GST Payment and Refund

• Gross GST Liability:
  This represents the total GST liability of the registered business/individual.
  
  

• Tax Deducted at Source (TDS):
  TDS is applied when the dealer deducts tax before making payments to the supplier. The TDS amount, if paid, is subtracted from the Gross GST liability.
  
  

• Tax Collected at Source (TCS):
  E-commerce aggregators often utilize the TCS mechanism on sales made through their platform. TCS, when paid, is deducted from the Gross GST liability.
  
  

• Input Tax Credit (ITC):
  ITC is a mechanism under GST that allows registered businesses/individuals to reduce their overall tax burden. By implementing ITC, the GST burden on a supplier’s output is reduced to the extent that GST has been paid on inputs purchased by the registered business/individual.
  
  

These factors collectively determine the net GST liability to be settled by the supplier/receiver. Understanding and appropriately applying these mechanisms contribute to effective tax management under the GST framework.

 Thus, Net GST Payable = Gross GST – (TDS/TCS+ITC)

As per the current provisions of the GST Act, once the net GST payable is reflected in the liability ledger of a GST registered taxpayer, the due amount can be settled through two methods:

• Utilizing Balance in the Credit Ledger:
  A GST registered business or individual can make GST payments by utilizing the balance in the credit ledger. This balance is derived from the input tax credit received. However, it cannot be used for settling other GST-related payments such as late fees or interest.
  
  

• Using Cash Ledger Balance:The taxpayer has the option to use the cash ledger balance to fulfill GST dues, either through online or offline modes. According to the current rules, if the total tax payable exceeds Rs. 10,000, GST dues must be paid online. When making GST payments, a GST payment challan is mandatory under the existing regulations

In accordance with the current regulations outlined in the GST Act, the time limit for filing a GST refund is 2 years from the “relevant date.” The definition of this relevant date varies based on the reason for the issuance of the GST refund. Here are examples of the “relevant date” for different GST refund scenarios:

• Finalization of Provisional Assessment:
  Relevant Date: Date on which tax is adjusted.
  
  

• Export/Deemed Export of Goods:
  Relevant Date: Date of dispatch/passing over the border/loading.
  
  

• Excess Tax Paid:
  Relevant Date: Date of tax payment.
  
  

• Refund for Unutilized ITC:
  Relevant Date: End of the Financial Year for which the refund is claimed.
  
  

• Refund Due to Court Order/Judgment:
  Relevant Date: Date of issue of the court order.
  
  

Please note that this list is illustrative, and there may be other instances where GST refunds can be claimed.

When applying for a GST refund, several key documents are essential to support the refund claim. Here is a list of crucial documents required for the GST refund process*:

• Form GST RFD 01:
  Description: This form is available on the Official GST Portal and serves as the primary document for claiming a GST refund. It can be filled out and submitted electronically through a notified Facilitation Centre or online via the common GST portal

   

• Copy of Order:
  Description: If the GST refund is a result of an order passed by an appellate authority or court, supporting documentary evidence is necessary. The application should include the reference number and a copy of the order as proof.
  
  

• Statement of Shipping Invoices:
  Description: For exporters claiming GST refunds, a statement containing the date and number of shipping bills/bills of export, along with copies of relevant export invoices, is required as supporting evidence.
  
  

• Statement of Invoices:
  Description: If a GST registered business supplies goods manufactured in a Special Economic Zone (SEZ), a statement with the date and number of invoices is needed for the refund claim.
  
  

• Copy of Final Assessment Order:
  Description: In cases where the GST refund is processed due to the finalization of provisional assessment, a copy of the final assessment order along with the reference number is necessary.
  
  

• Form GST RFD 02:
  Description: This form serves as an acknowledgment that the application for a GST refund has been filed and submitted using GST RFD 01. It is generated automatically based on the information provided in GST RFD 01. However, note that GST RFD-02 is an acknowledgment and does not guarantee the approval of GST refunds.
  
  

*This list is indicative, and additional documents may be required based on the specific circumstances of the applicant

In cases where there is a delay in crediting GST refunds to the registered business or individual, the government is obligated to pay interest on the outstanding refund amount. The interest rate is 6% per annum on the delayed refund amount. The provisions governing the applicability of GST refund interest are outlined in Section 54 (Section 12) and Section 56 of the GST Act, 2017.

Here are the key points regarding the interest payable on delayed GST refunds:

• Interest Rate:
  The government is liable to pay interest at a rate of 6% per annum on the delayed refund amount.
  
  

• Applicability:
  The applicability of interest on GST refunds is governed by Section 54 and Section 56 of the GST Act, 2017.
  
  

• Higher Interest Rate:
  If the delay in refund issuance is a result of an order from an applicable appellate authority, a higher interest rate of 9% is applicable.
  
  

• Details in Form GST RFD-05:
  The details of the interest payable on GST refunds are communicated to the taxpayer through Form GST RFD-05. This form is prepared by the appropriate government authority.
  
  

• Information in GST RFD-05:
  Key details included in GST RFD-05 are the total amount, the period for which interest is payable on the refund, and the total amount payable as interest.
  
  

• Interest Calculation:
  Interest is calculated only on the amount to be refunded and not on any unused input tax credit available in the taxpayer’s electronic ledger, as per existing rules.
  
  

This mechanism ensures that the government compensates for delays in processing and crediting GST refunds to taxpayers.