GST Payments and Refunds

Current GST return filing requires that every month, once GSTR-1 is filed to report Sales, one must file GSTR-3B to report the ITC and make necessary GST Payment. Also if a refund is required to be claimed the same can be done by filing relevant refund related forms.

Latest Updates

1st February 2023
Important updates from Budget 2023* 
1. Section 16 is amended to state that buyers who fail to pay their supplier the invoice value, including the GST amount, within 180 days from the date of issue of the invoice, must pay an amount equal to the ITC claimed along with interest under Section 50.
2. Sections 37, 39, 44, and 52 are amended to restrict taxpayers from filing their GSTR-1, GSTR-3B, GSTR-9 and GSTR-8 for a tax period after the expiry of three years from the due date. 
3. Section 17(5) is revised to include another item under ineligible ITC being expenditure on CSR initiatives for corporates.
4. High sea sales and similar transactions that are neither supply of goods or services are considered exempt and hence ITC proportional to such sales cannot be claimed as per revised Section 17(3).
5. Schedule III has been amended to provide for paras (7) and (8) and explanation (2) to take retrospective effect from 1st July 2017.
6. Section 10 of the CGST Act has been amended to allow businesses that supply goods through an e-commerce operator to opt into the composition scheme.
*These amendments will come into force once notified by the CBIC.

A. Payments

What are payments to be made under GST?

Under GST the tax to be paid is mainly divided into 3 –

• IGST – To be paid when interstate supply is made (paid to center)
• CGST – To be paid when making supply within the state (paid to center)
• SGST – To be paid when making supply within the state (paid to state)

Apart from the above payments a dealer is required to make these payments –

• Tax Deducted at Source (TDS) – TDS is a mechanism by which tax is deducted by the dealer before making the payment to the supplier

For example – A government agency gives a road laying contract to a builder. The contract value is Rs 10 lakh. When the government agency makes payment to the builder TDS @ 1% (which amounts to Rs 10,000) will be deducted and balance amount will be paid.

• Tax Collected at Source (TCS) – TCS is mainly for e-commerce aggregators. It means that any dealer selling through e-commerce will receive payment after deduction of TCS @ 2%.

This provision is currently relaxed and will not be applicable to notified by the government.

• Reverse Charge – The liability of payment of tax shifts from the supplier of goods and services to the receiver. To know more about reverse charge check out our article ‘Know all about Reverse Charge under GST‘

• Interest, Penalty, Fees and other payments

How to calculate the GST payment to be made?

Usually, the Input Tax Credit should be reduced from Outward Tax Liability to calculate the total GST payment to be made.

TDS/TCS will be reduced from the total GST to arrive at the net payable figure. Interest & late fees (if any) will be added to arrive at the final amount.

Also, ITC cannot be claimed on interest and late fees. Both Interest and late fees are required to be paid in cash. The way the calculation is to be done is different for different types of dealers –

Regular Dealer A regular dealer is liable to pay GST on the outward supplies made and can also claim Input Tax Credit (ITC) on the purchases made by him. The GST payable by a regular dealer is the difference between the outward tax liability and the ITC. 
Composition Dealer The GST payment for a composition dealer is comparatively simpler. A dealer who has opted for composition scheme has to pay a fixed percentage of GST on the total outward supplies made. GST is to be paid based on the type of business of a composition dealer.

Who should make the payment?

These dealers are required to make GST payment –

1. A Registered dealer is required to make GST payment if GST liability exists.
2. Registered dealer required to pay tax under Reverse Charge Mechanism(RCM).
3. E-commerce operator is required to collect and pay TCS
4. Dealers required deducting TDS

When should GST payment be made?

GST payment is to be made when the GSTR 3 is filed i.e by 20th of the next month.

What are the electronic ledgers?

These ledgers are maintained on the electronically on GST Portal.  

How to make GST payment?

GST payment can be made in 2 ways

Payment through Credit  Ledger

The credit of ITC can be taken by dealers for GST payment. The credit can be taken only for payment of Tax. Interest, penalty and late fees cannot be paid by utilizing ITC.

Payment through Cash Ledger

GST payment can be made online or offline. The challan has to be generated on GST Portal for both online and offline GST payment. Where tax liability is more than Rs 10,000, it is mandatory to pay taxes Online.

What is the penalty for non-payment or delayed payment?

If GST is short paid, unpaid or paid late interest at a rate of 18% is required to be paid by the dealer. Also, a penalty to be paid. The penalty is higher of Rs. 10,000 or 10% of the tax short paid or unpaid.

B. Refunds

What is GST refund?

Usually when the GST paid is more than the GST liability a situation of claiming GST refund arises. Under GST the process of claiming a refund is standardized to avoid confusion. The process is online and time limits have also been set for the same.

When can the refund be claimed?

There are many cases where refund can be claimed. Here are some of them – Excess payment of tax is made due to mistake or omission.

• Dealer Exports (including deemed export) goods/services under claim of rebate or Refund
• ITC accumulation due to output being tax exempt or nil-rated
• Refund of tax paid on purchases made by Embassies or UN bodies
• Tax Refund for International Tourists
• Finalization of provisional assessment

How to calculate GST refund?

Let’s take a simple case of excess tax payment made. Mr. B’s GST liability for the month of September is Rs 50000. But due to mistake, Mr. B made a GST payment of Rs 5 lakh. Now Mr. B has made an excess GST payment of Rs 4.5 lakh which can be claimed as a refund by him. The time limit for claiming the refund is 2 years from the date of payment.

What is the time limit for claiming the refund?

The time limit for claiming a refund is 2 years from relevant date. The relevant date is different in every case. Here are the relevant dates for some cases –

Also if refund is paid with delay an interest of 24% p.a. is payable by the government.

How to claim GST refund?

The refund application has to be made in Form RFD 01 within 2 years from relevant date. The form should also be certified by a Chartered Accountant. You can file your returns very easily using ClearTax GST Software.

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