Key Updates on GST Refunds

The realm of Goods and Services Tax (GST) refunds is constantly changing. Keeping abreast of the latest updates, definitions, and timelines is vital for taxpayers to navigate the refund process efficiently. This guide outlines significant updates related to GST refunds and their implications for taxpayers.

Recent Developments Impacting GST Refunds

Changes Introduced in Budget 2023

In the recent Budget 2023, a notable change was made concerning the calculation of interest for delayed GST refunds. Taxpayers must now consider the number of days exceeding sixty days from the date of filing the refund application until the actual refund payment is made. This amendment is designed to ensure prompt processing and payment of refunds, enhancing efficiency in the GST framework.

Major Changes Since 2022

1. July 5, 2022: Taxpayers can now exclude the COVID-19 pandemic period (from March 1, 2020, to February 28, 2022) when calculating the timeline for filing GST refund applications under Sections 54 and 55 of the CGST Act.
2. February 1, 2022: The Budget 2022 introduced several amendments, including:
   • A revised procedure for claiming refunds from the electronic cash ledger, necessitating specific forms and processes.
   • An extension of the time limit for UN agencies to claim refunds to two years from the end of the quarter in which supplies were received.
   • A broader application of restrictions on refunds for tax defaults, now applicable to various types of refunds beyond unutilized Input Tax Credit.
3. May 1, 2021: The deadline for processing refund claims that fall between April 15, 2021, and May 30, 2021, has been extended. The new deadlines will either be 15 days after a response to a notice is provided or May 31, 2021, whichever is later.

Key Definitions in GST Refunds

What is a Refund?

A refund under GST includes various scenarios, such as:

• Refunds for taxes paid on zero-rated supplies of goods or services.
• Refunds related to inputs or input services used for zero-rated supplies.
• Refunds for taxes on goods classified as deemed exports.
• Refunds of unutilized input tax credits arising from discrepancies between input and output tax rates.

Understanding Assessment

In GST terminology, 'Assessment' refers to the process of determining a taxpayer’s liability under the Act. This encompasses:

• Self-assessment
• Reassessment
• Provisional assessment
• Summary assessment
• Best judgment assessment

Defining the ‘Relevant Date’ for Refund Applications

The term ‘Relevant Date’ is essential for determining the timeline for filing GST refund applications. Typically, a refund application must be submitted within two years from this date, which varies based on the type of refund. Below are the relevant dates for different refund situations:

1. Refund of IGST on Goods Exported:

   • For sea/air exports: The date the vessel or aircraft departs from India.
   • For land exports: The date the vehicle crosses the border.
   • For postal exports: The date the consignment is dispatched.

2. Refund of Tax on Deemed Exports:

   • The date the relevant return indicating the deemed export is filed.

3. Refund of IGST on Export of Services:

   • Based on the invoice issue date or the date payment is received in convertible foreign exchange, whichever is applicable.

4. Refund following Judgements or Orders:

   • The date the judgement, decree, or order is communicated.

5. Refund of Unutilized ITC:

   • For zero-rated supplies without tax payment: The end of the financial year in which the claim arises.

Practical Examples for Clarity

• Deemed Export Case: Anuj, a sub-contractor, delivers goods to an export-oriented unit on July 25, 2017. He must file the return by August 20, 2017, making this the relevant date for his refund claim.
• Service Export Case: If Anuj provides services to a South Korean firm on July 28, 2017, with payment on August 10, 2017, the relevant date will be August 10, 2017. If he issues an invoice on August 20, 2017, but receives payment earlier on August 10, the relevant date remains August 20.
• Zero-Rated Supply Example: Anuj Hardware Technologies supplies materials to Bills Aerospace Components Private Limited (SEZ).

Grasping these terms and their implications can significantly assist taxpayers in managing their GST refund applications effectively and ensuring compliance with evolving regulations.