GST Refund for NRIs in India: Eligibility, Process, Calculation & Exemptions

NRIs are Indian citizens living abroad for business, employment, education or other purposes. They pay GST on purchases of goods and services while visiting India. However, some of their purchases are eligible for a GST refund. This article discusses the eligibility for GST refunds among NRIs and the process of claiming such refunds. 

Key Takeaways

• Non-resident Indians (NRIs) are eligible for GST refunds on specific transactions. 
• Primarily, health and life insurance premiums paid from NRE accounts are eligible for claiming GST refunds. 
• Claiming a refund of GST paid involves registration on the GST portal and filing the RFD-01 form.
• Rent from commercial properties exceeding Rs 20 lakhs is liable to pay GST. GST-registered NRIs can claim ITC on GST collected on their commercial rent income. 
• The Reverse Charge Mechanism (RCM) applies to non-registered NRIs earning GST-applicable rent income.  
• The maximum time limit for claiming a GST refund is 2 years from the date of the GST payment.

What is the GST Refund for NRIs in India?

The GST refund for NRIs is a provision within the GST Act, 2017, that allows only the eligible Indian citizens living abroad to reclaim GST paid in India in specific cases. Often, people misinterpret this provision as ‘GST-free shopping’ for all purchases made by NRIs in India. However, it is not true. 

NRI GST refund is permissible only for specific transactions, such as the purchase of health and life insurance products. Besides, eligible transactions must resemble ‘export of services or goods’, i.e., purchase of Indian goods and services with foreign currency. 

Eligibility Criteria for GST Refund 

GST paid in India by NRIs is eligible for a refund. However, the eligibility primarily depends on the following factors:

1. Mode of payment: An NRI should ensure that all payments for the purchase are made from an NRE (Non-Resident External) account. Any purchase made by NRIs from their NRO (Non-Resident Ordinary) bank account will not be eligible for a refund. 
2. Type of goods and services purchased: Broadly, two types of purchases by NRIs are eligible for GST refunds, which are: 

• Health and life insurance purchased in India 
• Goods and services purchased in India while visiting on a tourist visa. 

GST Refund on Health Insurance for NRIs

NRIs are eligible to claim refunds for GST paid on the purchase of health and life insurance in India for themselves and their family members. The eligibility criteria for claiming such refunds are: 

1. The insurance policyholder must be an NRI. 
2. The policy can be purchased for NRIs themselves or for their family members living in India. 
3. The premium payment mode for the policy has to be annual. 
4. NRI policyholders must fulfil tax obligations in their country of tax residency. 
5. NRI policyholders claiming GST refunds must not be present in India during the taxation year for more than 183 days. 
6. The GST refund can be claimed immediately after payment of the premium (in the same month) or at the latest within the same year in which the premium was paid. 

Documents required for claiming GST refunds for NRIs are,

• Self-declaration of NRI status 
• Tax Residency Certificate (TRC) from the foreign country.
• Address proof of residence in the foreign country 
• The latest 6 months’ statement of the NRE bank account from which the premium was paid 
• Scanned copy of passport, AADHAR for KYC documentation 

Key Terms & Conditions for GST Refund 

The essential conditions for claiming refunds of GST paid by NRIs on health and life insurance policies are,

• Proof of tax residency in a foreign country. 
• Payment of premium from NRE account.  
• GST registration using the REG-09 form and GST payment receipt. 
• Filing of RFD-01 form.  

GST Refund for Tourists Visiting India

Foreign nationals visiting India on tourist visas can claim refunds of IGST paid on their purchases of goods in India. The eligibility criteria for such refunds of IGST are: 

1. The person claiming the refund must be an international tourist as per Section 15 of the IGST Act. 
2. The person’s stay in India should not exceed 6 months. 
3. Refunds can be claimed only when the tourist is leaving India and taking the goods out of the country. 
4. The goods must remain ‘unconsumed’ while leaving India. 

TDS and GST on Rent from Property for NRIs

A tenant of a residential property in India, owned by an NRI, is required to deduct a withholding tax (TDS) at a flat rate of 31.2%. This rate may vary depending on the tax treaties (e.g., Double Taxation Avoidance Agreements) between India and the country of residence of the property owner. 

However, the NRI owner’s actual tax liability from rental income in India can be lower than the rate of the TDS applied. Besides, several deductions apply to rental income for calculating actual tax liability, such as:

• Standard deductions 
• Local/municipal taxes 
• Interest on residential home loan  

So, an NRI owner can claim a refund of excess TDS levied if the actual tax liability is lower. 

The process of claiming the refund for excess TDS is: 

• Get Form 16A from your residential tenant as a certificate of TDS collection and deposit to the government. 
• Check Form 26AS in the income tax e-portal against your NRI PAN. This is essential for verification of TDS deposited against your PAN in the e-portal. 
• File income tax return using ITR-2 or ITR-3. It is mandatory for NRIs claiming a refund. Additionally, under the new tax regime, a taxpayer having an annual income exceeding the basic exemption of Rs 3 lakh is required to file an ITR. 
• Claim credit for TDS deposit within the e-portal - If the tax liability is less than the TDS deposited against a PAN as per Form 26A, then the taxpayer can claim a refund of the excess tax paid.  

For NRIs enjoying DTAA benefits, they can file Form 13 with the necessary residency certificate and PAN details to claim a lower TDS rate (as per the specific DTAA provision) for withholding taxation. 

GST on rent for NRIs from property in India:   

• Rent from residential properties is exempt from GST payment in India for both domestic and NRI owners. 
• GST is applicable on rent from commercial properties. This applies to both regular Indian citizens and NRIs. So, NRIs owning commercial properties in India and earning Rs 20 lakh or more annually are required to collect GST at 18% from tenants and deposit/remit it to the government account. It requires NRI property owners to be registered on the GST portal. 
• NRI commercial property owners can claim input tax credit (ITC) on expenses incurred on property maintenance against the GST paid on rent. 
• To claim ITC, the NRI owner needs to file GSTR-1 and GSTR-3B. 

Example: 

Assume Mr Charan Singh is an NRI living and working in Singapore. He owns multiple office spaces in Gurgaon. Together these spaces earn Rs 3 lakh every month. 

• Monthly rental income - Rs 3 lakh 
• Total annual rent income - Rs 3 lakh * 12 = Rs 36 lakh 

According to the GST Act, Mr Singh is required to issue rent invoices that include GST at 18% every month to his tenants, along with the monthly rent. 

• Month GST collection = (Rs 3 lakh * 18%) = Rs 54000
• Total monthly invoiced rent = (Rs 3 lakh + Rs 54000) or Rs 3.54 lakh
• Annual GST collection = (Rs 54000 * 12) or Rs 6,48,000 

Now, Mr Singh can claim input tax credits against the GST he paid on maintenance and other expenses related to the property. Such expenses may include brokerage fees paid for finding tenants, regular property maintenance, and security. 

Assume total GST paid on brokerage fees, building maintenance and security agency is Rs 50,000. This will be adjusted with GST collected from Mr Singh’s commercial property. 

• GST collected from tenants yearly = Rs 6,48,000 
• GST paid on upkeep of the property = Rs 50,000
• GST to be remitted to the Government = (Rs 6,48,000 - Rs 50,000) = Rs 5,98,000

GST Refund Process for NRIs 

NRIs eligible for claiming a refund of GST paid on specific transactions need to follow these steps. 

• Step 1 - Register on the GST portal. If you are already registered, log in to the GST portal to file refund-related procedures.
• Step 2 - Navigate to Services > Refunds > “Application for Refund”.
• Step 3 - Select ‘Refund on account of excess balance in cash ledger’. 
• Step 4 - File GST RFD-01. Mention the amount to be claimed as a refund in the form. The portal will auto-populate the form with the credit available in the Electronic Cash Ledger. 

GST Refund Calculation for NRIs 

According to the IGST Act, 2017, NRIs are entitled to significant GST relief on purchases of life and health insurance. However, to become eligible for a GST refund, they need to pay the premium from their NRE accounts. Let us understand the refund calculation. 

Assume Mrs Arthi has been working in Germany for the last 5 years. She decided to purchase a health insurance policy for her parents, who live in India. The insurance policy she chose cost Rs 60,000. Currently, 18% GST is applicable on health insurance policy premiums. 

• Health insurance premium - Rs 60,000
• GST applicable on the policy - Rs 60,000*18% = Rs 10800
• Total payment Mrs Arthi made - Rs 60,000 + Rs 10800 = Rs 70,800