In our previous article, we had covered the form GST RFD-02 (acknowledgement) and the form GST RFD-03 (discrepancy memo). We will cover the form used for provisional sanction of refund by the proper officer (GST RFD-04) and the form used for payment of the final net refund.
Latest Updates on GST Refund
Update as on 27th June 2020
A full or part of the amount applied for refund may have been rejected via a notice issued by the authority. After completing the due proceedings, a final order must be issued within 60 days from the date of receipt of the refund application.
In case this time limit is expiring between 20th March to 30th August 2020, the last date to issue order shall be extended to the later of following dates:
- 15 days from the date of receiving a reply from the applicant towards the notice, or
- 31st August 2020
Update as on 3rd April 2020
The time limit for completion or compliance has been extended to 30th June 2020, where the time limit/time limit/ date of expiry falls between the period from 20th March 2020 to 29th June 2020. It includes cases where the time limit to apply for GST refund in RFD-01 expires between 20th March 2020 and 29th June 2020.
Update as in Sept 2019
RFD-01 (complete online refund processing functionality) is implemented from 26th September 2019.
Grant of Provisional Refund:
On application of GST refund, the GST Officer grants Provisional Refund in certain cases.
Rules for Provisional Refund are made because the entire refund process takes quite a long time to complete. Meanwhile, exporter or genuine claimant can face working capital shortfalls due to refunds getting delayed.
In order to cater to the short-term hardship of the exporter, the refunds are released on a temporary basis to the extent of 90% before a complete scrutiny of application and related records.
Once a complete check is done within the stipulated time limit, the final order for sanction or rejection ( RFD-06 or RFD-08) replaces the provisional refund order (RFD- 04).
Consequently, the actual refund amount decided in final order shall be adjusted for the amount already refunded on a provisional basis. Suppose, the GST officer rejects the refund claim, then the claimant has to pay back to the Government the entire amount that he received earlier
The Provisional Refund will be granted after Initial Scrutiny of the Application and documents by the Jurisdictional GST Officer.
Provisional refund is applicable in case of Zero-rated Supplies
Zero-rated supplies include :
In these cases, The GST officer shall grant the provisional refund to the extent of 90% of the Refund claimed.
The Refund claimed will be excluding the amount of ITC that got adjusted if any in the Electronic Credit Ledger on applying for the refund in RFD-01A/01.
Provisional Refund shall be granted by the issue of Form RFD-04 within seven days of giving the Acknowledgement in RFD-02.
This Provisional Refund amount is to be credited directly to the Bank account of the Refund applicant. Payment advice in RFD-05 is sent along for this payment.
The Provisional Refund is not granted if the applicant was prosecuted for the offence under any Indian Laws where the tax evaded is more than Rs. 250 Lakhs anytime in the last five years preceding the tax period for which refund is claimed.
- Export of Goods or Services
- Supplies made to Special Economic Zone(SEZ) units and Developers
Contents of the form RFD-04:
Amount at (iv) can be less than or equal to the amount arrived at in (iii)
- ARN / Refund Application Number with date
- Acknowledgement Number( as per RFD-02 ) with date
- The amount of refund claimed by the applicant, the balance amount left to be refunded later(10% of refund claimed), The amount sanctioned now on a provisional basis will be given under each category of tax- IGST or CGST and SGST/UTGST with cess if any.
- Point to be noted that the balance amount arrived at (iii) as per the form and the Provisional Refund sanctioned at (iv) need not be same.
Let’s check out how the Form RFD-04 looks like:
The GST officer after scrutiny of the Application and the documentary evidence, after being satisfied about the genuineness of the claims made, shall issue the Payment advice in RFD-05 alongwith the Final Order of Refund Sanction.
The GST officer shall transfer/ credit the Refund amount claimed to the account of Consumer Welfare Fund if there is any doubt regarding Unjust Enrichment i.e If there is suspicion that the claimant has passed the tax incidence to the buyer where the buyer has availed the ITC on same supplies. Any such Refund claims can be made by the aggrieved person by applying to the Fund with the necessary declarations and documents to prove the claim.
Exceptions: In following below cases, this Rule does not apply:
- At last details of Bank account to which the Refund amount is credited shall be mentioned in the Form.
- Zero-rated supplies of goods / services (where refund claim is IGST paid/ ITC on export under LUT)
- Inverted Duty Structure(refund of Unutilised ITC is claimed)
- Supply cancelled either wholly or partly and where invoice is not issued( Refund of Tax paid if any)
- Refund of tax paid , where there is sufficient proof that claimant has not passed the tax incidence on to any other person
- Any other case of refund notified by Government.
For further Understanding on GST Refund process, Read
Orders passed by GST officer for Sanction/ Rejection of Refund