How to Calculate & Claim GST Refund?

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Chanchal

Senior editor

Parul Saxena

Chief editor

Last updated: August 25, 2020

An Introduction to GST Refunds

GST refund might sound like a piece of good news, but the process is quite complicated and confusing, especially if you are handling GST and refunds for the very first time.

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An individual could claim GST refund if he paid in excess than what he owed as GST liability to the government. The government has standardized the process and procedure to calculate GST refund and claim it to avoid any confusion. How well do you know this standardized procedure for refund claim and calculation? This article will throw light on where, when, and how one can calculate and claim GST refund.

Criteria for Claiming a Refund

Not every individual can claim GST refund randomly. There are certain cases and criteria where one can choose to receive a refund. In general, the individual might pay in excess due to any mistake during payment calculation or any omission. This additional payment is claimable as a refund.

  1. Exports include deemed exports too. The individual can claim GST refund if the cumulative balance arises out of input credit of the exports. Refund is also possible under a claim of rebate.
  2. Refund is valid in case of inadvertent mistake, which led to the individual paying excess tax.
  3. In case of output tax becoming nil or the individual becoming exempted from any tax, the credit might get accumulated. In such a case, the individual can claim GST refund to receive the credit.
  4. After the provisional assessment, one might become eligible for a refund.
  5. Any amount paid as deposit by a respondent would get refunded to the appellant, who can claim GST refund.
  6. In some cases, after an investigation, the individual might be eligible for a refund.
  7. In case of goods/ service purchase by one of the UN bodies or any foreign embassies, you can claim GST refund
  8. You can also calculate GST refund by subtracting the output tax from input tax. If the output tax is less, you can claim GST refund.
  9. You can claim GST refund if the suppliers receive credits or any discounts via credit note issuance
  10. GST by international tourists

Refund of ITC

ITC – Input Tax Credit: One can claim GST refund on ITC under the following criteria.

  1. When the goods/ services are GST exempted, the unutilized ITC is refundable
  2. If output tax is lower than the input tax rate, you can claim GST refund on ITC.
  3. During partial reverse charge, the ITC might not get completely utilized against output tax. In such cases, GST refund is valid.

Also, Read: A Complete Guide of New Invoice Rules Under GST for 2020-2021

Calculating the GST Refund

So, let us say that you can claim GST refund. How much refund are you expecting? To understand that, you must learn to calculate GST refund. The calculation process is as follows.

To calculate GST refund, first, calculate the liability for the specific time period for which, you have made GST payment. Now, subtract it from the GST payment made to the government. The excess you find is the refund you are eligible to receive.

Refunding Process

The ultimate aim is not to just calculate GST refund. You should know how to claim it. To claim the refund, you have to submit RFD-01 form via online. GST portal is available for this process. Remember that the refund is claimable only for two years from payment date. Later sections of this article will deal with more details about the payment threshold time.

Step 1: Visit the GSTN portal and find RFD-01 application

Step 2: Calculate GST refund amount before you start filling the application.

Step 3: You will receive SMS or email with a unique acknowledgment number.

Step 4: Check the reduction in carry forward ITC. Calculate GST refund and check whether the amount reduced is coherent.

Step 5: The authorities will check and validate the refund within 30 days from submission of the application

Step 6: The authorities would strictly review for unjust enrichment. If found unqualified, the refund gets transferred to CWF – Consumer Welfare Fund.

Step 7: The authorities would calculate GST refund, and if the refund claimed by you is higher than the determined GST refund, pre-audit processes will start.

Step 8: Upon clarification, you will receive the refund via ECS, RTGS, or NEFT.

Frequency of Refund

Calculate GST refund at the quarter-end. You can make an application for the refund at the end of every quarter if you are eligible.

Also, Read: Top GST Number Search & Verification Tools

The Minimum Amount for Refund

Calculate GST refund amount, and if the amount is less than INR 1,000, you need not apply. The government provides refund only when the refund claimed by an individual or entity is above INR 1,000.

Time Threshold

As mentioned before, you can claim GST refund within two years. When does that two years time start?

  1. For goods exported via sea or air, the refund threshold is two years from the date on which the cargo leaves the country.
  2. For goods transported via road vehicles, the refund threshold time is two years from the date the goods crossed the country’s land frontier
  3. If good transportation takes place via post, it is two years from the date on which the goods get dispatched.
  4. If the services offered get performed after receiving the payment, it is two days from the date on the invoice.
  5. In the case of unutilized excess ITC, it is two years from the financial year’s end.
  6. For goods for deemed exports, the refund time threshold is two years from the date of return filing.
  7. For tax after provisional assessment, you can claim GST refund within two years from the date of the tax adjustment.

As mentioned before, the method you use to calculate GST refund is very crucial. Certain unique scenarios would need a different type of calculation. Wrongful refund claim can lead to regrettable scenarios. Thus, it is important to double-check the process. Besides, if you are running a large business, it is best to hire a professional legal service provider to deal with GST calculation, refund, and other processes. This service would allow you to relax and concentrate on your business.

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Chanchal Soni is a Growth Hacker and CRO Specialist at Appitsimple. She has experience in digital marketing, social media, content strategy, and marketing communications. Lover of huskies, the ocean & Boston sports.

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