It is imperative to make the process of refund much smoother under GST. A delay in refund would cause problem for the exporters/manufacturer’s in maintaining the working capital and cash flow.
Currently there is delay in months in providing the refund to the exporters/manufacturers. There should be strict regulation in the processing of refund under GST.
Situations for Refund under GST
(A) Excess payment of tax due to mistake or inadvertence.
(B) Export (including deemed export) of goods / services under claim of rebate or Refund of accumulated input credit of duty / tax when goods / services are exported.
(C) Finalization of provisional assessment.
(D) Refund of Pre – deposit for filing appeal including refund arising in pursuance of an appellate authority’s order (when the appeal is decided in favor of the appellant).
(E) Payment of duty / tax during investigation but no/ less liability arises at the time of finalization of investigation / adjudication.
(F) Refund of tax payment on purchases made by Embassies or UN bodies.
(G) Credit accumulation due to output being tax exempt or nil-rated.
(H) Credit accumulation due to inverted duty structure i.e. due to tax rate differential between output and inputs.
(I) Year-end or volume based incentives provided by the supplier through credit notes.
(J) Tax Refund for International Tourists.
Refund Process under GST
Following are the procedures for processing of refund claimed-:
- Application form for claiming refund can be filed through the GSTN portal.
- An acknowledgement number would be shared with applicant via sms or email, once the application is filed electronically.
- Adjustment would be made to return and cash ledger and reduce the “carry-forward input tax credit” automatically.
- Refund application and documents submitted shall be scrutinized within a period of 30 days of filing the refund application.
- Concept of “unjust enrichment” would be examined for reach refund application. If it does not qualify, then the refund would be transferred to CWF(consumer welfare fund).
- If refund claimed exceeds the predetermined amount of refund then it will go through pre-audit process for sanctioning the refund.
- Refund will be credited electronically to the account of applicant via ECS, RTGS or NEFT.
- Application for refund can be made at end of each quarter.
- No refund shall be provided for an amount of less than Rs 1000.
Delay in Refund and Interest
According to the GST law and recommendations from the Subramanian committee, a refund application is to be processed within a period of 90 days. If the refund application is not processed within said period then a interest at the rate of 6% is recommended.
According to Nirmala Sitharaman( Commerce and industry minister) who spoke for the concern of exporters on delay in refund, that the refunds under GST shall be processed within a period of 7 days. If same is delayed more than 2 weeks, then refund will be provided with interest.
Processing of the refund applications under GST is expected to be a faster and smoother process. Since all the data is going to be uploaded electronically , the verification and scrutinization of refund applications would be faster.