Process For GST Refund

The GST refund process requires the taxpayer to follow elaborate steps, submit documents and declaration if required, to the GST authorities for claiming a GST refund. The refunds under GST 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 utilised for tax payments due to zero-rated sales or inverted tax structure.

The forms in which a GST refund is claimed varies according to the type of GST refund being claimed. For instance, the refund of IGST in exports (with tax payment) can be claimed by only reporting details in the GSTR-1 and GSTR-3B. Whereas the refund of cash paid in excess of the electronic cash ledger can be claimed by applying in form RFD-01. Therefore, the steps or the process differs with the type of GST refund.

Latest Updates on GST Refund

05th July 2022
Taxpayers can exclude the COVID pandemic period (1st March 2020 and 28th February 2022) while calculating the time limit for filing GST refund applications under Sections 54 or 55 of the CGST Act.

1st February 2022
Budget 2022 update-
1. Section 54 is amended to provide that refund claim of any balance in the electronic cash ledger can be made in a particular form and manner prescribed.
2. The time limit to claim refund by UN agencies is now two years from last day of quarter when supply was received instead of six months.
3. The restriction to refund taxpayers for tax defaults, that earlier applied to unutilised ITC refund, is now extended to other types of refunds.
4. The relevant date to file refund claim application for supplies to SEZ is clarified in new sub-clause (ba) of clause (2) of the explanation.

1st May 2021
Where the time limit to pass orders for rejecting any refund claim fully or partly falls between 15th April 2021 and 30th May 2021, it is extended. The extended time limit shall be later of two dates:
(1) 15 days after reply to notice OR
(2) 31st May 2021

Steps to submit a refund pre-application form

Refund pre-application is a form that taxpayers must fill out to offer information about their business, Aadhaar number, income tax details, export data, expenditure and investment, and so on. Taxpayers must file this pre-application form for all types of GST refund. This form need not be signed and cannot be edited once submitted. Hence, the user must be careful while entering the details.

The two steps involved in filing the GST refund pre-application form are as follows:

Step 1: Log in to the GST portal, go to the ‘Services’ tab, click on ‘Refunds’ and select the ‘Refund pre-application form’ option.

Step 2: On the page displayed called ‘Refund pre-application form’, fill in the details asked, and click on ‘Submit’. A confirmation of submission will be displayed on the screen.

The following details must be reported:

  • Nature of business – Manufacturer, merchant exporter, trader, and service provider
  • Date of issue of IEC (only for exporters) – Those applying for a refund on account of exports (without payment of tax) must furnish the date of issue of the Import Export Certificate.
  • Aadhaar number of the primary authorised signatory is mandatory.
  • Value of exports made in the FY 2019-2020 (only for exporters) – This must be computed at the GSTIN level and not PAN level.
  • Income tax paid in FY 2018-2019. 
  • Advance tax paid in FY 2019-2020. 
  • Capital expenditure and investment made in FY 2018-2019.

Refund process of IGST paid on export of goods (with tax payment)

Exports are considered as ‘Zero-rated supplies’ under GST. Hence, the tax paid (IGST and cess, if any) is eligible for a refund by the exporter. Since the quantum of transactions can be huge in exporters, the GST portal facilitates a simpler process of GST refund. No separate application in form RFD-01 is required in this case. Certain conditions must be satisfied by the exporter for a GST refund.

Firstly, Table 6A in GSTR-1 must be filled up with Shipping bill details related to export transactions (with payment of tax) and filed by the due date. Secondly, the summary details must be reported in item 3.1 (b) of Table 3.1 of GSTR-3B, the corresponding tax must be paid, and the return should be filed by the due date prescribed by GST law. 

In the export invoice data provided under Table 6A of Form GSTR-1, the correct and complete shipping bill number, shipping bill date, and port code details must be provided. It should be noted that export transactions carried out in a tax period must be filed in the GSTR-1 and GSTR-3B of the same relevant tax period. Care must be taken to report the total of IGST and cess as a figure equal to or higher in Table 3.1 of GSTR-3B than Table 6A and Table 6B of GSTR-1.

The GST authority considers the shipping bill as a refund application. The GST portal sends export details to the ICEGATE as disclosed on GSTR-1. Also, a confirmation that GSTR-3B was filed for the relevant tax period is sent. The Customs system compares the information on GSTR-1 to the information on their shipping bill and Export General Manifest (EGM) and then processes the refund.

The ICEGATE system will share payment information with the GST portal once the refund payment has been credited to the taxpayers’ accounts. The GST portal will share the information with the taxpayers by SMS and e-mail.

What happens after the GST refund is applied?

The application filed by a refund applicant or taxpayer will appear on the dashboard of the tax officer or refund processing officer as a pending work item. He or she will verify and scrutinise the application along with the documents.

Filed applications can be tracked using the “Track Application Status” under Refunds. After inspection by a GST authorities refund amount will be credited to the applicant bank account. 

Following will be the officer’s actions:

  • Provisional refund can be granted in form RFD-04 for certain types of refunds. It is to be issued within seven7 days from the acknowledgement date with at least 90% of the amount of the refund claimed granted.
  • Acknowledgement in form RFD-02 is issued within 15 days from filing the refund of the application if it is complete in all aspects.
  • There is an option introduced to withdraw the application of refund by the applicant in form RFD-01W. Once the withdrawal application is submitted, the refund, which was debited to the taxpayer’s electronic credit or cash ledger upon the filing of the refund application, will be credited to the respective ledger.
  • Otherwise, a deficiency memo in form RFD-03 can be issued by the officer within the same time limit to rectify any deficiencies by the applicant. At this point, an auto re-credit of the amount of refund claimed in the electronic cash/ credit ledger will happen if the ledger had been debited at the time of filing the refund. A fresh application must be submitted in such cases.
  • Notice to seek clarification in form RFD-08 can be issued by the officer for rejecting the application or recovery of refund granted by mistake. In such cases, the applicant must reply to it within 15 days in form RFD-09.
  • A sanction or rejection order shall be passed by the officer in form RFD-06. Following this, in cases of sanction, a payment order in form RFD-05 is passed. Alternatively, RFD-05 is sometimes issued after RFD-04.
  • In certain cases, the officer may pass an order for withholding refund sanctioned in form RFD-07 (part-B). Here, RFD-05 is never issued.
  • Order to re-credit the refund from the taxpayer’s electronic cash or credit ledger in cases of rejection or when the provisional refund was granted in form PMT-03.