A Common Question among Tax Professionals and Businessmen alike is when the last date is, for filing Goods and Services Tax Refund claims, owing to the extensions in place due to Covid-19 Pandemic.
Timely refund mechanism is an essential aspect in tax administration, as it facilitates trade through release of blocked funds for working capital, expansion and modernization of existing business.
The provisions pertaining to refund contained in the Goods and Services Tax law aim to streamline and standardize the refund procedures under the GST regime. Thus, under the GST regime there is a standardized form for making any claim for refunds-GST RFD – 01 on the GST Portal.
The GST law requires that every claim for refund is to be filed within 2 years from the relevant date.
Special Exclusion of Covid Period for Inverted Duty Structure Refunds ( IDS Refunds under GST ):
The time period from 01.03.2020 to 28.02.2022 would be excluded for computation of the period of limitation for filing refund applications under Section 54 or section 55 of the Central Goods and Services Tax Act, 2017 as Vide Notification 13/2022 (CT) dated 05/07/2022, the Government has excluded of period of 1st March 2020 to 28th February 2022 from time limit filing of refund application and Order for recovery of erroneous refunds.
Normally, for the period from Months February 2020 to January 2022, the due date for filing the GST Refund Application, excluding the period of exemption, i.e., 01 March 2020 to 28 February 2022, owing to the extensions caused by Covid-19 Pandemic, is 28 February 2024.
Notably, Refund of Unutilized ITC under IDS is governed by Section 54(3) of Central Goods and Services Tax Act read with Rule 89 of CGST Rules. Further, Rule 89(5) of CGST Rules prescribes the formula of Refund.
Possible Situations for GST Refund Claims and Standard Due Date:
The relevant date provision embodied in Section 54 of the CGST Act, 2017, provision contained in Section 77 of the CGST Act, 2017 and the requirement of submission of relevant documents as listed in Rule 89(2) of CGST Rules, 2017 is an indicator of the various situations that may necessitate a refund claim.
A claim for refund may arise on account of:
(a) export of goods or services;
(b) supplies to SEZs units and developers;
(c) supply of goods regarded as Deemed Exports;
(d) refund of taxes on purchase made by UN or embassies etc. under Section 55 of CGST Act, 2017;
(e) refund arising on account of judgment, decree, order or direction of the Appellate Authority, Appellate Tribunal or any court;
(f) refund of accumulated Input Tax Credit on account of inverted rate structure;
(g) finalization of provisional assessment;
(h) refund of pre-deposit;
(i) tax paid in excess/by mistake;
(j) Refunds to International tourists of GST paid on goods in India and carried abroad at the time of their departure from India (not notified yet);
(k) refund of tax paid in wrong head under Section 77 of CGST Act, 2017 & Section 19 of IGST Act, 2017 (treating the supply as intra-State supply which is subsequently held as inter-State supply and vice versa);
(l) refund on account of any other reasons.
The GST law requires that every claim for refund is to be filed within 2 years from the relevant date.
How to File GST Refund Claims:
The registered person needs to file the refund claim along with documents on the common portal and after generation of Application Reference Number (ARN), the refund claim is transferred to the proper officer of the jurisdictional tax authority to which the taxpayer has been assigned as per the administrative order issued in this regard by the Chief Commissioner of Central Tax and the Commissioner of State Tax.
In case such an order has not been issued in the State, the registered person is at liberty to apply for refund before the Central Tax Authority or State Tax Authority administrative mechanism for assigning taxpayers to respective authority is implemented. However, in the latter case, an undertaking is required to be submitted stating that the claim for sanction of refund has been made to only one of the authorities.
Standard Procedure for Refund Claims:
The GST laws contain standardized provisions for making a refund claim.
Every claim, except for claims on account of integrated tax paid on export of goods and refund under section 55 of the CGST Act, 2017, has to be filed online in FORM GST RFD-01. The application will be assigned by the system to the proper officer who shall, within a period of fifteen days of filing of the said application, scrutinize the application for its completeness and where the application is found to be complete in all terms, an acknowledgement in FORM GST RFD-02 is made available to the applicant through the common portal electronically.
The proper officer has to convey deficiencies, if any, in the refund claimed within 15 days and in such cases the claim will be sent back to the applicant along with the notified deficiencies. The refund claim filed post rectification of deficiencies shall be treated as a fresh refund claim.
The time period from the date of filing of refund claim to the date of issuance of deficiency memo in Form GST RFD-03 would be excluded for computation of the time period of 2 years for filing of refund claim under sub-section (1) of section 54 of the CGST Act, 2017.
The claim, if in order, is sanctioned in FORM GST RFD-06 within a period of 60 days from the date of receipt of the application if the claim is complete in all respects.
If this mandatory period is exceeded, interest at the rate of 6% (9% in case of refund made on order passed by an adjudicating authority or Appellate Tribunal or court which has attained finality) becomes payable along with refund from the expiry of 60 days till the date of payment of refund.
However, if the refund claim is on account of pre-deposit made before any appellate authority, the interest becomes payable from the date of making such payment.
Refund Claims on Account of Inverted Duty Structure:
Refund claims in respect of inverted duty structure shall be filed for a tax period or by clubbing tax periods in FORM GST RFD-01. However, the registered persons having Aggregate Annual Turnover of up to R 1.5 Cr in the preceding financial year or the current financial year and opting to fileFORM GSTR-1 on quarterly basis shall apply for refund on a quarterly basis or by clubbing quarters.
Further, the refund claim for a tax period may be filed only after filing the details in FORM GSTR-1 for the said tax period. It is also to be ensured that a valid return in FORM GSTR-3B has been filed for the last tax period before the one in which the refund application is being filed.
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