund;
• Where any deficiencies are noticed, the proper officer shall communicate the deficiencies to the applicant in Form GST RFD – 3 through the common portal electronically requiring him to file a refund application after rectification of such deficiencies;
• If the proper officer is satisfied that the whole or part of the amount claimed is refundable, he may make an order in Form No. GST RFD – 5, sanctioning the amount of refund to which the applicant is entitled, mentioning the amount, if any, refunded to him on a provisional basis, amount adjusted against any outstanding demand and balance amount refundable;
• Such order shall be issued within 90 days from the date of receipt of application;
• Where the amount of refund is completely adjusted against any outstanding demand an order giving the details of adjustment may be issued in Form GST RFD – 6;
• If the amount of refund is not admissible or payable the proper officer shall issue a notice in Form No. GST RFD – 7 to the applicant, requiring him to furnish a reply within 15 days of the receipt of such notice;
• After considering the reply filed by the applicant, if any, the proper officer shall make an order in Form No. GST RFD – 5 sanctioning the amount o refund in whole or in part or rejecting the said refund claim;
• The said order shall be made available to the applicant electronically;
• No application for refund shall be rejected without giving the applicant a reasonable opportunity of being heard;
• Provisional refund shall be granted to the applicant subject to the following conditions-

• The person claiming refund has, during any period of 5 years immediately preceding the tax period to which the claim for refund relates, not been prosecuted for any offence under the Act or under an earlier law where the amount of tax evaded ₹ 250 lakhs;
• The GST compliance rating of the applicant is not less than 5 on a scale of 10;
• No proceeding of any appeal, review or revision is pending on any of the issues which form the basis of refund and if pending, the same has not been stayed by the appropriate authority or court;

• The proper officer, after scrutiny of the claim and on being prima facie satisfied that the amount claim as refund, shall make an order in Form GST RFD – 4 sanctioning the amount of refund due to the said applicant on provisional basis within a period not exceeding 7 days from the date of acknowledgment;
• The proper officer shall issue a payment advice in Form No. GST RFD – 8 for the amount sanctioned to be electronically credited to any of the bank accounts of the applicant mentioned in his registration particulars and as specified in the application for refund;
• The refundable amount shall be paid to the applicant, instead of being credited to the Fund, if such amount relates to-

• refund of tax on goods and/or services exported out of India or on inputs used in the goods and/or services which are exported out of India;
• refund of unutilized input tax credit;
• the tax and interest, if any, or any other amount paid by the applicant, if he had not passed on the incidence of such tax and interest to any other person; or
• the tax or interest borne by such other class of applicants as the Central or a State Government may, on the recommendations of the Council, by notification, specify;

• Where any refund is due to the applicant who has defaulted in furnishing any return or who is required to pay any tax, interest or penalty, which has not been stayed by any Court, Tribunal or Appellate Authority by the specified date, the proper officer may-

• Withhold payment of refund due until the said person has submitted the return or paid the tax, interest or penalty;
• Deduct from the refund due, any tax, interest or penalty which the taxable person is liable to pay but which remains unpaid;

• Where an order giving rise to a refund is the subject matter of an appeal or further proceeding or where any other proceeding under this Act is pending and the Commissioner/Board is of the opinion that grant of such refund is likely to adversely affect the revenue, he may, after giving the taxpayer an opportunity of being heard, withhold the refund tills such time as he may determine;
• Where a refund is withheld the taxable person shall be entitled to interest if as a result of the appeal or further proceeding he becomes entitles to refund;
• Where any interest is due and payable the proper officer shall make an order and a payment advice in Form GST RFD – 9, specifying the amount of refund which is delayed, the period of delay for which interest is payable and the amount of interest payable;
• The interest shall be electronically credited to any of the bank accounts of the applicant mentioned in his registration particulars and as specified in the application for refund;
• No refund shall be paid to an applicant if an amount is less than ₹ 1000/-;
• Any person eligible to claim refund on his inward supplies shall apply for refund in form No. GST RFD – 10 once in every quarter, electronically on the Common Portal along with a statement of inward supplies of goods and/or services in Form No. GSTR – 11 prepared on the basis of statement of outward supplies furnished by corresponding suppliers in Form GSTR – 1;
• The refund of tax paid by the applicant, in the above case, shall be available if-

• The inward supplies of goods and/or services were received from a registered taxable person against a tax invoice and the price of the supply covered under a single tax invoice exceeds ₹ 5000/- excluding tax paid, if any;
• Name and GSTIN/UIN, if available, of the applicant is mentioned in the tax invoice; and
• Such other restrictions or conditions as may be specified in the Notifications are satisfied.