GST Refund - Everything you need to know

General
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1. All you need to know about GST Refunds?

Timely filing of GST refunds and getting them sanctioned is essential since it facilitates trade through the release of blocked funds for working capital, expansion, and modernization of existing business. The filing and sanctioning procedure of GST refunds are time-bound and cumbersome and hence it calls for the help of professional services. Under GST, there can be multiple situations where taxpayers become eligible for claiming a GST refund.

Situations that lead to GST refund claims are:

  • Export of goods or services/ Supplies to SEZs units;
  • Deemed Export supplies;
  • Refund of accumulated Input Tax Credit (ITC) of GST on account of lower output tax and higher input tax (Inverted duty structure);
  • Excess payment of taxes due to mistake

Let’s briefly understand the possible refund situations available to any taxpayer:

Exports/ Special Economic Zone (“SEZ”) Supply

One of the major categories under which claim for refund may arise is on account of exports/ SEZ. All exports (whether of goods or services) and supplies to SEZs have been given the benefit to claim GST Refund.

Now an exporter has two options to choose under GST: Exports with GST and exports without payment of IGST (by filing an Letter of Undertaking).

In both the scenarios, an exporter is eligible to claim the GST Refund.

Deemed Export Supplies

There are certain transactions in which goods have not moved out of the country, but the goods are still considered exported. This is known as “Deemed Exports”.

A taxpayer can get the GST refund concerning such supplies as an exporter.

Examples of such supplies can be: supply of goods against Advance Authorization, Supply of capital against Export Promotion Capital Goods Authorization, Supply of goods to Export Oriented Unit etc.

Inverted Tax Structure

Where the credit has accumulated on account of rate of tax on inputs being higher (say 28% or 18%) than the rate of tax on output supplies (say 5% or 12%), the taxpayer can claim the refund of such accumulated ITC. This refunds is standard in the textile, footwear and related industries.

Excess payment of Tax by mistake

Any taxpayer who has mistakenly made the payment of tax under wrong GST head is eligible to get the GST refund of the amount so paid

For example, Mr. A paid IGST instead of CGST plus SGST due to misinterpretation of GST provisions, Mr. A is eligible to get the refund of wrongly paid IGST.

What all we do under “GST Refunds” Service

Our team of GST consultants or experts aims to give the clients guidance on various GST refund matters by performing a complete analysis of the transactions, applying for refunds, and streamlining the refund sanctioning procedures. For this, we perform the below tasks:

  • Analyze the transactions and create working papers to support the GST refund amount to be claimed from department
  • Prepare complete documentation to file for refund under GST
  • File applications with the Jurisdictional tax Authority for refund under GST
  • Represent the client in front of the proper officers and attend meetings for timely sanction of GST refunds

What do you need to do?

You only need to do is, provide us with the required data, sit back, and wait for the guaranteed GST refund solution.

To turn this complicated process into a reality, reach out to our team of experienced consultants.

2. How one can plan its GST Refunds?

Plan your GST refunds so that the chances of refund rejections can be reduced.

How can you plan for GST Refunds?

  1. Documentation: All the required documents like FIRC, SEZ Endorsement, relevant declarations and statements, GST returns, refund calculations, etc. should be prepared in the specified format before filing any refund application
  2. Frequency: Earlier, GST refund claims were allowed to be clubbed only for multiple tax periods within the same financial year. The restriction on clubbing refund claims across different financial years is no longer applicable. Hence, refunds for various tax periods across multiple financial years can be planned.
  3. Time Limitation: Time limit for claiming the refund is 2 years from the relevant date (the relevant date varies for different types of refunds). Therefore, a refund should be planned within the specified time limits
  4. Timely filing of a response to departmental notices: Due to a delay in response to the SCN, the refund gets rejected and when the taxpayer files it again, the prescribed time to file it expired. It would be best if you planned in such cases.
  5. Filing of refunds via GST returns: Refunds can also be granted via the filing of GST returns instead of filing of GST refund application separately. If a taxpayer plans this option, there would be no requirement for collection from the customers at the point when a refund is filed and granted.

Do you want to get your GST refund planned? Don’t worry. Our experienced team is here to help you!

3. Want to restructure your GST refunds?

GST refunds are a significant component of working capital for every exporter, any delay or stoppage in refunds affects the fund management adversely.

So now here comes the million-dollar question for every exporter – Whether to export with tax payment or without tax payment?

There are many factors to consider by each exporter to decide whether to go with or without payment – nature of business, the quantum of inward & outward supplies, the flow of ITC, etc.

In case of exports with payment of GST:

Since the inception of the GST regime, exporters have faced lots of issues with IGST refunds, as they were not getting processed by the Department of Customs due to mismatch in the details as per GST and Customs database. Department of Customs had come up with several special refund drives to clear the exporters’ pending IGST refunds. There are several exporters whose IGST refunds are still pending, with appropriate corrections said can be realized. Check out more on IGST Refund on ocean freight.

In case of exports without payment of GST:

In reality, even though the refunds are received regularly, ITC is still getting accumulated in the electronic credit ledger, which in the long run becomes a material amount, for which no refund can be claimed. For any exporter, there is no use of ITC lying in the electronic credit ledger unless it is realized in the bank account, leading to blocking working capital.

So an exporter needs to make the right choice between exporting with/ without payment of IGST

Do you want to understand whether restructuring would benefit you, talk to us about what options are available to you? We can help you choose the best option that helps overcome the blockage of working capital.

We can help you to get the GST Refund Solution you needed!

4. Is your GST refund stuck at Customs?

Who can claim a GST refund under customs?

The registered persons who have exported goods out of India on payment of IGST are eligible to get the refund of integrated tax (IGST) so paid subject to certain conditions related to filing correct and sufficient information in both GSTN and Customs system.

Challenges in IGST refund processing with Customs:

IGST refund would not be processed if it fails any validation at the level of either GSTN or Customs system.

Validation errors occur due to various deficiencies like:

  1. Missing invoices in GSTR 1;
  2. GSTR 1 and GSTR 3B have not been filed for that particular supply;
  3. Invoice details provided in GSTR 1 are incomplete. e.g., details of shipping bills and port numbers/codes are not mentioned.
  4. IGST paid under GSTR 3B being more petite than the total IGST claimed in GSTR 1 of the same period. The claim cannot be more than that of the amount of IGST paid

Sometimes, despite of filing the correct information in GST returns, IGST refund does not get sanctioned by the Customs Authorities

Don’t worry. First, understand why your GST refund claim is stuck with Customs Authorities and talk to us to learn what options are available to you. You will have to wait a certain period before we open all available options and process your refund accordingly. Even if your refund claim was rejected, we will help you challenge the claim and help you get the GST refund solution you needed!

5. Is your GST refund rejected?

We’ll let us help you get your claim back. More often than not, claims get rejected due to filing incorrect or invalid information. Although once rejected, the status of your claim can still be challenged.

Reasons why your refund claim can get rejected:

  1. Non-disclosure of relevant information
  2. Filing of time-barred GST refund applications
  3. Delay in filing of response against the Show cause notice
  4. Refund filed under the wrong head
  5. Inadmissible amount of refund claimed
  6. Incorrect calculation of refund amount

How to avoid these things to happen:

  1. Fill out your GST refund application properly
  2. Submit all relevant information while filing a GST refund application
  3. File the GST refund application within the specified time limit
  4. File the reply to SCN within the specified time limit
  5. If your refund is rejected on the wrong merits, file an appeal

We understand your claim better and help you re-file your claim rejection by looking at legal options per case-to-case requirements.

We do not settle until a GST refund solution is guaranteed!

6. Delay in the claim process

That’s a very unpleasant move, especially in this digital age, where document sharing and verification between the GST Authorities and taxpayers should be a seamless process yet delays in approval of GST refund claims are pretty common.

In our experience, the most common reasons for the delay in the GST refund claim process can be:

Reasons for delay in the claim process

  1. The process of GST refund is partly electronic and partly manual, which is cumbersome and adds to the transaction cost
  2. Non-submission of required documentation by the taxpayer at the time of filing GST refund application
  3. Error in GST refund filings
  4. GST Authorities asking for irrelevant documents
  5. Law requires that 90 percent of the refunds claimed should be provisionally granted within seven days of application submission, and 100 percent should be granted in two months. However, this law is not at all functional(source)
  6. A different interpretation of the formula for calculation of Refund amount is also leading to delay
  7. Issuance of multiple deficiency memos
  8. Improper due diligence by the consultant due to lack of legal knowledge and experience may lead to the submission of incorrect documents to the Authorities which ultimately may lead to a delay in the claim process

While it’s an endeavor that the GST Refund claims are being settled faster, sometimes there are specific questions raised by the Authorities that need to be answered technically to get the quicker refund claims without any delay. We can understand your case and can help you answer the questions accurately.

7. Is your consultant misselling you GST Refunds?

After the Provisional GST Refund order, @90% of the amount claimed is issued, GST Officer has to investigate and examine the whole refund claim and post-investigation final refund order for 100% is given. And many times the last refund order stands rejected and accordingly you have to return the provisional refund amount granted along with interest implications?

Did your consultant promise you a GST refund credit in your bank account, however at the time of the final order it got rejected? While that is indeed it’s a sad reality that despite paying vast amounts to your consultants, you are not getting any credits in your account. Let us tell you that you are also not alone in the fight against misselling!

If you have already fallen into GST Refund mis-selling, don’t feel disheartened quite yet because we have some good news for you. We already have achieved the milestone in getting the final refund orders for most of our clients and we work on the principle “Charge only when there is “SUCCESS”. “No success, no fees”.

If you are dissatisfied or believe that you have been scammed, give us a shot! We will help you fight your GST refund battle and bring home the justice you deserve.