It is imperative for the government to provide hassle free GST refund process since delay in its process would cause problem for the exporters in maintaining the working capital and cash flow.
Currently there is delay in months in providing refund to the exporters.
Refund of IGST paid by Exporters
Exporter can choose either of the way to claim IGST paid on export.
(A) Without payment of IGST
(B) With payment of IGST
(A) Without payment of IGST
Under this method exporter can export goods or services or both under bond or Letter of Undertaking without IGST and claim refund of un-utilized input credit tax.
The procedure for refund is outlined in Rule 89 of CGST Rules, 2017.
– Who can Claim refund and how?
Under this rule any person other than person covered in notification issued under section 55 (Specialised agency of the United Nations Organisation etc.) can claim refund of tax, interest, penalty, fees or any other amount paid by him, other than refund of IGST paid on goods exported out of India (Covered later) by filing application electronically in FORM GST RFD-01 through the common portal, either directly or through a Facilitation Centre notified by the Commissioner
– Time limit to file GST Return
Applicant must make application for refund of Tax, interest paid on tax or any amount before the expiry of 2 years from the relevant date
– What is “Relevant Date”?
(a) “Relevant date.” This relevant date is different for different scenarios.
(b) When the goods are exported through air or sea, then relevant date shall be the date on which such ship or aircraft leaves India.
(c) When the goods are carried by a land vehicle, then relevant date shall be the date when the goods cross the land frontier of the country
(d) When goods are sent through post, then relevant date shall be the date of despatch of goods from the Post Office.
(e) When the supply includes services, and when the same is completed before receipt of payment, then relevant date shall be the payment receipt date.
(f) Similarly, when the services are performed after receipt of an advance, then relevant date shall be the invoice date.
(g) Where refund claim is made for excess input tax credit left unutilised, then relevant date shall be the end of the financial year for which such refund claim is being made.
(h) Where the goods are supplied for deemed exports, i.e. supply to SEZ or 100% EOU, the relevant date shall be the return filing date related to such deemed exports was filed.
(i) Where refund arises due to an order passed in favour of the appellant, then relevant date shall be the date of such order.
(j) Where tax was paid following a provisional assessment and refund now arises, then relevant date shall be date at which such tax was adjusted.
(k) When the person claiming refund is not the supplier, then relevant date shall be the date at which the goods are received by such person.
(l) For all other cases, relevant date shall be the date of payment of tax.
– Circumstances for GST refund of Input Tax Credit
GST refund of Input Tax Credit can arise in the following situations:-
(a) Input Tax Credit unutilized when the goods/services supplied at zero rated or exempt from GST
(b) Where Tax rate on input goods/services is higher than output good/services
(c) In case of partial reverse charge, where the input tax credit cannot be used completely against the output tax
– Documentary evidence required
List of Documentary evidence required are:-
Ø Case of export of goods and services
(a) a statement containing the number and date of shipping bills or bills of export and the number and date of relevant export invoices, in a case where the refund is on account of export of goods;
(b) a statement containing the number and date of invoices and the relevant Bank Realisation Certificates or Foreign Inward Remittance Certificates, as the case may be, in a case where the refund is on account of export of services;
Ø Case of supply to/from Special Economic Zone (SEZ)
(c) A statement containing the number and date of invoices as prescribed in rule Invoice.1 along with the evidence regarding endorsement specified in the third proviso to sub-rule (1) in the case of supply of goods made to a Special Economic Zone unit or a Special Economic Zone developer;
(d) Statement containing the number and date of invoices, the evidence regarding endorsement specified in the fourth proviso to sub-rule (1) and the details of payment, along with proof thereof, made by the recipient to the supplier for authorized operations as defined under the Special Economic Zone Act, 2005, in a case where the refund is on account of supply of services made to a Special Economic Zone unit or a Special Economic Zone developer
(e) A declaration to the effect that the Special Economic Zone unit or the Special Economic Zone developer has not availed of the input tax credit of the tax paid by
the supplier of goods or services or both, in a case where the refund is on account of supply of goods or services made to a Special Economic Zone unit or a Special Economic Zone developer;
Ø Cases of deemed exports
(f) A statement containing the number and date of invoices along with such other evidence as may be notified in this behalf, in a case where the refund is on account of deemed exports;
Ø Cases where output tax is lower than input tax result into more ITC
(g) A statement in Annex 1 of FORM GST RFD-01 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 under sub-section (3) of section 54 where the credit has accumulated on account of rate of tax on inputs being higher than the rate of tax on output supplies, other than nil-rated or fully exempt supplies;
Ø Miscellaneous cases
(h) 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
(i) A statement showing the details of transactions considered as intra-State supply but which is subsequently held to be inter-State supply;
(j) A statement showing the details of the amount of claim on account of excess payment of tax;
Ø Declaration where refund is less Rs.2 lakh
(k) The self-declaration shall be required where
The tax or interest or any amount is paid by the applicant and the incidence has not been passed to the other person and the refund amount is less than Rs.2 lakh
(l) Certificate from CA to claim refund where refund is more than Rs.2 lakh under GST
The certificate shall be required where the tax or interest or any amount is paid by the applicant and the incidence has not been passed to the other person and the refund amount is more than Rs.2 lakh
– Refund on provisional basis
GST law also provides for grant of provisional refund of 90% of the total refund claim, in case the claim relates for refund arising on account of zero rated supplies. The provisional refund would be paid within 7 days after giving the acknowledgement.
The acknowledgement of refund application is normally issued within a period of 14 days but in case of refund of integrated tax paid on zero rated supplies, the acknowledgement would be issued within a period of three days. The provisional refund would not be granted to such supplier who was, during any period of five years immediately preceding the refund period, was prosecuted.
– Debit to Electronic Credit ledger
The Electronic Credit ledger shall be debited by the amount equal to refund so claimed
– Maximum amount of refund allowed
Refund of input tax credit shall be granted as per the following formula-
Refund amount = (Turnover of zero-rated supply of goods + Turnover of zero-rated supply of service) x Net ITC / Adjusted Total Turnover
Where,-
(a) “Refund amount“ means the maximum refund that is admissible;
(b) “Net ITC” means input tax credit availed on inputs and input services during the relevant period;
(c) “Turnover of zero-rated supply of goods” means the value of zero-rated supply of goods made during the relevant period without payment of tax under bond of letter of undertaking
(d) “Turnover of zero-rated supply of services made without payment of tax under bond or letter of undertaking, calculated in the following manner, namely:-
Zero-rated supply of services is the aggregate of the payments received during the relevant period for zero-rated supply of services where supply has been completed for which payment had been received
(e) “Adjusted Total Turnover“ means the turnover excluding the value of exempt supplies other than zero rated supplies, during the relevant period
(f) “Relevant period” means the period for which the claim has filed.
– Periodicity
A registered person can claim refund of any unutilized input tax credit at the end of any tax period provided they have not defaulted in filing of periodic return and there is amount payable
– Minimum of claim
No refund shall be payable if amount is less than Rs.1,000/-
(B) With payment of IGST
Under this method exporter pay IGST on export and claim of refund shall be processed after fulfillment of required conditions.
The procedure for refund is outlined in Rule 96 of CGST Rules, 2017.
– Application for refund
The shipping bill filed by an exporter shall be deemed to be an application for refund of integrated tax paid on the goods exported out of India and such application shall be deemed to have been filed only when :-
(a) The person in charge of the conveyance carrying the export goods duly files an export manifest or an export report covering the number and the date of shipping bills or bills of export; and
(b) The applicant has furnished a valid return in Form GSTR-3 or Form GSTR-3B, as the case may be;
– Transmission of data electronically by common portal to system designated by customs
Details of export invoices contained in GSTR-1 shall be transmitted by common portal to system designated by customs and the said system shall acknowledge the same through a confirmation that the goods covered in invoices are exported out of India
– Processing of Claim
After the confirmation, the system designated by the customs shall process the claim for refund for an amount equal to IGST paid in respect of each shipping bill or bill of export by electronically crediting to the bank account of the applicant.
– Situation where refund is withheld
Claim of refund shall be withheld where;
(a) A request has been received from the jurisdictional commissioner of central tax, state tax or Union territory tax to withhold the payment of refund because applicant has as defaulted in furnishing of any return or any tax, penalty or interest (not been stayed by any court) is unpaid
(b) An order giving rise to refund is subject matter of an appeal or further proceedings and commissioner is of opinion that grant of such refund is likely to adversely affect the revenue.
– Payment of IGST to the Government of Bhutan on export to Bhutan
The Central government may in case of notified goods, pay IGST to the government of Bhutan on export to Bhutan. In such cases, exporters shall not be paid any refund of IGST payment
Conclusion
GST provides for a clearer and efficient invoice based tracking system, verifying the transactions on an individual basis, thus, allowing systematic checking of the same. It comes as a huge relief for manufacturers or exporters, especially those in a 100% EOU or Special Economic Zone, whose working capital gets tied up in this complicated refund process.
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