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How to claim refund under GST online! – GST Refund Procedure for CGST/SGST or IGST explained

By Paras Mehra

( 10.1K Views) June 15, 2017

1.0 Introduction

Refund of taxes is one of an important part of the tax machinery. An efficient refund structure denotes a healthy taxation system of the country. The refund policies under GST are drafted with a motive to provide ease to the taxpayers; however, that will be seen once things will be tested on the ground.

Under GST, there can only be two types of refund claim; one from the electronic cash ledger and another is from electronic credit ledger. Both these claims have been dealt differently under the GST law. Let us move forward and understand the concept and law behind the refund of tax under GST regime.

2.0 Meaning of Refund under GST

“Refund” includes refund of tax on goods and/or services exported out of India or on inputs or input services used in the goods and/or services which are exported out of India, or refund of tax on the supply of goods regarded as deemed exports, or refund of unutilized input tax credit.

3.0 Procedure to claim refund under GST

Under GST, the taxes paid are reflected under two different ledgers;

Electronic Cash Ledger
Electronic Credit Ledger

Further, the procedure and conditions to claim the refund in both the above cases is different. Hence, let us understand the procedure for both the aforesaid cases:

3.1 Procedure to claim refund of Electronic Cash Ledger

#Step No.1 – Apply for refund – Make application [Section 54 of CGST]

1. Any person claiming refund of any tax and interest may make an application in FORM GST RFD – 1 to the proper officer of IGST/CGST/SGST before the expiry of two years from the relevant date through the common portal.

Read: What is the meaning of relevant date to claim refund under GST?

However, if any registered taxable person wants to claim refund of any balance in the electronic cash ledger, he may do so by filing the return for their relevant tax period in

FORM GSTR – 3 [Consolidated return filed every month]
FORM GSTR – 4 [Return by composition dealer]
FORM GSTR – 7 [Return for tax deduction at source]

So that they don’t have to file for refund claim in form GST RFD – 1.

Read: Documents to be attached along with the refund application under GST

#Step No.2 – Acknowledgement for filing of tax return

Once the application has been filed, an acknowledgement in FORM GST RFD – 2 shall be made available to the applicant through the common portal electronically, clearly indicating the date of filing of the claim for refund.

#Step No.3 – Verification by the Proper Officer

After receiving the application along with the necessary attachment, the proper officer shall verify the application. Further, if the officer is satisfied that the whole or part of the amount is refundable, he may make an order accordingly. Once the order is issued, the amount shall be credited to the consumer welfare fund.

Cases where refund is given to applicant and not to consumer welfare fund

The refund shall be credited to consumer welfare fund and not to the supplier. However, there are only few cases where funds instead of being credited to the fund, be paid to the applicant, if such amount is relatable to;

(i) Refund of tax on goods and/or services exported out of India or on inputs or input services used in the goods and/or services which are exported out of India.

(ii) Refund of unutilized input tax credit.

(iii) Refund of tax paid on a supply which is not provided, either wholly or partially, and for which invoice has not been issued.

(iv) Refund of tax in pursuance of section 70.

(v) 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.

Let us now proceed to some other important issues:

3.2 Refund of unutilized input tax credit ledger

The refund of unutilized input tax credit can be claimed by a taxable person at the end of any tax period only under the following situations:

In case of exports including zero rated supplies. However, no refund shall be allowed in case where the goods exported out of India are subjected to export duty.

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.

3.2.1 Procedure to claim the refund of electronic credit ledger

#Step No.1 – Apply for refund – Make application [Section 54 of CGST]

#Step No.2 – Verification and issue of Acknowledgement

1. The application for refund for electronic credit ledger shall be forwarded to the proper officer who shall, within fifteen days of filing of the said application, scrutinize the application for its completeness.

2. Further, if the application is found to be complete an acknowledgement in FORM GST RFD-2 shall be made available to the applicant through the Common Portal electronically, clearly indicating the date of filing of the claim for refund.

3. However, if any deficiencies are noticed, the proper officer shall communicate the deficiencies to the applicant in FORM GST RFD-3 through the Common Portal electronically, requiring him to file a refund application after rectification of such deficiencies.

#Step No.3 – Disbursement of Refund claim

On receipt of application, the proper officer is satisfied that the whole or part of the amount claimed as refund is refundable, he may make an order accordingly and the amount so determined shall be credited to the fund or paid to the applicant. The order shall be issued within sixty days from the date of receipt of application.

4.0 Important points in respect of claim of refund under GST

No refund of input tax credit shall be allowed if the supplier of goods or services claims refund of output tax paid under the IGST Act.

In case of export of goods, the application for refund shall be filed only after the export manifest or an export report, in respect of such goods is delivered under section 41 of the Customs Act 1962.

No refund of unutilized input tax credit shall be allowed in cases where the goods exported out of India are subjected to export duty.

In case of supplies made to an SEZ unit or a developer, or supplies regarded as deemed exports, the application shall be filed by the said unit or the developer or the recipient of deemed export supplies.

Where the application relates to refund of input tax credit, the electronic credit ledger shall be debited by the applicant in an amount equal to the refund so claimed.

However, where any deficiencies have been communicated to the applicant, the amount debited shall be re-credited to the electronic credit ledger.

Where any amount claimed as refund is rejected, either fully or partly, the amount debited, to the extent of rejection, shall be re-credited to the electronic credit ledger by an order made in FORM GST PMT-2A