Refund Claims under GST for Tax and Input Tax Credit (ITC)

By: Mr. Harshit Mogra - 9th November, 2020

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Accumulation of Input Tax Credit occurs when the tax paid on inputs exceeds the output tax liability. In such a case, the excess amount has to be carried forward to the next financial year, so it could be used to pay the output tax liability by the registered individual. The GST Law also permits refund ofunutilised ITC in certain cases.

Conditions applicable for Claim of a refund to the applicant

Below mentioned are some of the conditions allowing the applicant to claim for getting a refund:

  1. Supply of Zero-rated goods or services or both under bond or Letter of Undertaking, subject to such conditions, safeguards and procedure as may be prescribed, without payment of integrated tax and claimrefund of unutilised input tax credit.
  2. Supply of goods or services or both, subject to such conditions, safeguards and procedure as may be prescribed, on payment of integrated tax and claim refund of such tax paid on goods or services or both supplied.
  3. Credit accumulated on account of rate of tax on inputsbeing higher than the rate of tax on outputsupplies (other than nil rated or fully exemptsupplies), except supplies of goods or services orboth as may be notified by the Government (on therecommendations of the Council.).
  4. Refund of tax paid on a supply which is not provided,either wholly or partially, and for which invoice hasnot been issued, or where a refund voucher hasbeen issued.
  5. Refund of additional tax paid due to mix-up of interstate or intrastate transaction.

It should be noted that no refund of unutilised inputtax credit is allowed in cases where the goods exportedout of India are subjected to export duty. Further, norefund of input tax credit is allowed, if the supplier ofgoods or services or both avails of drawback in respect of central tax or claims refund of the integrated taxpaid on such supplies.

Time Limit for Filing the claim for refund

Any person eligible for the refund of the GST tax or the accumulated interest must claim it by sending the application electronically within two years from the date applicable by using the Form GST RFD – 01. He may also claim the available refund directly in the electronic cash ledger by filing the return according to the dates mentioned under the GST act.

In the case of UNO agencies or any other multidimensional financial organizations registered under the foreign embassies or the Consulate or the United Nations, they are also entitled to claim for the refund of tax on inward supply of goods and services. All they have to do is to apply for a refund within six months from the last date of the quarter in which these goods or services were ascertained.

Process for claiming the refund of the application process

Section 54(4) ofthe CGST Act, 2017 states that where the amount claimedas refund is less than two lakh rupees, it shall not benecessary for the applicant to furnish any documentary and other evidences but he may file a declaration,based on the documentary or otherevidences availablewith him, certifying that the incidence of such tax andinterest had not been passed on to any other person.

The process for refund amount exceeding 2 lakhs is explained below: -

  • GST refund application in Form GST RFD-01 is required to be filed online.
  • The taxpayer is entitled to register the application based on the documents or any other pieces of evidence if the claimed refund amount is below INR 2 Lakh.
  • Refund on unutilised ITC can be claimed only in respect of ITC availed in respect of Input and Input Services and not for ITC availed on Capital Goods.
  • A Statement No. 3 is required to be filed online along with the refund application duly containing the Invoice Number, Invoice Value and the date of invoices in respect of Invoices raised by the entity along with the details of relevant Bank Realisation Certificates (BRC) or Foreign Inward Remittance Certificates (FIRC) in respect of amounts received in Foreign Currency from Foreign Customer such as number and date of BRC / FIRC.
  • Export Invoice values as mentioned in Statement No. 3 will be matched by the GST Department with GSTR-1 and GSTR-3B filed for the respective period.
  • Amount of refund will be based on Turnover ratio as stated in Rule 89 of the CGST Rules.
  • The Refund claim application must contain all the documentary evidence or the amount specified in the applicant's tax invoice to determine the net tax and interest amount (if any) paid by the applicant, thereby mentioning that it was not passed on to any other person.

Overall, it is easier to get the refund of tax and ITC under the GST Act.


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