GST Refund Process

The joint committee on business processes for GST which was formulated in early 2014 finalized the reports on the various processes under GST, including the refund process. The sub-committee had held discussions on the refund process report and was concluded with changes on 22nd& 23rd July, 2015 by the Joint committee.

To establish an efficient and effective tax administration system it is required that the issues on which refund arises should be kept at a minimum. Therefore the report clearly brings out the situations under which refunds may arise. These include the excess payment of tax due to mistake, exports, and finalization of provisional assessments etc. Besides these the credit accumulation due to output being zero rated and tax refunds for international tourists are some of the other areas where refunds become due under GST.

For claiming the refund on exports of goods, the exporter would be required to upload the shipping bill, and bill of lading etc. online. A link is proposed to be established between ICEGATE of Customs administration and the GST Network for the online verification of exports. This will minimize the fraudulent claims for refund. The Bank realization certificate or BRC is another export authentication tool which is planned for linkage online. The e-BRC will bring out the shortfall if any in the exports and accordingly and necessitate the recovery of the refund amount.

In case of the provisional assessment it is necessary that the assessing officer agrees to the reason for provisional filing mentioned by the tax payer. Also the period for finalization of the provisional assessment must be done within 90 days. The refund if any will only be granted if the GST paid by him has not been passed on to the consumer (principle of unjust enrichment). The GST law may make provisions to counter the principle.

The committee has proposed to keep the process of refund simple and hassle free. Once the refund is sanctioned, the amount must be credited to the bank account of the tax payer which has been taken along with the refund application. This should be without any human intervention to make the experience pleasant for the tax payers. Also, the GST law may do away with the audits of refund application if the refund amount is less than one lakh rupees for tax payers. A pre audit of the refund application, and not the accounts of the taxpayer, may be carried out up to a threshold limit of Rs. 1 Crore of tax refund.

The processing of refunds must be completed within a stipulated period of 90 days, beyond which the tax authorities will be paying interest at the rate of 6% for delays. However in case of a default, the committee recommends an interest of 18%.

The format for the tax refund has been put forth in its recommendations by the Joint committee. The same will be available electronically for the tax payers under the GST regime.

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