- Introduction
- Who can claim refund of GST?
- Time Limit for claiming GST Refund
- Situations leading to refund claim of GST
- Cases where unutilized ITC can be claimed
- Refund on Supplies made by Casual Taxable Person (CTP) or Non-Resident Taxable Person (NRTP)
- Refund on Supplies made to Special Economic Zone unit or developer
- Refund on Supplies regarded as Deemed Exports
- Concept of Theory of Unjust Enrichment
- Cases where refund claims paid to an applicant
- Other Key points regarding refund claim
Introduction
GST Refund can be the cash balance in the electronic cash ledger deposited in excess or tax paid by mistake or the accumulated Input Tax Credit (ITC) unable to be utilized for tax payments due to zero-rated supplies or an inverted tax structure.
The provisions of GST refund under the GST Act have made the process online results less time-consuming and more transparent than earlier Indirect tax laws.
The provisions are contained in sec 54 to 58 of the CGST Act,2017 along with Rules 89 to 97A of CGST Rules,2017. State GST Laws also have identical provisions. Further, it is to be noted that provisions of refunds under the CGST Act have also been made applicable to IGST Act vide Sec 20 of the IGST Act.
In this article, we are here to discuss the cases when a GST refund can be claimed and the time limit for such claiming.
Who can claim refund of GST?
Any registered person can claim a refund of GST or any other amount paid by him.
Time Limit for claiming GST Refund
Before the expiry of two years from the relevant date.
Relevant Date – As per explanation 2 to Sec 54, it means:
S.No. | Cases | Relevant Date |
1 | Export of goods | |
Exported by sea or air | Date on which loaded ship or aircraft leaves India | |
Exported by land | Date on which goods pass the frontier | |
Exported by post | Date of dispatch of goods by the Post Office concerned to a place outside India | |
2 | Export of services | |
Payment received after completion of supply of services | Date of receipt of payment in convertible foreign exchange or in Indian rupees wherever permitted by the Reserve Bank of India | |
Payment received in advance but prior to the invoice issued date | Date of issue of invoice | |
3 | Supply of goods considered as deemed export | Date on which the return for such deemed exports is furnished |
4 | Tax becomes refundable as a result of judgment, decree, order or direction of the Appellate Authority, Tribunal or any court | Date of communication of such judgment, decree, order or direction |
5 | Refund of unutilized ITC on account of inverted duty structure | Due date for furnishing of return under section 39 for the period in which such claim for refund arises |
6 | tax is paid provisionally under the Act or rules made thereunder | Date of adjustment of tax after the final assessment thereof |
7 | In the case of a person, other than the supplier | Date of receipt of goods or services or both by such person |
8 | Cases where tax paid under the wrong head i.e. Paid IGST instead of CGST and SGST or vice-versa | Date of payment of correct GST |
9 | Supplies made to SEZ units | Due Date for furnishing of return |
10 | Any other case | Date of payment of tax |
Situations leading to refund claim of GST
- Cases where unutilized ITC can be claimed:
*In this case calculation for the claim of refund shall be:-
Refund Amount = Turnover of Zero rated supply of goods or services or both × Net ITC
Adjusted Total Turnover
Where,
- Refund amount = Maximum admissible refund
- Adjusted Total Turnover = Total turnover in a state or a union Territory
- Including turnover of zero-rated supply of goods and services and value of export.
- Excluding the value of exempt supplies other than zero-rated turnover of supplies for which refund is claimed under Rule 89(4A) and rule 89(4B)
- Turnover of Zero-rated supply of good = Lower of the following-
- Value of zero-rated supply of goods made under the bond or LUT or
- 1.5 times of the value of like goods traded domestically.
However, there are certain cases where a Refund of unutilized ITC cannot be claimed:
- where the goods exported out of India are subjected to export duty.
- if the supplier of goods or services or both avails of drawback in respect of central tax or claims refund of the integrated tax paid on such supplies.
- Refund on Supplies made by Casual Taxable Person (CTP) or Non-Resident Taxable Person (NRTP):
A CTP means a person who occasionally undertakes transactions involving the supply of goods or services or both in the course or furtherance of business, whether as principal, agent or in any other capacity, in a State/UT, where he has no fixed place of business.
NRTP means any person who occasionally undertakes transactions involving the supply of goods or services or both, whether as principal or agent or in any other capacity, but who has no fixed place of business or residence in India.
CTP | NRTP |
A CTP does not have a fixed place of business in the State/UT where he undertakes supply though he might be registered in some other State/UT | NRTP does not have a fixed place of business/residence in India at all. |
He has to undertake transactions in the course or furtherance of business. | No such business test is required here. |
A casual taxable person (CTP) or a non-resident taxable person (NRTP) shall apply for registration at least 5 days prior to the commencement of business.
At the time of submission of application for registration under section 25(1), they shall make an advance deposit of tax in an amount equivalent to the estimated tax liability for the period for which the registration is sought.
However, the period for such registration shall not exceed 90 Days but can be extended upto next 90 days in such manner as may be prescribed.
Provisions of refund in this case shall be as follows:
- Advance tax paid shall be refunded only when such person has furnished all required returns u/s 39 for the period for which certificate of registration is granted.
- Such refund can be claimed at the time of furnishing of the last return.
- It shall be calculated as:
Amount Refundable = Advance tax paid – Tax payable by the applicant
- Refund on Supplies made to Special Economic Zone unit or developer:
- Refund on Supplies regarded as Deemed Exports:
- Either supplier or recipient can a claim refund.
- Supplier can claim – if the recipient has not availed ITC on such supplies and the recipient has furnished an undertaking that the supplier can claim a refund.
- Recipient can claim – in all other situations where supplier has not claimed.
Concept of Theory of Unjust Enrichment
- Unjust = Inequitable and enrichment = benefit.
- It means that no person can be allowed to enrich inequitably at the expense of others.
- Under GST, it states that the registered person who has not passed the incidence of tax can only claim the refund.
- If the claim of refund passed the test of unjust enrichment, only then it is paid to applicant.
However, unjust enrichment does not applicable in the cases where refundable amount is paid to the applicant instead of crediting Consumer Welfare Fund u/s 57.
Cases where refund claims paid to an applicant
As a general rule, the refund is credited to Consumer Welfare Fund u/s 57 in such manner as may be prescribed u/r 97 of CGST Rules, 2017 but credit shall be made to applicant in the following circumstances as stipulated u/s 54(8) of CGST Act,2017:
- where tax has been paid on zero rated supplies of goods or services or both or on inputs or input services used in making such zero-rated supplies
- Refund of unutilized ITC claimed under section 54(3)
- Refund of tax paid on a supply which is not provided, either wholly or partially, and for which invoice has not been issued, or where a refund voucher has been issued
- Refund of tax in pursuance of section 77*
Paid | Considering transaction as | But subsequently held | Consequences |
Central and State Tax | Intra state | Inter-State Supply | The taxes paid shall be refunded in such manner and subject to such conditions as may be prescribed |
Integrated Tax | Inter State | Intra state Supply | Applicant shall not be required to pay any interest on the amount of central tax and State tax. |
*Sec 77- A registered Person who has
- 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
- The tax or interest is borne by such other class of applicants as the Government may, on the recommendations of the Council, by notification, specify.
Other Key points regarding refund claim
- Where the application relates to the refund of the input tax credit, the electronic credit ledger shall be debited by the applicant by an amount equal to the refund so claimed.
- Interest will be paid for any delay in sanctioning of Refund beyond the mandated period of 60 days.
- The refund and/or interest sanctioned, if any, will be directly credited to the bank account of the applicant.
- 90% of the claim would be paid within 7 days of acknowledgment of the claim on a provisional basis.
Jiya Gupta
CA Finalist