A PROJECT REPORT ON

GST REFUND UNDER TAX LAWS: AN

ANALYSIS

SUBMITTED TO:

Mr. RANA NAVNEET ROY

(FACULTY, INDIRECT TAX)

SUBMITTED BY

ATUL VERMA

SEMESTER-X

ROLL NO - 35

DATE OF SUBMISSION- 08/04/2019

HIDAYATULLAH NATIONAL LAW UNIVERSITY

RAIPUR (C.G.)

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 TABLE OF CONTENT

1. ACKNOWLEDGEMNTS…………………………………………........3
2. CHAPTER – 1- INTRODUCTION……………………………..……..4
3. CHAPTER – 2 – AN INTRODUCTION TO GST ………….………..5
4. CHAPTER – 3 - THE PROCESS OF REFUNDS IN GST...............11
5. CHAPTER – 4 - PAYMENTS ON THE PROCESS OF GS.............14
6. CONCLUSION………………………………………..………….....….20

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 ACKNOWLEDGEMENTS

The successful completion of any task would be, but incomplete, without the mention of
people who made it possible and whose constant guidance and encouragement crowned my
effort with success.

I would like to thank my course teacher Mr. RANA NAVNEET ROY for providing me the
topic of my interest.

Secondly, I would like to thank our Vice Chancellor for providing the best possible facilities
of I.T and library in the university.

I would also like to extend my warm and sincere thanks to all my colleagues, who
contributed in numerable ways in the accomplishment of this project.

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 INTRODUCTION

Timely refund mechanism is essential in tax administration, as it facilitates trade through release
of blocked funds for working capital, expansion and modernization of existing business. The
provisions pertaining to refund contained in the GST law aim to streamline and standardise the
refund procedures under GST regime. Thus, under the GST regime there will be a standardised
form for making any claim for refunds. The claim and sanctioning procedure will be completely
online and time bound which is a marked departure from the existing time consuming and
cumbersome procedure.

It has been decided, however, that since the online refund module is not available immediately,
the refund process would be handled manually and Circular No. 17/17/2017- GST dated
15.11.2017 and Circular no. 24/24/2017-GST dated 21.12.2017 prescribing the detailed
procedure have been issued.1

1
CBIC, Chap 34 2017.

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 CHAPTER 2

AN INTRODUCTION TO GST

The Goods and Services Tax, or GST is a major indirect tax reform introduced in India by
integrating the major indirect taxes of the centre and states. It is a comprehensive tax levied on
the manufacture, sale, and consumption of goods and services. The GST is a destination based
consumption tax made on value addition. It is “collected on value-added goods and services” at
each transactional stage of the supply chain or process. Already several countries have adopted
GST based VAT systems. In India, the GST came into effect from July 1, 2017.2

2.1 Features of GST:

GST belongs to the VAT family as tax revenues are collected on the basis of value added.
Unlike in the case of a pure commodity based VAT system, GST includes services tax also.
Similarly, input credit is given while calculating the tax burden. Following are the main features
of the GST as per the final agreement.

1. Taxes covered: Most of the important indirect taxes of the centre and states are integrated
under the GST. The most important tax of the central government (in terms of tax revenue
collection) -the Central Value Added Tax (or Union Excise Duty), Additional Customs Duty
(CVD), Special Additional Duty of Customs (SAD), Central Sales Tax (levied by the Centre and
collected by the States, the fastest growing tax revenue of the centre – Service Tax, the most
important tax revenue of the states – the state VAT (Sales tax) are now merged into a single tax
under the Goods and Service Tax.

There are three important indirect taxes for the centre – the union excise duties, service tax and
customs duties. Of these, the central excise duties and service taxes are brought under the GST.
Customs duties as a tax on trade was not merged with the GST.

22
Associate Professor& Dean - Research, Department of Management, KCL Institute of Management and
Technology, Jalandhar, Punjab

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States have two important indirect taxes – sales tax and state excise duties. Of these two, only the
sales tax is merged with the GST.

Along with these four big taxes of the centre and states, several other low revenue incurring
taxes are also brought under the GST.3

A. The following taxes levied and collected by the Centre are merged with the GST:

a. Union Excise duties

b. Services tax

c. Duties of Excise (Medicinal and Toilet Preparations)

d. Additional Duties of Excise (Textiles and Textile Products)

e. Additional Duties of Excise (Goods of Special Importance)

f. Additional Duties of Customs (commonly known as CVD)

g. Special Additional Duty of Customs (SAD)

h. Cesses and surcharges

B. State taxes that are subsumed under the GST are:

a. State VAT

b. Central Sales Tax

c. Entertainment Tax (not levied by the local bodies)

d. Entry Tax (other than those in lieu of octroi)

e. Luxury Tax

f. Taxes on advertisements

g. Taxes on lotteries, betting and gambling

33
Associate Professor& Dean - Research, Department of Management, KCL Institute of Management and
Technology, Jalandhar, Punjab

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h. State cesses and surcharges insofar as they relate to supply of goods or services.

Notable exlusions from GST: Some notable taxes are not covered under GST and these includes:
leveis on petroleum products, tax on alchoholic products, electricity duteis/taxes, stamp duteis on
immovabel properties and vehicle taxes.

The achievement of GST reforms is the unificaiton of the numerous taxes into the single GST.
Here, both the centre and states agreed to sacrifice thier fiscla right or power to give way for the
common tax.

2. Unified tax regime: The GST integrates Goods and Service Taxes into one unified tax regime.
Previously, the goods and services were imposed and administered differently.

3. The four-tier rate structure: the GST proposes a four-tier rate structure. The tax slabs are
fixed at 5%, 12%, 18% and 28% besides the 0% tax on essentials. Gold is taxed at 3%. The
centre has strictly demanded and got an additional cess on demerit luxury goods that comes
under the high 28% tax. Essential commodities like food items are exempted from taxes under
GST. Other consumer goods which are common items will be taxed at 5%.4. The new GST
seems to have two standard rates – 12% and 18%. GST rate structure for the goods and services
are fixed by considering different factors including luxury/necessity nature.

4. Service tax rate under GST: Under the GST, there is a differential tax structure. A low tax
rate of 5% is imposed on essential services. Common services are charged at 12% and some
commercial services at 18%. A tax rate of 28% on luxury services is also made. Several services
like education provided by an educational institution, Post Offices, RBI etc. are exempted from
service taxation. The standard GST rate on services seems to be 18%. Services are taxed at a
common rate of 15% previously.

5. Turnover limit: under GST and tax right over low turnover entities: GST is applied when
turnover of the business exceeds Rs 20lakhs per year (Limit is Rs 10lakhs for the North-Eastern
States). Traders who would like to get input tax credit should make a voluntary registration even
if their sales are below Rs 20 lakh per year. Traders supplying goods to other states have to
register under GST, even if their sales is less than Rs 20 lakh. There is a composition scheme for
selected group of tax payers whose turnover is up to Rs 75 lakhs a year.

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6. Tax revenue appropriation between the centre and states: The centre and states will share
GST tax revenues at 50:50 ratio (except the IGST). This means that if a service is taxed at 18%,
9% will go to the centre and 9% will go to the concerned state.

7. Components of GST: CGST, SGST and IGST

When the centre and states are merging their prominent indirect taxes under GST, both should
get their own share in the GST. For this, the GST Council has adopted a dual GST with two
components – the Central GST (CGST) and the State GST (SGST).

Objective of this division is sharing the revenue from the unified GST between the centre and
states.

2.2 Central and State GST:

There is sharing of GST by the centre and the tax accruing state at 50:50 ratio. For example, if a
good is taxed at 18%, out of this, 9% will go to the centre and the remaining 9% will go to the
state where the good is consumed. The GST going to the Centre is called as Central GST
(CGST) and that toes to the States is known as State GST (SGST). Here, the centre and the
concerned state will equally share GST on goods and services.

Basically, GST is a destination based or consumption tax. Meaning of a destination based tax is
that tax revenue (SGST) will go to the consuming state and not to the producing state.

In the case of intrastate production and consumption (production and consumption takes place in
the same state), the share of SGST will accrue to the concerned state where as the share of CGST
should be credited to the center’s account.4

2.3 Integrated GST (IGST):

The IGST comes to play when the commodity is produced in one state and is traded to another
state (interstate trade). In this case, the share of SGST should go to the consuming state (as the
GST is a destination based tax). As a consumption based tax i.e the tax SGST share should be

44
Taqvi, S. M. A., Srivastava, A. K., & Srivastava, R. K. (2013). Challenges and opportunities of goods and service
tax (GST) in India. Indian Journal of Applied Research, 3 (5), 413 - 415.

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received by the state in which the goods or service are consumed and not by the state in which
such goods are manufactured.

As per the GST law (Article 269 A), an Integrated GST (IGST) would be levied and collected
by the Centre on inter-State supply of goods and services. This tax will be collected by the
Centre to ensure that the supply chain or interstate trade is not disrupted.

8. Composition scheme under GST:

The composition levy is an alternative method of levy of tax designed for small taxpayers with
turnover is up to Rs. 75 lakhs. The scheme can be availed by manufacturers and restaurants.
Other service providers can’t opt for the scheme. It enables taxpayers to make payments at a flat
rate under GST, without input credits. An alternate upper limit of Rs. 50 lakhs is applicable in a
few states – Assam, Arunachal Pradesh, Manipur, Meghalaya, Mizoram, Nagaland, Tripura,
Sikkim and Himachal Pradesh.

The objective of the optional Composition Scheme is to bring simplicity and to reduce the
compliance cost for the small taxpayers. Eligible persons opting to pay tax under this scheme can
pay tax at a prescribed percentage of the turnover every quarter, instead of paying tax at normal
rate. The GST rate under the composition scheme is 1% for manufacturer, 2.5% for restaurant
sector and 0.5% for other suppliers of turnover. There will not be any input tax credit under the
scheme. Instead of filing 3-4 returns monthly, taxpayers registered under this scheme will be
required to file returns once every quarter.5

In the service sector, Composition Scheme is available only for one sector – restaurants. The
Composition Scheme is not available for manufacturers of tobacco and manufactured tobacco
substitutes, pan-masala and ice-cream and other edible ice, whether or not containing cocoa.

Exports are exempted from GST as in the case of the previous regime. Administrative
coordination between the centre and states, improvement of the tax administration machinery,
awareness to the tax payers and the launch of the IT interface of GSTN are some of the

5
Tripathi, S., & Tripathi, N. (2016, August 3). India : In a historic move, Rajya Sabha passes the GST Bill : Annexure
(p.4). Retrieved from https://www.icicibank.com/managed-assets/docs/corporate/global-tradeservice/economic-
reports/rajya-sabha-passes-gst-bill.pdf

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preparatory efforts made by the government. Several benefits like creation of a unified tax
regime in the country for indirect taxes, better centre state coordination and elimination of
reducing tax on tax or cost cascading effect of tax are the positive outcome of the GST regime.
Similarly, the system may raise compliance (revealing of taxable activity and paying taxes)
among assessees. 6

9. Right to tax on territorial waters: Right to impose tax on economic activities that are done
on territorial waters: Here, the both centre and states have decided that states can impose and
collect tax on those falls within 12 nautical miles.

66
Taqvi, S. M. A., Srivastava, A. K., & Srivastava, R. K. (2013). Challenges and opportunities of goods and service
tax (GST) in India. Indian Journal of Applied Research, 3 (5), 413 - 415.

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 CHAPTER 3

THE PROCESS OF REFUNDS IN GST

3.1 SITUATIONS LEADING TO REFUND CLAIMS:

The relevant date provision embodied in Section 54 of the CGST Act, 2017, provision contained
in Section 77 of the CGST Act, 2017 and the requirement of submission of relevant documents
as listed in Rule 89(2) of CGST Rules, 2017 is an indicator of the various situations that may
necessitate a refund claim. A claim for refund may arise on account of 7:-

1. Export of Goods or services

2. Supplies to SEZs units and developers

3. Deemed Export supplies

4. Refund of taxes on purchase made by UN or embassies etc

5. Refund arising on account of judgment, decree, order or direction of the Appellate Authority,
Appellate Tribunal or any court

6. Refund of accumulated Input Tax Credit on account of inverted duty structure

7. Finalisation of provisional assessment

8. Refund of pre-deposit

9. Excess payment due to mistake

10. Refunds to International tourists of GST paid on goods in India and carried abroad at the time
of their departure from India

7
Chakraborty, P., & Rao, P. K. (2010, January 2). Goods and services tax in India: An assessment of the base.
Economic and Political Weekly, 45 (1), 49 - 54.

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11. Refund on account of issuance of refund vouchers for taxes paid on advances against which
goods or services have not been supplied

12. Refund of CGST & SGST paid by treating the supply as intra-State supply which is
subsequently held as inter-State supply and vice versa. Thus practically every situation is
covered. The GST law requires that every claim for refund is to be filed within 2 years from the
relevant date.8

(A) Filling of GST Funds:

Once you have identified that you have a GST claim for refund then you need to file your
claim through GST Refund Form RFD-01. This form preferably should be prepared by a
certified Chartered Accountant and this GST claim need to be made within 2 years of
“relevant date” of the GST refunds application. The different “relevant date” is defined for
different GST Refund scenarios, which one can check on online tax site or with the Chartered
accountant who is preparing your GST refund.In case you fail to file your GST claim within
mentioned timelines then you may never get your GST refunds and your credits may be
blocked forever. When the assesse submits his GST Refund form he gets an
acknowledgement form GST RFD-02 which is auto-generated. This GST Refund form RFD-
02 helps the assesse for any future reference for his GST claim and is sent to taxpayer’s
email or phone number as an SMS. Once the GST claim by assesse is found to have any
deficiencies then a Form RFD-03 is generated and sent to the taxpayer asking him to correct
his application. While filing GST refunds, the taxpayer must submit a declaration that the
GST refund amount will not be utilized or transferred to any third person or entity. In case
the GST refunds is of more than five lakhs then the taxpayers filing for the GST refunds must
provide additional document as an evidence that the said amount is paid by the taxpayer.The
duration of filing for GST refunds by United Nation, consulate or foreign embassy is only 90

8
CBIC, Chap 34 2017.

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 days from the quarter end when they have procured the goods or services. Also, they must
make their GST claim through a different GST Form - RFD-10.9

(C) Processing of GST Refunds:

GST refunds are processed normally within a period of 30 days from filing a GST refund forms.
This period may alter in some cases depending on the amount of GST refunds to be processes.
The GST claim application shall undergo a scrutiny or audit as maybe applicable and the said
amount shall be processed to taxpayer's account when found eligible. In case the adjudicating
body finds that taxpayer comes under the category of being "unjustly enriching" then the GST
refunds amount shall be transferred to Consumer Welfare Fund. When the GST refunds arise out
of an export of goods or services then authorized officer can issue a provisional refund order
through GST Form RFD-04 of ninety percent of the GST refunds claim. This kind of provision
can only be made if the taxpayer has never been found guilty of evading taxes for amounts more
than two hundred and fifty lakh rupees over a period of past five years and his GST compliance
rating is five or more out of the score of ten and he do not have any appeal pending in respect to
his GST refunds.The new GST Refund process is thorough and effective. It follows the trail of
invoices to process the GST claim and is designed by keeping in mind the ease for manufacturers
and exporters. Previously which tax refunds use to take years to pass is now being processed
within not more than sixty days10

9
Tripathi, S., & Tripathi, N. (2016, August 3). India : In a historic move, Rajya Sabha passes the GST Bill : Annexure
(p.4). Retrieved from https://www.icicibank.com/managed-assets/docs/corporate/global-tradeservice/economic-
reports/rajya-sabha-passes-gst-bill.pdf

10
Chakraborty, P., & Rao, P. K. (2010, January 2). Goods and services tax in India: An assessment of the base.
Economic and Political Weekly, 45 (1), 49 - 54.

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 CHAPTER 4

PAYMENTS ON THE PROCESS OF GST

(A) What are payments to be made under GST?

Under GST the tax to be paid is mainly divided into 3 –

 IGST – To be paid when interstate supply is made (paid to center)

 CGST – To be paid when making supply within the state (paid to center)
 SGST – To be paid when making supply within the state (paid to state)11

CIRCUMSTANCES CGST SGST IGST

Goods sold from Delhi to Bombay NO NO YES

Goods sold within Bombay YES YES NO

Goods sold from Bombay to Pune YES YES NO

Apart from the above payments a dealer is required to make these payments –

 Tax Deducted at Source (TDS) – TDS is a mechanism by which tax is deducted by the
dealer before making the payment to the supplier12

11
Chakraborty, P., & Rao, P. K. (2010, January 2). Goods and services tax in India: An assessment of the base.
Economic and Political Weekly, 45 (1), 49 - 54.

12
Jain, A. (2013). An empirical analysis on goods and service tax in India: Possible impacts, implications and
policies. International Journal of Reviews, Surveys and Research (IJRSR), 2 (1). Retrieved from
https://www.ijrsr.com/January2013/5.pd

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For example –

A government agency gives a road laying contract to a builder. The contract value is Rs 10 lakh.

When the government agency makes payment to the builder TDS @ 1% (which amounts to Rs
10,000) will be deducted and balance amount will be paid.

 Tax Collected at Source (TCS) – TCS is mainly for e-commerce aggregators. It means
that any dealer selling through e-commerce will receive payment after deduction of TCS
@ 2%.

This provision is currently relaxed and will not be applicable to notified by the government.

 Reverse Charge – The liability of payment of tax shifts from the supplier of goods and
services to the receiver. To know more about reverse charge check out our article ‘Know
all about Reverse Charge under GST‘
 Interest, Penalty, Fees and other payments

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 (B) How to calculate the GST payment to be made?

Usually, the Input Tax Credit should be reduced from Outward Tax Liability to calculate
the total GST payment to be made.

TDS/TCS will be reduced from the total GST to arrive at the net payable figure. Interest
& late fees (if any) will be added to arrive at the final amount.

Also, ITC cannot be claimed on interest and late fees. Both Interest and late fees are
required to be paid in cash.

The way the calculation is to be done is different for different types of dealers 13

Regular Dealer

A regular dealer is liable to pay GST on the outward supplies made and can also claim
Input Tax Credit (ITC) on the purchases made by him.

13
Jain, A. (2013). An empirical analysis on goods and service tax in India: Possible impacts, implications and
policies. International Journal of Reviews, Surveys and Research (IJRSR), 2 (1). Retrieved from
https://www.ijrsr.com/January2013/5.pd

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 The GST payable by a regular dealer is the difference between the outward tax liability
and the ITC.

Composition Dealer

The GST payment for a composition dealer is comparatively simpler. A dealer who has
opted for composition scheme has to pay a fixed percentage of GST on the total outward
supplies made.

GST is to be paid based on the type of business of a composition dealer.

(C) Who should make the payment?

These dealers are required to make GST payment –

1. A Registered dealer is required to make GST payment if GST liability exists.

2. Registered dealer required to pay tax under Reverse Charge Mechanism(RCM).
3. E-commerce operator is required to collect and pay TCS
4. Dealers required deducting TDS.14

(D) When should GST payment be made?

GST payment is to be made when the GSTR 3 is filed i.e by 20th of the next month.

(E) What are the electronic ledgers?

14 14
Kelkar, V. (2009, July 01). A tax for economic growth. Retreived from
http://www.livemint.com/Opinion/S0hlNhimkhl9OhAiYwnbYJ/A-tax-for-economic-growth.html.

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These ledgers are maintained on the electronically on GST Portal.

(F) How to make GST payment?

GST payment can be made in 2 ways –

 Payment through Credit Ledger –

The credit of ITC can be taken by dealers for GST payment. The credit can be taken only for
payment of Tax. Interest, penalty and late fees cannot be paid by utilizing ITC.

 Payment through Cash Ledger –

GST payment can be made online or offline. The challan has to be generated on GST Portal for
both online and offline GST payment.

Where tax liability is more than Rs 10,000, it is mandatory to pay taxes Online.15

15 15
Kelkar, V. (2009, July 01). A tax for economic growth. Retreived from
http://www.livemint.com/Opinion/S0hlNhimkhl9OhAiYwnbYJ/A-tax-for-economic-growth.html.

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(G) What is the penalty for non-payment or delayed payment?

If GST is short paid, unpaid or paid late interest at a rate of 18% is required to be paid by the
dealer.

Also, a penalty to be paid. The penalty is higher of Rs. 10,000 or 10% of the tax short paid or
unpaid.16

16
Chakraborty, P., & Rao, P. K. (2010, January 2). Goods and services tax in India: An assessment of the base.
Economic and Political Weekly, 45 (1), 49 - 54.

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 CONCLUSION

GST is all about a smooth flow of funds and compliances till the end. To facilitate such a smooth
flow, it is imperative for the Government to provide for a hassle-free refund process. The current
tax structure is cumbersome, and it takes months and sometimes years to get refunds from the
Government’s kitty.

GST provides for a clearer and efficient invoice based tracking system, verifying the transactions
on an individual basis, thus, allowing systematic checking of the same. It comes as a huge relief
for manufacturers or exporters, especially those in a 100% EOU or Special Economic Zone,
whose working capital gets tied up in this cumbersome refund process.

In sum, the law envisages a simplified, time bound and technology driven refund procedure with
minimal human interface between the taxpayer and tax authorities.17

17 CA Mohnish Katre, Refund Process Under GST, Profit book,net,(2018).

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