Introduction:
GST registration is an indirect form of tax where the supplier collects the tax from the purchaser and deposits it with the government. But there are few instances where suppliers are eligible to get a refund under GST from the government. The taxpayers shall be aware of these kinds of instances where they are eligible to take a refund. Under the GST regime, the application form for filing of refund is prescribed, and the procedure to file it is a completely online process.
Situations that lead to refund claims are such,
- Export of goods or services
- Supplies to SEZs units and SEZ developers
- Deemed exports
- Refund of taxes on purchases made by the UN or embassies
- Refund arising on account of order, decree judgment or order of appellate authority, tribunal or any other court.
- Refund of accumulated ITC on account of inverted duty structure.
- Refund of pre-deposit.
- Finalization of provisional assessment.
- Excess payment due to a mistake
- Refund t international tourists on GST paid on goods in India and carried abroad.
- Refund on account of refund vouchers issued for taxes paid on advances against which goods or services have not been supplied.
- Refund of CGST & SGST paid on supplies which subsequently held as inter-state supplies, and IGST is supposed to be paid or vice versa.
Let us see each instance briefly.
- Export of goods/services: Exports under GST is to be treated as inter-state supplies, and IGST is to be paid on it. Exports under GST are also termed as Zero rated supplies under GST. Any registered person exporting their goods or services outside India has two options. First, is that they can collect IGST on the supplies made by them by exporting goods/services and get a refund of IGST paid on exports. The second option is to export the goods/services under the LUT (Letter of undertaking) i.e. export under 0% of IGST. That is to say that exports under LUT shall be treated as 0-rated supplies. Exporting under LUT (0 rated) enables the exporter to claim a refund of ITC paid on the purchase of goods or services.
- Supplies to SEZ units or SEZ developers: Supplies to SEZ or SEZ developers are to be treated as exports only hence IGST shall be applicable in this case also exporter has two options to either collect IGST on outward supplies and get it back as a refund or the to supply as 0 rated and get a refund of ITC accumulated.
Deemed exports:
Deemed Exports and Refund Procedures
The government may notify certain goods or services as deemed exports where goods do not leave India and payment for such supplies is received either in Indian Rupees or in convertible foreign exchange if such goods are manufactured in India. These deemed exports are treated as exports, and the procedure to apply for a refund remains the same as in the case of exports.
Refund of Taxes on Purchases Made by UN Bodies or Embassies
Supplies made to UN bodies or embassies may be exempted from GST as per international obligations. However, this exemption is granted by allowing refunds to UN bodies or embassies, as they are notified entities under Section 55 of the CGST Act, 2017. Therefore, supplies made to UN bodies or embassies are taxable, meaning the supplier must charge GST, and UN bodies are eligible to claim a refund for the taxes they have paid.
Refund Arising from Order, Decree, Judgment, or Appellate Authority
In cases where there is confusion regarding the taxability of goods/services, GST rates, or refund applicability, the sum of money involved is refundable to the assessee based on the judgment of the case by the appellate authority, tribunal, or court.
Refund of Accumulated ITC on Account of Inverted Duty Structure
An inverted duty structure occurs when the GST rates for outward supplies are lower than those for inward supplies. For example, if the GST rate on a saree is 5% and the rate on ink for printing is 18%, the accumulated ITC in the Electronic Credit Ledger can be refunded to the taxpayer.
Refund of Pre-Deposit
Before admitting a case to the tribunal or court, an assessee is required to deposit a certain amount as a pre-deposit. Upon completion of proceedings, this pre-deposit is refundable depending on the case’s judgment.
Finalization of Provisional Assessment
Provisional assessment is initiated when an officer believes that an assessee needs assessment. During this process, a sum of money may be ordered to be paid to the government. Upon completion of the assessment, any excess payment may be refunded to the assessee.
Excess Payment Due to Mistake
If a person pays taxes incorrectly or pays more than required, they are eligible to claim a refund for the excess payment or incorrect payment of taxes.
Refund to International Tourists on GST Paid on Goods in India
International tourists, who are non-residents and visit India for a stay of up to six months for non-immigrant purposes, can claim a refund of GST paid on goods purchased in India when leaving the country.
Refund on Account of Refund Vouchers Issued
When refund vouchers are issued for taxes paid on advances for which goods or services have not been supplied, a refund can be applied for the corresponding supplies.
Refund of CGST & SGST Paid on Supplies Later Held as Inter-State Supplies
In cases where supplies initially considered intra-state are later deemed inter-state, or vice versa, based on updated rules or notifications, taxpayers can claim a refund of the taxes paid incorrectly.
What is the time limit to apply for a refund?
All the refund applications must be applied within two years from the “relevant date.” The term used here “Relevant date,” has a different meaning and different applicability in all the above-mentioned conditions. The time limit of two years is to be computed separately for each refund case.
