Goods and Services Tax (GST) is a unified tax system implemented in many countries, and in the context of India, it has changed the indirect taxation landscape since its introduction in 2017. One of its salient features is the provision for the refund on exports, which boosts the global competitiveness of domestic goods and services.
Exports are deemed as zero-rated supplies in the GST regime. It implies that the goods or services exported are not subject to GST but the input tax credit (ITC) can be claimed. For businesses that export, understanding the refund process is crucial to maintain liquidity. In this article, we’ll guide you on how to claim refund of export refund under GST.
Types of Refunds Available to Exporters
Exporters should maintain proper documentation and timely GST returns to ensure smooth refunds.
- IGST Refund on Exports: Refund of the Integrated Goods and Services Tax paid on goods/services exported.
- Unutilized ITC Refund: Refund of the Input Tax Credit accumulated from domestic purchases when the final product or service is exported.
- Compensation Cess Refund: For exported goods which had a compensation cess applied (typically luxury or sin goods).
- Export of Services Refund: For services exported with tax payment and where payment is received in foreign exchange.
- SEZ Supplies Refund: Refund for taxes on supplies made to Special Economic Zones and their developers.
- Deemed Exports Refund: For supplies that remain within the country but are considered as exports (e.g., supplies to Export-Oriented Units).
Eligibility Criteria for Refund
To be eligible for a GST refund:
- Export Status: Goods/services should be exported out of the country.
- Documentation:
- IGST: Filed shipping bill with the Customs Department declaring IGST payment.
- ITC: Maintained invoices and records of input tax.
- GST Returns: Filed required GST returns, including Table 6A of FORM GSTR-1, with relevant invoice details.
- No Tax Burden Transfer: A declaration that the tax burden hasn’t been passed to any other person.
- Foreign Exchange Payment: For service exports, payment should be in convertible foreign exchange or as permitted by RBI.
- SEZ Supplies: Goods/services must be received by the SEZ for authorized operations.
- Deemed Exports: Fulfill criteria specified by the GST council for deemed export transactions.
Procedure to Claim Refund of Export Under GST
To claim refund of export under GST regime involves a systematic procedure. Here’s a succinct overview of the steps to claim a refund:
Application Submission:
- File FORM GST RFD-01 on the GST portal. This form is the primary application to claim refund of export under GST.
Auto-population of Details:
- Details from FORM GSTR-2A (inward supplies) and FORM GSTR-3B (monthly/quarterly return) will auto-populate in certain cases, providing relevant details to validate the claim refund of export.
Acknowledgment:
- If the application is correct, an acknowledgment is issued within 15 days in FORM GST RFD-02.
Deficiency Notice:
- If there are errors or deficiencies in the application, the officer will communicate the same using FORM GST RFD-03. The applicant must rectify these within a stipulated time frame or the application might be rejected.
Documentation:
- Attach necessary documents with FORM GST RFD-01, such as a statement with details of shipping bills and invoices. A declaration that the tax hasn’t been passed to another person is also needed.
Refund of IGST on Exported Goods:
- Ensure the shipping bill filed with the Customs Department declares the IGST payment. The Customs Department will process and sanction the refund.
Provisional Refund:
- 90% of the total refund amount can be sanctioned provisionally within 7 days of acknowledging the claim refund of export. The remaining will be processed after due verification.
Refund Order:
- After verifying the claim refund of export, the officer will issue a refund order in FORM GST RFD-04, and the payment order in FORM GST RFD-05.
Credit to Account:
- The sanctioned refund amount is credited directly to the claimant’s bank account.
Refund Denial:
- If the refund is inadmissible, an order detailing the reasons will be issued in FORM GST RFD-04.
Required Documents
The following documents need to be attached with FORM GST RFD-01:
- Statement of Invoices: Listing invoices related to the claim refund of export under GST.
- Proof of IGST Payment: Copy of the shipping bill for exports showing IGST paid.
- Declaration: Statement confirming no tax burden transfer.
- Bank Account Details: Linked with the GST registration.
- Foreign Exchange Proof: Evidence of foreign exchange receipt for exported services.
- SEZ Endorsement: Certification from SEZ on receipt of goods/services.
- Proof of Tax Payment: For deemed exports.
- Specific Documents: As mandated by the refund type or GST guidelines.
Scrutiny of the Refund Application
The scrutiny of the refund application under the GST regime is an integral step to ensure the authenticity and accuracy of multiple claim refund of export under GST. Here’s a summarized version of the scrutiny process:
- Initial Examination: Officers check if the FORM GST RFD-01 is complete and all required documents are attached.
- Details Verification: Cross-checking of application details with GST returns and related forms.
- Discrepancies Handling: If discrepancies arise, the applicant may be asked for further clarifications or additional documents.
- Deficiency Memo: For defects or missing details in the application, a memo in FORM GST RFD-03 is issued. The applicant needs to correct and resubmit.
- Field Verification: In specific cases, an on-ground check might be conducted for transaction authenticity.
- Decision: Post scrutiny, the application is either approved with a refund sanctioned or rejected. The reason for rejection is provided.
- Provisional Refund: In some situations, up to 90% of the claim might be provisionally approved.
- Communication: Updates, queries, or decisions are communicated through the official GST portal.
Provisional Refund
Here’s a concise breakdown of the provisional refund mechanism:
- Eligibility: Provisional refunds are mainly available for zero-rated supplies and cases where undue delay in refund might hamper business operations.
- Application: While filing FORM GST RFD-01 for a refund, the applicant can also claim a provisional refund.
- Amount: Up to 90% of the total refund claimed can be sanctioned provisionally. The remaining 10% is processed after complete verification.
- Issuance: If eligible, a provisional refund order is issued in FORM GST RFD-04 within seven days of acknowledging the refund claim.
- Payment: After the order, payment advice is given in FORM GST RFD-05, leading to a direct bank transfer to the applicant’s account.
- Final Settlement: After complete verification of the claim, the final refund order is issued. If any discrepancy is found, the provisionally refunded amount might be adjusted.
Conclusion
The GST system, through its Electronic Credit and Cash Ledgers, has digitalized and streamlined the tax payment process to claim refund of export under GST and credit mechanisms, ensuring transparency and ease of monitoring for taxpayers. The Electronic Credit Ledger effectively captures the Input Tax Credit, allowing businesses to offset their tax liabilities, while the Electronic Cash Ledger records cash deposits for settling various GST dues. Regularly overseeing these ledgers is pivotal for efficient tax management and compliance. Together, these systems reinforce the GST framework’s commitment to simplifying tax processes, reducing manual interventions, and promoting a more organized and accountable business environment in India.
