Updated on: December 26th, 2024 1:38 PM

Who can claim Refund in GST?

Goods and Services Tax (GST) is a comprehensive tax that covers a wide range of goods and services in India. However, taxpayers may sometimes find themselves in a situation where they have paid more GST than required. To address this, Government provide GST refund mechanism that allows registered taxpayers to recover the excess tax paid under certain conditions. A GST refund can be claimed by exporters, businesses with excess input tax credit, tourists (in some countries), taxpayers with excess GST payments, and eligible entities like embassies or deemed exporters, subject to specific conditions. In this article, we will explore who can claim a GST refund, the various scenarios under which taxpayers can apply for a refund, the procedure involved, and the timeline for claiming a refund.

What is a GST Refund?

A GST refund is a process that allows a registered taxpayer to claim back the excess GST paid on the supply of goods or services over and above the tax liability due. This situation may arise due to errors, excess tax payments, or other specified reasons like exports or inverted duty structure.

Who Can Claim GST Refund?

Several categories of taxpayers and situations qualify for GST refunds. These include:

• Excess Payment of GST: If taxpayers have paid more GST than required due to errors, they can claim a refund for the excess amount. This situation often arises from clerical mistakes, miscalculation of tax, or payments made under the wrong tax heads.
• Accumulated Input Tax Credit (ITC): Exporters, as well as taxpayers who deal in zero-rated supplies, can accumulate ITC. When the ITC exceeds output tax liability (for instance, in the case of exports), a refund is applicable. Similarly, businesses that manufacture goods or provide services for export can also claim refunds on the IGST paid.
• Exports of Goods and Services: Taxpayers involved in exporting goods or services can claim a refund for the IGST paid on exports. This includes cases where businesses pay tax at the time of export but later realize that they can reclaim the tax under the refund provision.
• Purchase by UN Agencies or Embassies: Purchases made by United Nations agencies or foreign embassies are eligible for a GST refund. These entities often enjoy tax exemptions and are eligible to claim back GST paid on goods and services.
• Inverted Duty Structure: This refers to a situation where the GST paid on inputs (raw materials, services) is higher than the GST collected on outputs (finished goods). Businesses in such cases are eligible to claim a refund for the accumulated ITC. This commonly occurs in sectors like textiles, where the tax on inputs is greater than the tax on finished products.
• Finalization of Provisional Assessment: A refund can be claimed once provisional assessments are finalized. This applies when taxes have been deposited during a provisional assessment, but the final determination of tax liability is different.
• Tourists: International tourists visiting India can also claim a GST refund on goods purchased, provided they follow the proper procedures before leaving the country. This helps facilitate tourism and ensures that foreign visitors are not burdened with the GST they paid during their stay.
• Error or Defect in GST Payment: Sometimes, taxpayers may discover defects or errors in their GST returns or payments, leading to excess payments. In such cases, businesses can file for a refund through the GST portal.

GST Refund Claim on Exports

Exporters, whether dealing with goods or services, are eligible for a GST refund because exports are considered zero-rated supplies under GST. This means that no GST is charged on the supply, but exporters can claim a refund for the input tax credit (ITC) paid on inputs. There are two ways exporters can claim this refund:

• Export under Bond/LUT (Letter of Undertaking) and claim a refund of the accumulated ITC.
• Export by paying integrated tax (IGST) and later claim a refund for the tax paid.

However, delays in processing these refunds have affected the working capital cycle of many businesses. To address this issue, the government has introduced an e-wallet facility for exporters to expedite and streamline the GST refund process.

When Can GST Refund Be Claimed?

A GST refund can be claimed in the following situations:

• Export of goods or services.
• Supplies made to SEZ units and developers.
• Deemed exports.
• Refund of taxes on purchases made by UN organizations or embassies.
• Refund arising from a judgment, decree, order, or direction issued by the Appellate Authority, Appellate Tribunal, or any court.
• Refund of accumulated Input Tax Credit due to an inverted duty structure, excluding nil-rated or fully exempt supplies.
• Finalization of provisional assessments.
• Refund of pre-deposits.
• Excess payment of tax due to errors or mistakes.
• Refund for international tourists on GST paid on goods purchased in India when carried abroad at the time of departure.
• Refund of taxes paid on advances for goods or services not yet supplied through refund vouchers.
• Refund of CGST & SGST paid on supplies treated as intra-state, later determined to be inter-state, and vice versa.

Time Limit for Filing GST Refund Request

Under GST, refund claims must be filed within 2 years from the relevant date. If the claim is valid, the refund must be processed within 60 days from the date of submission. If the refund is delayed, interest will be applied at a rate of 6% on the withheld amount and 9% per annum if the refund is delayed beyond 60 days due to an order from the authority or court.

How to Claim a GST Refund?

The process of claiming a GST refund involves the following steps:

• Login to GST Portal: The taxpayer must log into the GST portal using their credentials.
• Fill in Refund Form RFD-01: The application for a refund is made using Form RFD-01. The taxpayer must provide necessary details, including the refund amount, the reason for the refund, and supporting documents.

The Refund Form RFD-01 is attached here for your reference.

• Submit the Application: Once the form is completed, it is submitted electronically on the GST portal. The taxpayer will receive an Application Reference Number (ARN) for future tracking.
• Approval from Chartered Accountant (if required): In some cases, particularly for large refunds, approval from a Chartered Accountant may be necessary.
• Refund Process: The tax authorities will process the refund application within 30 days. They may request additional documents or clarification if needed.
• Refund Transfer: Once the refund is approved, the money is transferred to the taxpayer's bank account via NEFT, RTGS, or ECS.

Also read: How to Get GST Refund?

How to Track GST Refund Status Online?

Once the refund application is submitted, individuals can track the status of their GST refund through the GST portal. There are two ways to do this:

• Post-Login Tracking: After logging into the GST portal, users can go to the "Services" tab and check the status under "Track Application Status." They will need to provide their year and confirm the bank details for accurate tracking.
• Pre-Login Tracking: For those who do not wish to log in, they can still track their refund status by visiting the GST portal, selecting "Track Application Status," and entering their ARN (Application Reference Number).

Three Stages of GST Refund Status

• Refund Request Submitted: This is the first stage, where the taxpayer submits the refund application with all required details. Once submitted, an acknowledgement is sent via email or SMS.
• Processing of the Refund: The GST authorities process the claim within 30 days. They may request additional information or clarification during this phase. Once processed, the refund amount is transferred to the taxpayer’s bank account.
• Refund Confirmation: The final stage occurs once the refund is confirmed by the GST authorities. The taxpayer receives a confirmation order, and the amount is credited to the provided bank account.

 Conclusion

The GST refund system is an essential mechanism for businesses to recover excess tax payments and improve cash flow. Whether due to errors, accumulated ITC, or export-related transactions, various categories of taxpayers can claim refunds. The GST portal offers a streamlined process for applying and tracking refunds, ensuring that businesses can quickly and efficiently handle their tax claims. Following the prescribed procedures and timelines is essential to ensure eligibility and timely processing of refund claims.