Important Definitions and Interest Rates for Refund under GST

This article is ancillary to our articles explaining the process of refund.

Latest Updates on GST Refund

Budget 2023
Now, taxpayers shall count the number of days beyond sixty days from the date of receipt of the refund application till the date of refund payment while calculating interest on delayed refunds.

05th July 2022
Taxpayers can exclude the COVID pandemic period (1st March 2020 and 28th February 2022) while calculating the time limit for filing GST refund applications under Sections 54 or 55 of the CGST Act.

1st February 2022
Budget 2022 update-
1. Section 54 is amended to provide that refund claim of any balance in the electronic cash ledger can be made in a particular form and manner prescribed.
2. The time limit to claim refund by UN agencies is now two years from last day of quarter when supply was received instead of six months.
3. The restriction to refund taxpayers for tax defaults, that earlier applied to unutilised ITC refund, is now extended to other types of refunds.
4. The relevant date to file refund claim application for supplies to SEZ is clarified in new sub-clause (ba) of clause (2) of the explanation.

1st May 2021 
Where the time limit to pass orders for rejecting any refund claim fully or partly falls between 15th April 2021 and 30th May 2021, it is extended. The extended time limit shall be later of two dates:
(1) 15 days after reply to notice OR
(2) 31st May 2021
 

Important definitions you need to know

“Refund” includes:

• Refund of tax paid on zero-rated supplies of goods or services or both
• Refund on inputs or input services used in making such zero-rated supplies
• Refund of tax on the supply of goods regarded as deemed exports
• Refund of unutilised input tax credit due to a higher tax rate on the input than the output

  “Assessment” means determination of tax liability under this Act and includes

• Self-assessment
• Reassessment
• Provisional assessment
• Summary assessment
• Best judgment assessment

What does ‘Relevant Date’ mean?

Refund application can be filed under GST within a period of 2 years from the relevant date. It is important to understand what would be the “Relevant date”, as this date is required for calculating the time-limit for claiming refund. This date can be different under different cases of Refund under GST  

Illustrations:

Illustration to Sl.no 2(Deemed exports) : Anuj is a sub-contractor and he supplies goods to an export oriented units(EOUs) on 25 July 2017. Anuj was to file the return by 20 August 2017 for the supplied goods. The transaction would be considered as “Deemed Export”. The relevant date for this would be 20 August 2017. Anuj has time till 19th August 2019 to claim refund for these supplies.

Illustration to Sl.no. 3( Export of Services) : Anuj provides services to a company in South Korea on 28 July 2017. He is paid in convertible foreign exchange on 10 August 2017. The relevant date would be  10 August 2017.Suppose, Anuj provided services to a company in Japan and issued invoice on 20 August 2017 but got payment on 10 August 2017. The relevant date would be 20 August 2017.

Illustration to Sl.No. 5(Zero-rated supplies) : Anuj Hardware technologies supplied certain goods to Bills Aerospace Components Private Limited (SEZ) on 20 July 2017. He claimed the refund on such goods on 5 September 2017. The relevant date would be 31 March 2018.

Interest on Refund

Once an application for the refund is filed, within 60 days the GST officer may issue an order if he is satisfied with the whole or partial refund amount claimed. If the refund is not provided within 60 days of the application by the proper officer then the refund has to be paid with an interest at 6% p.a. calculated for the period of delay.

Exception: If refund from an order/direction from the appellate authority/tribunal/court is granted then interest on refund is 9% calculated for period of delay.

Period of delay for Interest calculation: To find out the period for which Interest at 6%/9% is to be calculated, count the number of days beyond sixty days from the date of receipt of the refund application* till the date of refund payment.

*Amended through Budget 2023. Yet to be notified by CBIC.

Exception: A Casual taxable person/ Non-resident Taxable person who claims the Refund of the balance unutilised advance deposit of tax made at the time of registration, is eligible to count the days from the date of deposit till the date of payment of Refund. The Interest shall be paid by issuing Payment advice in RFD-05. Payment advice (RFD-05) contains the amount of refund delayed, the period of delay and amount of Interest being paid. The Interest amount is directly credited to the registered Bank account of the claimant that was declared at the time of GST registration.

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