GST Refund – Understanding GST Refund

gst refund process

GST Refund – Understanding GST Refund

In the existing GST regime, the return filing necessitates that each month, as and when the GSTR-1 is filed to report Sales, one needs to file GSTR-3B for reporting the input tax credit (ITC) and then make the required GST Payment. Also, in case a refund is needed, the same could be done via filling the relevant refund-related form on the GST portal. When the Goods and Services Tax (GST) came into force, the regime along with its new tax laws also fetched multiple mechanisms and systems for refunds. Subsequently, numerous refund claims are being filed by the taxpayers and due to this, a standardized form for the purpose of GST refund has been introduced by the tax authorities.


What is GST Refund?

Goods and Services Tax refund is a process wherein, the registered taxpayers could claim any excess amount which they have paid against their GST liability. A registered taxpayer could claim the GST refund after submitting the refund application along with the required details on the GST portal.

The working capital and the cash flow requirements of a manufacturer or an exporter could get unfavorably impacted if the GST refund pertaining to them is delayed. Accordingly, one of the intents of the enactment of GST is for ensuring that the tax refund process is smoother and easy so that a manufacturer or an exporter doesn’t face any impact on his business due to tax refund delays. By warranting that the GST refund process is facilitated easily and quickly, the tax administration could become more effective and efficient.

The Goods and Services Tax regime has detailed provisions with respect to GST refunds, and these provisions are intended to streamline and standardize the entire refund process under the GST regime. Hence, a standardized form is put in place for making claims for GST refunds. There’s an online procedure to claims GST refunds over the GST portal.


Situations that lead to refund claims

There are several cases where the GST refund could be claimed. As mentioned before, a robust GST refund machinery is essential for efficient and effective tax administration, as the trade is bolstered with the release of the blocked funds in the form of GST refunds for expansion, modernization, and cash flow and working capital necessities of their business. Some of the situations which lead to refund claims are mentioned below:

  • When a registered taxpayer exports commodities or services
  • In case of deemed exports
  • Refund of taxes in cases where the embassies or UN bodies make purchases
  • When a registered taxpayer makes any supplies to an SEZ developer or any unit in an SEZ (special economic zone)
  • Refund of pre-deposit
  • Refund which arises from an order, direction, decree, or judgment of the of any court of law, Appellate Authority or Appellate Tribunal
  • Finalization of provisional assessment
  • When a registered taxpayer makes excess GST payment due to an error
  • Input Tax Credit accumulated due to output being Zero-rated
  • Tax Refund for International Tourists


Calculating GST refund

Let’s try to calculate the GST refund with the help of a simple example. Mr. Ajay’s GST tax liability for August month is INR 40000. But due to a mistake, Mr. Ajay made the payment of INR 4 lakhs. Now Mr. Ajay has made an extra payment of INR 3.6 lakhs which could be claimed by Mr. Ajay as a refund and the time limit for claiming the same is two years from the day he made such payment.

If you want to learn more about the GST refund process, you can opt for the GST compliance course provided by Taxguru which is a comprehensive course and will resolve all your doubts and help you with all your GST-related activities. You can check the content of the course and details of this course by clicking here.

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