What You Need to Know About GST Refunds in India?

Posted In | Finance | Accounting Software | India Accounting Tax

GST (Goods and Services Tax) is a comprehensive indirect tax system implemented in India in July 2017. It has replaced multiple taxes levied by the Central and State Governments and has significantly streamlined the taxation process. One of the essential aspects of the GST regime is the GST refunds, which help businesses and taxpayers get refunds for extra GST paid or the unutilized Input Tax Credit (ITC). In this article, we will discuss everything you need to know about GST refunds in India, including eligibility, the application process, and the timeline for refunds.

 

Eligibility for GST Refunds

There are various circumstances under which a taxpayer can claim a GST refund. Some of the most common scenarios include:
 

• Refund of unutilized Input Tax Credit (ITC) on account of zero-rated supplies (exports) or supplies to SEZ (Special Economic Zone)
   

• Refund of excess balance in the electronic cash ledger
   

• Refund of tax paid on a deemed export, supply to an EOU (Export Oriented Unit), or supply under a bond or Letter of Undertaking (LUT)
   

• Refund of tax paid on an intra-State supply which is subsequently held as inter-State supply and vice versa
   

• Refund of tax paid on a transaction considered as an inverted tax structure, where the tax rate of inputs is higher than the tax rate of outputs
   

• Refund of tax paid by foreign tourists on goods purchased and taken out of India
   

• Any other situation as prescribed by law or when the tax paid is more than the required amount
   

Application Process for GST Refunds

To claim a GST refund, eligible taxpayers need to file the refund application in the prescribed form (Form GST RFD-01) through the GST portal (www.gst.gov.in). The application should be accompanied by relevant supporting documents, as required. Here are the steps to file a GST refund application:
 

1. Login to the GST portal with your credentials
    

2. Go to 'Services' > 'Refunds' > 'Application for Refund'
    

3. Select the appropriate reason for claiming the refund
    

4. Fill in the required details in the application form and upload the relevant supporting documents
    

5. Submit the refund application by clicking on the 'Submit' button
    

6. After submitting the application, you will receive an Application Reference Number (ARN) via email and SMS
    

7. You can track the status of your refund application using the ARN on the GST portal
    

Timeline and Interest on Delayed Refunds

As per the GST law, the refund application should be processed, and the amount should be credited to the applicant's bank account within 60 days from the date of receipt of the complete application. If the refund is not granted within 60 days, the applicant is entitled to receive interest at the rate of 6% per annum on the refund amount, calculated from the 61st day onwards. In the case of refunds related to zero-rated supplies (exports) or supplies to SEZ, if the refund is not granted within 15 days from the date of acknowledgment of the refund application, the applicant is entitled to receive interest at the rate of 9% per annum on the refund amount, calculated from the 16th day onwards.

 

GST refunds play a crucial role in ensuring a smooth flow of working capital for businesses and maintaining the overall efficiency of the tax system. It is essential for taxpayers to be aware of their eligibility, the application process, and the timelines for GST refunds. By understanding these aspects, businesses and taxpayers can effectively manage their cash flow and comply with the GST law.