GST Refund Process for Exporters

In this article,we are going to discuss:

  • How to apply for refund in GST for export without payment of tax.
  • Refund in case of Export of Services under GST.
  • Refund of IGST paid on export of goods.
  • Refund of ITC on export of goods & services without payment of Integrated Tax.

Overview

An exporter has to ensure that he is aware of all rules and regulations related to exports, including registration procedures,GST refund process for exporters and other compliances in terms of  the current taxation policy of the Government for availing the benefits via schemes and refunds of taxes paid, if any.If such norms are not adhered to, it may lead to difficulty in executing the exports or denial of export incentive.

Foremost, as per the current export-import policy in India, no export or import shall be made by any person without an Importer Exporter Code (“IEC”) number, unless specifically exempted. IEC number is a 10-digit code number given to an exporter or importer by the regional office of the Director General of Foreign Trade (“DGFT”), Department of Commerce, Government of India. This number is to be filled in the shipping bill made  for exports.

The exporter shall register with the Export Promotion Council for obtaining a Registration-cum-Membership Certificate for availing benefits available to exporters under the current Foreign Trade Policy  (“FTP”). These incentives or schemes under FTP would go a  long way in lowering the cost burden.

The Government of India, besides providing incentives in the form of  refund to the exporters, has incorporated provisions for refund in the following situations:

  • Inverted duty structure, i.e., input credit is more than tax payable on output supply.
  • Supply of goods, which is equalised as export (Deemed Export).
  • Taxable person can also claim refund, if he has paid excess tax by mistake.

List of Statutory Provisions related to refund process under GST

The Central Goods and Services Tax Act, 2017 hereinafter referred as “the CGST Act, 2017” or “the CGST Act”The Central Goods and Services Tax Rules, 2017 (hereinafter referred as “the CGST Rules, 2017” or “the CGST Rules”)
Chapter XIChapter X
SectionsRules
54.Refund of tax.89.Application for refund of tax, interest, penalty, fees or any other amount.
55.Refund in certain cases.90.Acknowledgement.
56.Interest on delayed refunds.91.Grant of provisional refund.
57.Consumer Welfare Fund.92.Order sanctioning refund.
58.Utilisation of Fund.93.Credit of the amount of rejected refund claim.
94.Order sanctioning interest on delayed refunds.
95.Refund of tax to certain persons.
95A.Refund of taxes to the retail outlets established in the departure area of an international Airport beyond immigration counters making tax free supply to outgoing international tourists.
96.Refund of integrated tax paid on goods or services exported out of India.
96A.Export of goods or services under bond or Letter of Undertaking.
96B.Recovery of refund of unutilised input tax credit or integrated tax paid on export of goods where export proceeds not realised.
97.Consumer Welfare Fund.
97A.Manual filing and processing.

Forms prescribed for GST Refund Process for Exporters under the Law

FORMPARTICULARS
FORM-GST-RFD-01 Application for Refund.
FORM-GST-RFD-02Acknowledgment.
FORM-GST-RFD-03Deficiency Memo.
FORM-GST-RFD-04Provisional Refund Order.
FORM-GST-RFD-05Payment Order.
FORM-GST-RFD-06Refund Sanction/Rejection Order.
FORM-GST-RFD-07Order for Complete adjustment of sanctioned Refund.
FORM-GST-RFD-08Notice for rejection of application for refund.
FORM-GST-RFD-09Reply to show cause notice.
FORM-GST-RFD-10Application for Refund by any specialized agency of UN or any Multilateral Financial Institution and Organization, Consulate or Embassy of foreign countries, etc.
FORM-GST-RFD-11Furnishing of a bond or Letter of Undertaking for export of goods  or services.
FORM-GST-RFD-01AApplication for Refund (Manual).
FORM-GST-RFD-01BRefund Order Details.
FORM-GST-RFD-10BApplication for refund by Duty-Free Shops/Duty Paid  Shops (Retail outlets).

Procedure of Refund of IGST paid on Export of Goods

Filing of the Shipping Bill:

The Shipping bill is filed to obtain clearance for exports from Customs authorities. This bill is treated as a claim application for the purpose of the export of goods with the payment of IGST.

Furnishing the details of export supplies in Table 6A of Form GSTR-1:

The details of zero-rated supplies declared in Table 6A of return in Form GSTR-1 are matched electronically with the corresponding details available in Customs Systems as per details provided in the shipping bills/bill of export. Thus, exporters must file their Form GSTR-1 very  carefully  to ensure that all relevant details match with the details provided in the shipping bill. For their convenience, the details available in the Customs System have been made  available  for viewing in their Indian Customs Electronic Gateway (ICEGATE) login.

In case, where the shipping bill particulars are either not available or wrongly quoted in Form GSTR- 1, the only way out is to amend the Form GSTR-1 of  the  subsequent  tax period in  Table 9A (Amendments to taxable outward supply details furnished in returns for earlier tax periods) and enter the correct particulars as mentioned in the shipping bill.

Further, where the invoice number and IGST paid amount mismatch (i.e. the exporters have  quoted different invoice numbers and amount in Table 6A of the Form GSTR – 1 and the shipping bill) then the same needs to be amended by following the amendment process prescribed above.

Filing of Form GSTR-3B:

A registered person should properly disclose the Assessable Value and the IGST payment particulars for the tax period under the head “Zero-Rated  Supply” in Entry 3.1(b) of the Form GSTR-3B. Since, there is a validation check in the GSTN system to ensure that the IGST paid on the export goods in any particular month [3.1(b)] is not less than the refund claimed by the exporter [Table 6A of Form GSTR – 1].

However, it has been observed that  the exporters have inadvertently mis-declared IGST paid on export supplies as IGST paid on inter-State domestic outward supplies while filing Form GSTR-3B. The exporters have also in certain cases short paid IGST vis-à-vis their liability declared in Form GSTR-1. As a result of these mismatches in the amount of IGST paid on exported goods between Form GSTR-1 and Form GSTR-3B, the transmission of records from GSTN to Customs EDI system has not taken place and, consequently, IGST refunds could not be processed.

To overcome the problem of refund blockage, the CBIC vide Circular No.12/2018 – Customs  dated 29.05.2018 and Facilitation No. 11/2019 – Customs dated 13.09.2019, has provided an interim solution Applicable for the FY 2017 – 18 and FY 2018 – 19. (Similar facility may be extended for the next financial years also).

Also Read:What is capital gain?How it is calculated?How to take exemptions under the head capital gain?

Procedure of Refund in case of Export of Services under GST

Furnishing the details of export supplies in Table 6A of GSTR-1:

The details of zero-rated supplies declared in Table 6A of return in Form GSTR-1.

Filing Form GSTR 3B:

The registered person should properly disclose the Assessable Value and the IGST payment particulars for the tax period under the head “Zero-Rated Supply” in entry 3.1(b) of the Form GSTR 3B. There is a validation check in the GSTN system to ensure that the IGST paid on the export in any particular month [3.1(b)] is not less than the refund claimed by the exporter [Table 6A].

However, it has been observed that the exporters have inadvertently mis-declared IGST paid on export supplies as IGST paid on inter-State domestic outward supplies  while  filing Form GSTR-3B. The exporters have also in certain cases short paid IGST vis-à- vis their liability declared in GSTR-1. As a result of these mismatches in the amount of IGST paid on exported services between Form GSTR-1 and Form GSTR-3B, the validation fails and GSTN does not permit claims for refund. However, to overcome the problem of blockage of the refund, the CBIC had clarified the following vide Circular No.12/2018 – Customs, dated 29-05-2018.

In this regard, it has been clarified vide Circular 125/44/2019 that for the tax periods commencing from 01.07.2017 to 30.06.2019, such  registered persons shall be allowed to file the refund application in FORM GST RFD-01A on the common portal subject to    the condition that the amount of refund of integrated tax/cess claimed shall not be more than the aggregate amount of integrated tax/cess mentioned in the Table under columns 3.1(a), 3.1(b) and 3.1(c) of FORM GSTR-3B filed for the corresponding tax period.

File Form GST RFD 01 using Online utility:

The online claim application has to be accompanied with the Declaration / Statement / Undertaking / Certificates along with supporting documents which are listed in Annexure – II.

Refund of ITC on Export of Goods & Services without payment of Integrated Tax(under the Cover of Letter of Undertaking/Bond)

The registered person who has opted to provide

  • exporting goods or services or both without payment of integrated tax
  • Supplying goods or services or both without payment of integrated tax

has to execute a Letter of Undertaking (hereinafter referred as  LUT) or  Bond. In  this  regard, the CBIC vide Circular No. 08/08/2017 dated 04.10.2017 stipulates the procedure.

Furnishing the details of export supplies in Table 6A of GSTR-1:

The details of zero- rated supplies declared in Table 6A of return in GSTR-1.

Filing of Form GSTR 3B:

A registered person should properly disclose the Assessable Value and the IGST payment particulars for the tax period under the head “Zero-Rated Supply” in entry 3.1(b) of Form GSTR 3B. There is a validation check in the GSTN system to ensure that they are eligible for refund. In case the date is not filled in the said entry then the network will not permit refund.

Rule 89(2) of the CGST Rules specifies documents to be attached with the refund application in case of different types of refund applicants.

File Form GST RFD 01 using Online utility:

The online claim application has to be accompanied with the Declaration / Statement / Undertaking / Certificates along with supporting documents which are listed in Annexure – II.

You may also like:What is Statement of Financial Transaction(SFT)

Refund on account of ITC Accumulated due to Inverted Tax Structure

Filing Form GSTR-1 and Form GSTR-3B:

The registered person should disclose the Assessable Value of such supply in entry 3.1(a) of FORM GSTR-3B.

Rule 89(2) of the CGST Rules specifies documents to be attached with the refund application of different types of refund applicants.

File Form GST RFD 01 using Online utility:

The online claim application has to be accompanied with the Declaration / Statement / Undertaking / Certificates along with supporting documents which are listed in Annexure – II.

Detailed Refund Procedure under GST:Application and Processing of Refund

With effect from 26.09.2019, the applications for the following types of refunds shall be filed in FORM GST RFD-01 on the common portal and the same shall be processed electronically.

Filing of FORM GST RFD-01:

The applicants have to file their application on the common  portal for any of the categories mentioned below:

  • Refund of unutilized ITC on account of exports without payment of tax;
  • Refund of tax paid on export of services with payment of tax;
  • Refund of unutilized ITC on account of supplies made to SEZ Unit/SEZ  Developer  without payment of tax;
  • Refund of tax paid on supplies made to SEZ Unit/SEZ Developer with payment of tax;
  • Refund of unutilized ITC on account of accumulation due to inverted tax structure;
  • Refund to the supplier of tax paid on deemed export supplies;
  • Refund to the recipient of tax paid on deemed export supplies;
  • Refund of excess balance in the electronic cash ledger;
  • Refund of excess payment of tax;
  • Refund of tax paid on intra-State supply which is subsequently held to be inter-State supply and vice versa;
  • Refund on account of assessment/provisional assessment/appeal/any other order;
  • Refund on account of “any other” ground or reason.

This shall entail filing of statements/declarations/undertakings which are part of FORM GST RFD-01, and also uploading of other documents/invoices which shall be required to be provided by the applicant for processing of the refund claim.

It has been further clarified that neither the refund application in FORM GST RFD-01 nor any of the supporting documents shall be required to be physically submitted to the office of the jurisdictional proper officer.The facility of uploading these other documents/invoices shall be available on the common portal and may be uploaded along with the refund application.

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The ARN will be generated only after the applicant has completed the process of filing the refund application in FORM GST RFD-01, and has completed uploading of all the supporting documents/undertaking/statements/invoices and, where required, the  amount has been debited from the electronic credit/cash ledger.

As soon as the ARN is generated, the refund application along with all the supporting documents shall be transferred electronically to the jurisdictional proper officer who shall be able to view it on the system. The application shall be deemed to have been filed under Rule 90(2) of the CGST Rules on the date of generation of the said ARN and the time limit of 15 days to issue an acknowledgement or a deficiency memo, as the case may be, shall be counted from the said date.

This will obviate the need for an applicant to visit the jurisdictional tax office for the submission of the refund application and/or any of the supporting documents. Accordingly, the acknowledgement for the complete application (FORM GST RFD-02) or deficiency memo (FORM GST RFD-03), as the case may be, would be issued electronically by the jurisdictional tax officer based on the documents received from the common portal.

If a refund application is electronically transmitted to  the wrong jurisdictional officer, he/she shall reassign it to the correct jurisdictional officer electronically as soon as possible, but not later than 3 working days from the date of generation of the ARN. Deficiency memos shall not be issued in such cases merely on the ground that the applications were received electronically in the wrong jurisdiction.

It may be noted that the facility to  reassign such refund applications is  already available with the Commissioner or the officer(s) authorized by him.

Transfer to Jurisdictional Proper Officer:

The refund application  in  FORM  GST RFD-01 filed by all taxpayers, who have already been assigned to the Centre or the State  tax  authorities, shall be automatically forwarded by the common portal to the concerned authority. At the same time, there might be some migrated taxpayers, who have remained unassigned so far.The refund application in FORM GST RFD-01 filed by such unassigned taxpayers shall  be forwarded, for processing, by  the common portal to the jurisdictional proper officer of  the tax authority from which the taxpayer has originally migrated.

Such officers will continue to process these applications up to the stage of issuance of final order in FORM GST RFD-06 and the related payment order in FORM GST RFD-05 even if the applicant is assigned to the counterpart tax authority while the refund claim is  under  processing.

However, if such an applicant gets assigned to one of the tax authorities after generation of the ARN and a deficiency memo gets issued for the refund application submitted by him, then the re-submitted refund application, after correction of deficiencies,  shall  be treated as a fresh refund application and shall be forwarded to the jurisdictional proper officer of the tax authority to which the taxpayer has now been assigned, irrespective  of  which authority handled the initial refund claim and issued the deficiency memo.

Acknowledgement:

The proper officer after verifying the completeness of the application has to issue either acknowledgement in Form GST RFD-02 or Deficiency Memo in Form GST RFD- 03.

Deficiency Memo:

Within the period of 15 days from the date of generation of ARN for FORM GST RFD-01 the proper officer should communicate to the applicant the deficiencies in FORM GST RFD-03.

Once an acknowledgement has been issued in relation to a refund application, no deficiency memo, on any grounds, may be subsequently issued for the said application.  After  a deficiency memo has been issued, the refund application will not  be  further  processed and a fresh application will have to be  filed within 2 years of the relevant date, as stated in the explanation after section 54(14) of the CGST Act.

Any amount of ITC/cash debited from electronic credit/cash ledger would be re-credited automatically once the deficiency memo has been issued. It may be noted that the re-credit would take place automatically and no order in FORM GST PMT- 03 is required to be issued. The applicant is  required to rectify the deficiencies highlighted in the deficiency memo and file a fresh refund application electronically in FORM GST RFD-01 again for the same period and this application would have a new and distinct ARN.

Once an application has been submitted afresh, the proper officer will not serve another deficiency memo with respect to the application for the same period, unless the deficiencies pointed out in the original deficiency memo remain un-rectified, either wholly or partly, or any other substantive deficiency is noticed subsequently.

Provisional Refund only in case of ZERO-RATED SUPPLY:

The proper officer has to release 90% of the amount claimed through Form GST RFD-04; however, the CBIC in the Circular 125/44/2019 has clarified that no prohibition under the law prevents a proper officer from sanctioning the entire amount within 7 days of the issuance of acknowledgement  in FORM GST RFD-06, instead of granting of provisional refund of 90% of the amount claimed through FORM GST RFD-04.

If the proper officer is fully satisfied about the eligibility of a refund claim on account of zero-rated supplies, and is of the opinion that no further scrutiny is required, the proper officer may issue final order in FORM GST RFD-06 within 7 days of the issuance of acknowledgement. In such cases, the issuance of a provisional refund order in FORM GST RFD-04 will not be required.

The CBIC has further clarified that no adjustment or withholding of refund, as provided under section 54(10) or (11) of the CGST Act, shall be allowed in respect of the amount of refund  which has been provisionally sanctioned. In cases where there is an outstanding recoverable amount due from the applicant, the proper officer, instead of granting refund on a provisional basis, may process and sanction refund on a final basis at the earliest and recover the amount from the amount so sanctioned.

Scrutiny of Application:

The proper officer will scrutinise the refund application along with the enclosed documents and process the refund application within 60 days from the date of ARN. In case of refund claim on account of export of goods without payment of tax, the SHIPPING BILL details shall be verified by the proper officer through ICEGATE portal(www.icegate.gov.in) wherein the officer would be able to check details of the EGM and  shipping bill by keying in port name, SHIPPING BILL number and date.

It is advised that while processing refund claims, information contained in Table 9 of FORM GSTR-1 of  the relevant tax period as well as that of the subsequent tax periods should also be taken into cognizance, wherever applicable.

In this regard, Circular No. 26/26/2017-GST dated 29.12.2017 provides the procedure for rectification of errors made while filing the returns in FORM GSTR-3B has been provided. Therefore, in case of discrepancies between the data furnished by the taxpayer in FORM GSTR-3B and FORM GSTR-1, proper officer shall refer to the said Circular and process the refund application accordingly.

Re-crediting of electronic credit ledger on account of  rejection of  refund claim: 

In  case of rejection of refund claim of unutilized/accumulated ITC due to ineligibility of the ITC under  any provisions of the CGST Act and Rules made thereunder, the proper officer shall have to issue a show cause notice in FORM GST RFD-08, under Section 54 read with Section 73 or Section 74 of the CGST Act, requiring the applicant to show cause as to why:

  • (a)the refund amount corresponding to the ineligible ITC should not be rejected as per the relevant provisions of the law; and
  • (b)the amount of ineligible ITC should not be recovered as wrongly availed ITC  under Section 73 or Section 74 of the CGST Act, as the case may be, along with interest and penalty, if any.

The above notice shall be adjudicated following the principles of natural justice, and an order shall be issued, in FORM GST RFD-06, under Section 54  read with Section 73  or Section 74 of the CGST Act, as the case may be.

If the adjudicating authority decides against the applicant in respect of both points (a) and (b), then FORM GST RFD-06 shall have to be issued accordingly, and the amount of ineligible ITC, along with interest and penalty, if any, shall be entered by the officer in the electronic liability register of the  applicant through issuance of FORM GST DRC-07.

Alternatively, the applicant can voluntarily pay this amount, along with interest and penalty, as applicable, before service of the demand notice, and intimate the same to the proper officer in FORM GST DRC-03 in accordance with section 73(5) or section 74(5) of the CGST Act, as the case may be, read with Rule 142(2) of the CGST Rules.

In such cases, the need for serving a demand notice for recovery of ineligible ITC will be obviated. In any case, the proper officer shall order for the rejected amount to be re-credited to the electronic credit ledger of the applicant using FORM GST PMT-03, only after the receipt of an undertaking from the applicant to the effect that he shall not file an appeal or in case he files an appeal, the same is finally decided against the applicant.

In case of rejection of a claim for refund, on account of any reason other than the ineligibility of credit, the process described above shall be followed with the only difference that there shall be no proceedings for recovery of ineligible ITC under Section 73 or Section 74, as the case may be.

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