India, a large and developing country, has traditionally used the previous taxation system, which was more complicated, had more layers, and so on. In India, there are two sorts of taxes: direct and indirect.
Direct tax is paid on income and profits, whereas indirect tax is paid on products and services. Before the implementation of the GST, we used the VAT system. We usually marvel when we see a restaurant bill that includes VAT, Sales tax, Service tax, Excise charge, and so on. Most people are perplexed until India’s greatest tax reform, GST takes effect.
What exactly is GST?
GST (Goods and Services Tax) was India’s largest tax reform in its history. The Goods and Services Tax (GST) is an indirect tax that streamlines the existing taxation structure. It is essentially the total of all indirect taxes.
GST was approved by parliament in 2017 and went into effect on July 1, 2017. Quite some time. After all, no indirect taxes are required to be paid, making it a simpler taxation system. The GST tax system has been adopted in over 150 countries.
Before we go into how to get a GST refund, let’s go over some GST fundamentals.
You may learn a GST course at IIPTR Institute, which offers the finest available course that provides practical training in all important elements of GST, including registration, implementation, and other compliances.
Types of GST?
Forget those bundles of tax, we have got the new tax reform divided into 4 simple categories:
The Central Products and Services Tax (CGST), sometimes known as the Central Goods and Services Tax, is the portion of the tax levied on intra-state transactions involving goods and services. The central government collects the proceeds of the goods and services tax.
The SGST, also known as the state goods and services tax, is a tax levied on intra-state sales of goods and services. The state government collects money in the form of taxes.
The IGST, also known as the integrated goods and services tax, is a portion of the tax levied on interstate transactions of goods and services. The central government collects the sum here.
The Union Territory Goods and Services Tax (UGST) is a tax levied on the exchange of goods and services between two or more union territories. The union territory government collects the tax income.
We, the common people, are ecstatic when we consider or have the opportunity to claim anything. It might be any form of claim, such as a life insurance claim or a health insurance claim. But we were relieved to learn that GST could also be claimed.
GST can be claimed in 2 ways:
Cases in which GST can be claimed as an input tax credit (ITC).
In the next paragraph, we will discuss how input tax credits and cases can assist you in claiming a portion of the GST paid.
Tax credit for input ( ITC)
What is the first thing that comes to mind when you hear the word ITC? Sonar Bangla ITC? Aside from that, jokes. The input tax credit is abbreviated as ITC. An input tax credit is a portion of the tax paid on the purchase of inputs used to produce outputs.
Let’s look at an example to acquire a better understanding:
Rajiv is a mobile phone maker. He would need batteries, hardware, and other components to build a mobile phone. He paid Rs 500 in tax to purchase the ingredients. He produced the cellphone after acquiring it, and the total tax amount was Rs1000. So, would Rajiv have to pay a tax of Rs 1000?
No! This is where an input tax credit comes into play.
Rajiv just needs to pay Rs 500 as tax using the input tax credit method since the 500 spent on the input may be claimed. This strategy ensures that no double taxation occurs
Who is eligible to get ITC?
- Only if he is a registered GST dealer may a business or an individual claim ITC. Only if the following requirements are met may an input tax credit be claimed under GST:
- The buyer must have a valid tax invoice, debit note, or other documentation provided by the vendor.
- The buyer must have got the purchased goods or services.
- The GST return must have been lodged by the supplier.
- The tax collected from the buyer must have been paid to the government in some way.
- If the items are delivered in installments, ITC can be claimed only after the last and final lot is delivered.
Input tax credits can only be claimed for commercial reasons. ITC cannot be claimed if products or services are utilized for personal use, exempted supplies, etc.
Do you need any documents?
Certain documentation is necessary to claim the input tax credit, which is stated below:
Invoices supplied by the provider.
- Supplier’s debit note (if applicable)
- Customs departments may offer a bill of entry or other comparable documents.
- When the total amount is less than Rs 200 or the reverse charge is applicable under GST law, an invoice, similar to a bill of supply, is sent.
- Input service distribution (ISD) documents, which might be an invoice or a credit note.
- The suppliers issued a bill of supply.
The time limit for claiming ITC.
There is a time limit for claiming ITC. ITC can only be claimed on tax invoices or debit notes of supply that are less than a year old. In other circumstances, the final date to claim the tax credit will be the earliest of the following dates:
- Before filing the GST return for the September month following the conclusion of the fiscal year.
- Before submitting the yearly return for the period to which the tax invoice or debit note relates.
How to Get the Maximum Credit.
- There are various methods for claiming the maximum credit allowed under GST laws:
- You should maintain regular communication with your vendors.
- You must specify the tax payable on a reverse charge basis.
- Always keep your books of account up to date and error-free.
- The statements should be reconciled regularly.
- To verify that vendors are following the e-invoicing guidelines
If these factors are kept in mind, one may get the most out of it.
2. Top 10 cases in which GST can be claimed.
The GST council has provided us with a very straightforward and effective procedure for claiming the GST refund, which will greatly assist the firm in operating without the frozen working capital. The full GST refund claim process takes place on the GST web platform.
The following are the circumstances in which a GST refund may be claimed:
- Goods or services are exported.
- Provision of goods or services to SEZ units and developers.
- Considered exports
- Purchased by the United Nations or its embassies.
- If you pre-deposited your tax credit, you will receive a refund.
- If you have paid too much tax by mistake.
- After the finalization of the provisional assessment, a refund based on the verdict of any tribunal, appellate, etc.
- Amount of tax paid in advance for which no goods or services were provided.
- Refund of CGST and SGST paid by declaring inter-state transactions to be intra-state transactions.
- Refund of accrued tax based on duty structure other than completely exempted transactions.
- Refund to overseas travelers who paid GST on products and services purchased in India and transported abroad while on vacation.
These are the top cases under which GST can be claimed.
The Time frame for claiming the GST refund.
To be eligible for a GST refund, the applicant must make a refund claim within two years of the filing date. If the claim is in the queue, the reimbursement amount must be sanctioned within 60 days of the claim’s receipt.
If the claim is in the queue, the interest rate on the suppressed refund should be 6%, and the interest rate on the delayed refund (beyond 60 days) should be 9%.
GST refund claims:-
Based on exports: The majority of the refund is based on exports. All exports (goods or services) and supplies to SEZ units (special economic zones) have been classified as zero-rated supplies since the supplies are produced at zero percent; one can claim a tax refund.
On purchases made by the UN or its agencies: Purchases made by the UN or its agencies may be free from taxation under international responsibilities. It is organized on the route to the charge refund process. Section 55 of the CGST statute specifies that the United Nations or its embassies may obtain a refund of the tax paid on account of purchase. However, the claim must be lodged within 6 months after the last day of the quarter in which the transaction occurred.
International tourists: Under Section 15 of the IGST Act, an international tourist who purchases goods in India may seek a refund on the integrated tax paid if they are not permanent residents of India and do not remain for more than 6 months.
Extra tax paid: If you pay the tax by mistake instead of paying only CGST and IGST, you can recover the excess amount paid during the refund procedure.
Documentation is necessary.
- An individual must submit an invoice with a statement indicating the number and date of shipping bills of export to get a GST refund on exports.
- An applicant must provide clearance from the officer, which clarifies the receipt of goods or services in the SEZ, to receive a GST refund on supplies to SEZ units. According to a disclosure from the SEZ entities, the tax credit has yet to be claimed.
- The statement with the invoice data in the GST return format must be filed for the refund of the accrued tax.
There will be no return of unutilized tax credits on CGST and IGST paid for the delivery of services for the construction of buildings, offices, complexes, etc. Also, no reimbursement if the total tax rate on inputs exceeds the total tax rate on outputs.
- For GST refunds based on order, the reference number supplied for the refund procedure should be presented along with a tax invoice.
Certificate of Chartered Accountancy for GST Refund:
If the refund exceeds Rs 2 lakh, a certificate from a Chartered accountant must be produced in addition to the other documentation stated above.
The procedure for claiming the GST refund.
Here’s a step-by-step method for claiming your GST refund:
- Visit the GSTN web page and fill out the refund claim form.
- An acknowledgment number will be sent to you through email or SMS.
- The ledgers will be reconciled, and the carry-forward tax credit will be decreased.
- The authorities will analyze or audit the application and the papers presented within 30 days of submitting the refund application.
- The tax amount will be credited based on unjust enrichment. If the applicant does not qualify for unjust enrichment, the refundable amount will be donated to the consumer welfare fund.
- Before sanctioning the refund amount, a pre-audit procedure may be performed to identify whether a person has claimed for more than a predetermined amount.
These are the steps through which you can claim the tax refund.
Unjust enrichment is a notion in which company owners split the tax with the ultimate customers because GST is an indirect tax that consumers must face. As a result, passing the unjust enrichment test is essential.
This notion, however, does not apply to refunds for accumulated tax, exports, excessive tax, supply to SEZ units, and so on. It is required for various reasons.
Obtaining a GST refund might be complicated, but if you follow the steps carefully, even a layperson can do it. For the uncomplicated procedure of refund claims, there should be an appropriate submission of documentation and no errors. These are some of the scenarios and techniques for obtaining a GST refund.