Easy claim ITC refund under GST regime
Easy claim ITC refund under GST regime:
What is ITC (input tax credit):
ITC “Input Tax” in relation to a taxable person, means the Goods and Services Tax charged on any supply of goods or services to him which are used or are intended to be used, during furtherance of his business.Getting of ITC (Input Tax Credit )under GST – Conditions To Claim is one of the most critical activity for every business to settle its tax liability.
ITC being the backbone for success of GST reform and a major matter of concern for the registered persons, conditions for eligibility to ITC have been prescribed which in majority in line with pre- GST regime. These rules are also quite particular and stringent in its approach.
ITC is imperative to make the process of refund much flexible under GST. A delay in ITC refund https://www.aces.gov.in/Documents/faq-on-gst.pdf would cause many problem for the exporters/manufacturer’s in maintaining the working capital and cash flow statements.
Currently there is delay in months in providing the refund to the exporters/manufacturers. There should be strict regulation in the processing of ITC under GST.
Currently there is delay in months in providing the refund to the exporters/manufacturers. There should be strict regulation in the processing of refund under GST.
bearing for ITC Refund under GST regime:
(A) Excess payment of tax due to mistake or demerits
(B) Export (including deemed export) of goods / services under claim of rebate or Refund of accumulated input credit of duty / tax when goods / services are exported.
(C) Finalization of provisional assessment.
(D) Refund of Pre – deposit for filing appeal including refund arising in pursuance of an appellate authority’s order (when the appeal is decided in favor of the appellant).
(E) Payment of duty / tax during investigation but no/ less liability arises at the time of finalization of investigation / adjudication.
(F) Refund of ITC tax payment on purchases made by Embassies or UN bodies.
(G) Credit accumulation due to output being tax exempt or nil-rated.
(H) Credit accumulation due to inverted duty structure i.e. due to tax rate differential between output and inputs.
(I) Year-end or volume based incentives provided by the supplier through credit notes.
(J) Tax Refund for International Tourists.
Procedures of ITC refund under GST:
Following are the procedures for processing of refund claimed-:
Application form for claiming refund can be filed through the GSTN portal.
- An acknowledgement number would be shared with applicant via sms or email, once the application is filed electronically.
- Adjustment would be made to return and cash ledger and reduce the “carry-forward input tax credit” automatically.
- Refund application and documents submitted shall be scrutinized within a period of 30 days of filing the refund application.
- Concept of “unjust enrichment” would be examined for reach refund application. If it does not qualify, then the refund would be transferred to CWF(consumer welfare fund).
- If refund claimed exceeds the predetermined amount of refund then it will go through pre-audit process for sanctioning the refund.
- Refund will be credited electronically to the account of applicant via ECS, RTGS or NEFT.
- Application for refund can be made at end of each quarter.
- No refund shall be provided for an amount of less than Rs 1000.
Documents required for claiming ITC refund under GST:
If the amount claimed as tax refund is less than Rs. 5 Lakhs – The person needs to file a declaration, based on the documents or other evidence available with him, certifying that the incidence of tax or interest being claimed as refund has not been passed on to another person.
If the amount claimed as refund is more than Rs. 5 Lakhs – The application for refund must be accompanied by:
Documentary evidence to establish that the refund is due to the person.
Documentary or other evidence to establish that the amount was paid by him/her, and that the incidence of the tax or interest has not been passed on to another person.
Refund on account of export
If the refund is on account of export of goods and/or services, the authorised officer will refund 90% of the total amount claimed as refund on a provisional basis in Form GST RFD-4. Thereafter, after due verification of the documents furnished, the officer will issue an order for final settlement of the refund claim.
Provisional refund will be granted subject to the following conditions:
- The person claiming refund has not been prosecuted for tax evasion of an amount exceeding Rs. 250 Lakhs during the preceding 5 years.
- The person’s GST compliance rating is not less than 5 on a scale of 10.
- No pending appeal, review or revision exists on the amount of refund.
Delay in ITC Refund and Interest:
According to the GST law and recommendations from the Subramanian committee, a ITC refund application is to be processed within a period of 90 days. If the ITC refund application is not processed within said period then a interest at the rate of 6% is recommended.
According to Nirmala Sitharaman( Commerce and industry minister) who spoke for the concern of exporters on delay in refund, that the refunds under GST shall be processed within a period of 7 days. If same is delayed more than 2 weeks, then refund will be provided with interest.
scenarios of Exceptional ITC GST refund:
Following are few exceptional scenarios in which refund is allowed under ITC GST:
- Tax on supply of goods regarded as deemed exports. For example: Supply of goods or services to an SEZ (Special Economic Zone) or EOU (Export Oriented Unit).
- Tax is refundable as a consequence of a judgment, decree, order or on the direction of an Appellate Authority, Appellate Tribunal or any court.
- Tax has been paid on a supply which has not been provided, either wholly or partially, and for which an invoice has not been issued. For example: A supplier has received an advance from the recipient on 28th November ’17 for a supply to be made on 20th December ’17, but which finally did not take place owing to a disagreement. While filing the return for November ’17, the supplier has to pay tax on the advance received. This tax is eligible for refund.
- Tax wrongly collected and deposited with the Central or State Government- If a person has paid CGST and SGST on an interstate supply or IGST on an intrastate supply, the person is eligible for refund of the amount once the tax has been remitted correctly.
- IGST paid on supply of goods to tourists traveling out of India, if the goods are taken out of India.
Processing of the ITC refund applications under GST regime is expected to be a faster and smoother process. Since all the data is going to be uploaded electronically through using some providers like https://www.gstreporting.com/ , the verification and discretization of ITC refund applications would be easy and faster.