The timely processing of GST refunds benefits firms and facilitates commerce by releasing frozen working capital balances. The GST Council established a clear framework to process GST refund requests in a straightforward manner for taxpayers. The GST Portal handles the full GST refund claim and processing, which requires claimants to know what documents are required for GST refund process to commence.
Previously, the tax system was complicated and getting a return from the government took a long time. The legislature has now enacted simple and straightforward procedures to ensure that any excess GST paid is not parked with them. To avoid confusion, the refund process has been standardised and is entirely online and timely.
Conditions for Claiming GST Refund
The conditions for claiming GST refund are as follows:
1. Export of Goods or Services:
Initiation of a GST refund claim can stem from the export of goods or services, relevant when goods or services are furnished to a foreign market.
2. Supplies to SEZs Units and Developers:
Refunds can be claimed for supplies made to Special Economic Zones (SEZs) units and developers. SEZs are designated areas within a country aimed at promoting exports and economic growth.
3. Deemed Exports:
Deemed exports, where the supply is made to a recipient in India but the supplier receives payment in foreign currency, can also be a ground for GST refund claim.
4. Refund of Taxes on Purchases by UN, Embassies, etc.:
Refunds can be started when taxes are paid on purchases conducted by entities such as the United Nations, embassies, and similar organisations that qualify for tax exemptions.
5. Refunds Arising from Legal Decisions:
Judgments, decrees, orders, or directions issued by the Appellate Authority, Appellate Tribunal, or a court can lead to the initiation of refunds.
6. Refund of Accumulated Input Tax Credit:
When there is an inverted duty structure (where tax on inputs is higher than that on the output) for supplies other than those that are Nil rated or fully exempt, a refund of accumulated Input Tax Credit can be claimed.
7. Finalisation of Provisional Assessment:
Upon the completion of the final assessment, a refund claim becomes feasible in cases where provisional assessments were initially conducted.
8. Refund of Pre-Deposit:
Furthermore, should a taxpayer have made a pre-deposit of taxes for appeal filing and if the appeal subsequently turns in their favour, they can proceed to claim a refund of the pre-deposited sum.
9. Excess Payment Due to Mistake:
If there were instances of overpayment of GST due to errors or miscalculations in tax computations or reporting, eligible parties have the right to claim refunds for such excess payments.
10. Refunds for International Tourists:
International tourists who have paid GST on goods in India that they carry abroad upon departure are eligible to claim a refund of the GST paid.
11. Refund Vouchers for Advances:
If taxes were paid in advance for the goods and/ or services that were not eventually supplied, a refund voucher can be issued and the corresponding refund can be claimed.
12. Correction of Intra-State and Inter-State Supply Classification:
If a supply was initially treated as intra-state (within the same state) but is later determined to be inter-state (between different states) or vice versa, a refund of the CGST and SGST paid can be claimed accordingly.
Time Limit for Filing GST Refund Request
Under the Goods and Services Tax (GST) law and framework, there are specific time limits associated with filing GST refund requests, as well as guidelines for processing such requests.
1. Filing Deadline
Those seeking GST refunds must submit their refund claims within a maximum period of 2 years from the relevant date. This timeframe holds significance to guarantee the punctual submission of refund requests.
2. Refund Sanction Period
After a legitimate refund claim has been lodged, the concerned authorities are bound to process it within 60 days from the claim’s receipt date. This swift processing timeframe has been established to guarantee timely resolution for eligible refund requests.
3. Interest on Withheld Refund
If a refund claim is found to be in order but is intentionally withheld, an interest rate of 6% will be applicable on the withheld refund amount. This measure encourages the timely release of legitimate refund amounts to eligible applicants.
4. Interest on Delayed Refund
In instances where the refund is not processed within the stipulated 60-day period, an interest rate of 9% per annum will be levied on the delayed refund amount. This provision ensures that any undue delays in refund processing are properly addressed.
What Documents are Required for GST Refund?
When applying for a GST refund, certain documents are required for GST refund. The necessary documents vary depending on the nature of the refund. The documents required for GST refund claims of different types are:
GST Refund for Exports
If the refund claim is related to exports or supplies to Special Economic Zones (SEZs), the following documents are required for GST refund:
- Relevant invoice related to the transaction.
- Statement containing the no. as well as the date of shipping bills or the bills of export, along with the no. and date of the corresponding invoices of export for goods.
- For GST refund on account of export of services, tax invoices and bank realisation certificates evidencing receipt of payment in foreign currency.
Export of Goods: For refund claims related to the export of goods, the application must include a statement containing the following details:
- No. and date of the shipping bills or bills of export.
- No. and date of relevant export invoices.
Export of Services: In cases of GST refund claims for the export of services, the application should include a statement with the following information:
- Number and date of invoices.
- Relevant realisation certificates from bank or foreign inward remittance certificates.
Deemed Exports: For deemed exports, the application must contain a statement including the number and date of invoices, along with any other evidence as may be notified.
GST Refund for Supply to SEZ
For claiming a GST refund for supplies to SEZ units, the following documents are required for GST refund:
- Endorsement from the Proper Officer confirming receipt of goods/services in the SEZ.
- Tax Invoice.
- Declaration from the relevant SEZ unit stating that input tax credit of tax from the supplier hasn’t been availed yet.
GST Refund for Accumulated Input Tax Credit
For cases where the refund claim is solely for accumulated ITC, only a statement containing details of invoice as prescribed under the GST refund rules is needed.
Points to be noted:
- No refund of unutilised ITC will be permitted on CGST and IGST paid for the supply of services for construction intended for sale.
- No refund of unutilised ITC will be permitted for CGST and IGST when the credit has accumulated due to higher input tax rate than output supply tax rate.
GST Refund on Account of Order
If the refund claim is due to an order or judgment of an appellate authority or court, the following documents are required for GST refund:
- Reference number of the order leading to the refund claim.
- Relevant tax invoices.
Inverted Duty
In scenarios where the refund claim pertains to unutilised input tax credit due to a higher tax rate on inputs compared to the rate of tax on output supplies (other than fully exempt or nil-rated supplies), the application should include a statement with:
- No. and date of invoices received and issued during a tax period.
Difference in Supply Nature
When a refund claim is due to a change in the nature of the supply (considered initially as intra-State but later determined as inter-State supply), the application must include a statement showing the details of such transactions.
Excess Payment of Tax
For situations involving the excess payment of tax, the application should include a statement detailing the amount of the claim for the excess payment of tax.
Final Thoughts
Efficient GST refund processing benefits businesses by providing them with working capital. The GST Council has standardised the process of GST refund via the GST Portal. Conditions for refunds include exports, SEZ supplies and more, each demanding specific documents. Filing deadlines ensure timely claims, processed within 60 days. However, applicants and claimants must be aware of what documents are required for GST refund for ensuring a fast and effective GST refund process.
It must be noted that withheld refunds incur 6% interest, while delayed refunds face 9% annual interest. Therefore, accurate documentation is important for successful claims, promoting smooth transactions.
For more information on what documents are required for GST refund, connect with our experts at StartupFino.
