As discussed in section 54 of the CGST/SGST Act, a “refund” includes:
- any balance amount in the electronic cash ledger so claimed in the returns
- tax paid by specialized agencies of the United Nations or any multilateral financial institution and organization notified under the United Nations (Privileges and Immunities) Act, 1947, consulate or embassy of foreign countries on any inward supply; and
- any unutilized input tax credit (ITC) in respect of:
- zero-rated supplies made without payment of tax
- an accumulation of credit due to a higher rate of tax on inputs than on the output supplies (other than nil rated or fully exempt supplies)
2. Can an unutilized ITC be given as a refund when goods exported outside India are subjected to export duty?
A refund of an unutilized input tax credit is not granted in cases where the goods exported out of India are subject to export duty – as per the second proviso to section 54 (3) of the CGST/SGST Act.
3. Are purchases made by embassies or the U.N. taxed or exempted?
Supplies to embassies or U.N. bodies will be taxed, however, these entities can claim these taxes later as a refund per the terms of section 54 (2) of the CGST/SGST Act. Embassies or U.N. bodies must file claims in the manner prescribed under CGST/SGST refund rules within 6 months from the last day of the month in which they received such supply.
4. Will an unutilized ITC be refunded at the close of the fiscal year?
There is no such provision in the GST law that would allow a refund of unutilized ITC at the conclusion of the fiscal year. It shall be carried forward to the following fiscal year.
5. What is the time limit for claiming a refund?
A person claiming a refund is required to file an application within two years from the “relevant date” as given in the explanation to section 54 of the CGST/SGST Act.
6. Will the principle of unjust enrichment be applicable in the case of a refund?
The principle of unjust enrichment will be applicable in all cases of refunds except in the following circumstances:
- when a refund of tax has been paid on zero-rated supplies of goods or services or both, or on inputs or input services used in making such zero-rated supplies;
- in cases of unutilized input tax credit in respect of:
- zero rated supplies carried out without payment of tax, or
- an accumulation of credit due to a higher rate of tax on inputs than the rate of tax on output supplies
- when a supply has not been provided, either wholly or partly, or an invoice has not been released
- in pursuance of Section 77 of the CGST/SGST Act, when a tax has been wrongfully collected and paid to the Central Government or State Government
- when tax or interest paid has not been passed on to any other person
- In circumstances regarding other classes of persons as the Government may notify
7. Is there any time limit for sanctioning of refund?
Yes, the refund must be approved within 60 days from the date of receipt of a complete application. If a refund is not approved within the stated period of 60 days, interest at the rate notified must be paid in conformity with section 56 of the CGST/SGST Act. However, in case where a provisional refund to the extent of 90% of the amount claimed is refundable, in respect of zero-rated supplies made by particular categories of registered persons in terms of sub-section (6) of section 54 of the CGST/SGST Act, the provisional refund must be given within seven days from the date of acknowledgement of the claim of refund.
8. Can refunds be withheld by the department?
Yes, a refund can be withheld in the following circumstances:
- if the person has failed to furnish any return until he files such return
- if a registered, taxable person owes any tax, interest, or penalty that has not been stayed by an appellate authority/tribunal/ court, until he pays such tax, interest or penalty; the proper officer can also deduct unpaid taxes, interest, penalty, late fee, if any, from the refundable amount [Section 54(10) (d) of the CGST/SGST Act]
- If the order of refund is under appeal and a commissioner believes that the grant of such a refund will adversely affect revenue in the said appeal on account of malfeasance or fraud [Sec. 54 (11) of the CGST/SGST Act]
9. Is there any minimum threshold for a refund?
No refund shall be granted if the amount is less than Rs.1000. [Sec.54 (14) of the CGST/SGST Act].
10. How will the applicant prove that the principle of unjust enrichment does not apply in his case?
Where the claim of refund is less than Rs.2 Lakh, the applicant will provide a declaration based on the documentary or other evidence that certifies that the incidence of tax has not been passed on to any other person would make him eligible to get a refund. However, if the claim of refund is more than Rs.2 Lakh, the applicant is required to submit a certificate from a chartered accountant or a cost accountant to the effect that the incidence of tax has not been passed on to any other person.
11. What is the time period within which the department must acknowledge a refund claim?
Where an application relates to a claim for a refund from the electronic cash ledger as per section 49 (6) of the CGST/SGST Act and is made through a return that is furnished for the relevant tax period, the department will communicate an acknowledgment as soon as the return is furnished. In all other cases, the acknowledgment will be delivered to the applicant within 15 days from the date of receipt of a complete application.
12. Is there any set format for filing refund claim?
Every claim of refund has to be filed in Form GST RFD 1. However, a claim for a refund of the balance in the electronic cash ledger can be made by furnishing monthly/quarterly returns in Form GSTR 3, GSTR 4 or GSTR 7 of the relevant period.
Demands and recovery
In such cases, notice shall not be issued by the proper officer.
14. If a show cause notice is gone forth under Section 73, and after that the noticee makes the payment along with the applicable interest, is there any need to adjudicate the case?
If the individual pays the tax along with interest within 30 days of issue of notice, no penalty shall be payable, and all transactions in respect of such notification shall be closed.
15. Is there any time limit for adjudication the cases?
Following are the cases:
- In the event of section 73 (cases other than fraud/suppression of facts/wilful misstatement), the time limit for adjudication of cases is three years from the due date for filing the annual return for the fiscal year of which the demand relates to, or the date of erroneous refund/ITC wrongly availed.
- In the case of section 74 (cases of fraud/suppression of facts/wilful misstatement), the time limit for adjudication is five years from the due date for filing of the annual return for the financial year to which demand relates to, or the date of erroneous refund/ITC wrongly availed.
16. If a noticee makes a payment after a notice is issued under Section 74, is there any need to adjudicate the case?
Where the person to whom a notice has been issued under sub-section (1) of section 74 pays the tax along with interest — a penalty equal to 25% of such tax — within 30 days of issue of notice, all proceedings in respect of such notice shall be deemed to be concluded.
17. In case a notice is adjudicated under Section 74 and an order is issued confirming the tax demand and penalty, does the noticee have an option to pay a reduced penalty?
Yes, if any person pays the tax determined by the order along with interest and a penalty equivalent to 50% of such tax within 30 days of the communication of the order, all proceedings in respect of the said tax shall be deemed to be concluded.
18. By what modalities may the proper officer retrieve taxes?
The proper officer may recover the dues in following ways:
- By deducting dues from the amount owned by the tax authorities payable to such person;
- By detaining and selling any goods belonging to such individual;
- Recovery from the other person from whom money is due or may become due, to such person or who holds or may subsequently hold, money for or on account of such person, to pay to the credit of the Central or a State Government;
- By seizing any movable or immovable property belonging to such individual until the sum payable is paid. If the dues are not paid within 30 days, the said property is to be sold, and with the proceeds of such sale the amount payable and cost of sale shall be recovered;
- Through the collector of the district in which such person owns any property or resides or carries on his business as if it was an arrear of land revenue;
- By applying to the appropriate magistrate to reclaim the amount as if it were a penalty levied by him;
- Through enforcing the bond/instrument executed under this Act or regulations made thereunder;
- CGST arrears can be retrieved as an arrear of SGST and vice-versa;
19. Can payment of tax dues be made in installments?
On receipt of any such request, the Commissioner/Chief Commissioner may extend the time for payment or allow the payment of any amount due under the Act by such person in monthly instalments not exceeding 24, subject to payment of interest under section 50 and with such limitations and conditions as may be prescribed. Nevertheless, where there is a default in the payment of any one instalment on its due date, the whole outstanding balance payable on such date shall become payable and recovered without any further notification.
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