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Are GST Rebates Taxable? Top 10 Reasons To Claim A GST Rebate

It is important to make the means of rebate much smoother under GST. A delay in rebate would cause difficulty for the exporters/manufacturers in keeping the working capital and cash flow.


Currently, there is a delay in months in providing the refund to the exporters/manufacturers. There should be strict regulation in the processing of refunds under GST. Processing timely GST refunds will help enterprises to promote business through the discharge of blocked working capital funds. Under GST, the GST Council formed a graded system to process GST rebate claims in a simplistic method for the taxpayers. The complete GST refund claim and processing are made online on the GST Portal. In this article, we look at when the GST Rebate can be claimed by taxpayers and are GST rebates taxable?


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are GST rebates taxable


GST Rebate claim as per section 54 of CGST Act, 2017.


1.In case of excess GST is paid due to an error:


As the subtitle suggests, it relates to the condition where the taxpayer has given excess payment of tax either by error or by omission resulting in added payment of tax than due to the Government. Since the tax had been paid in excess, then it should be refunded. Let’s check out such cases, where GST rates are rebated. 


 Such excess amount may be on account of:-

  1. a) incorrect notice of nature of tax (CGST / SGST / IGST)
  2. b) incorrect notice of GSTIN, or
  3. c) incorrect notice of tax amount.


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  •  In the first two circumstances, the tax authority is required to check the accuracy of the taxpayer’s claim, hence the taxpayer may file a return application which should be settled within a period to be designated by the GST Law.


  • A dealer is needed to make tax payment on two accounts i.e. payment connected to a refund or payment in reply to a specific need arising out of the audit, etc. The IT system should be in a situation to make a difference between these two types of payment. Possibly the payment challan may have a patch to select the purpose of payment.


  • The GST Law Drafting Committee / Payment Committee may determine as to whether the payment is to be made tax season-wise or a system of Personal Ledger Account (PLA) is to be used. 


  •  In the third situation, the return of the excess amount of tax, at the option of the taxpayer, would either be automatically carried forward for compensation against future tax debts or be refunded on the assent of application by the taxpayer. The automated carry forward would be allowed if the excess payment was made against a rebate and not against any other obligation. The GST Law may present for automatic set-off if the extra payment of tax is not on account of interpretation of notifications, application of releases, etc. That is the extra payment is not on account of the difference of view between the tax authority and the taxpayer. The GST Law may also lay down the deadline within which the excess amount of tax, as shown in the return filed by a taxpayer for that relevant period, can be re-credited and can be utilized by the taxpayer for payment of future tax liability. The return may be on account of CGST, SGST, or IGST as the case may be, but the question is- are GST rebates taxable?


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2 Exports of goods or services:


One of the chief sections under which, claim for GST rebate arises is export. Exports (whether of goods or services), as well as supplies to SEZs, have been classified under GST as Zero-rate supplies. Because the supply applies zero percent, the supplier can claim a refund of the input tax credit paid.


Currently, exporters can claim a refund on zero-rated supplies under two choices. Either the exporter can export under Bond/ LUT and claim a refund of acquired Input Tax Credit or may export on payment of consolidated tax and claim reimbursement. 


If a GST rebate claim is < Rs. 2 Lakhs, then a self-declaration of the candidate must be offered to the result that the incidence of tax has not been transferred to any other person along with other papers listed below. 


For GST refund claims exceeding Rs. 2 Lakhs, a certificate from a Chattered accountant/ cost accountant must be tendered along with the required documents.


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3.Refund of pre-deposit:


This section concerns to return on necessary pre-deposit made at first appellate authority and court. This section declares that where an amount deposited by the appellant under sub-section (6) of section 98 or sub-section (9) of section 101 is required to be rebated following any order of the First Appellate Authority or the Appellate Tribunal, as the case may be, interest at the rate designated under section 50 shall be due in respect of such rebate from the date of payment of the sum till the date of rebate of such amount. This plan is similar to existing provisions included in section 35FF of the Central Excise Act, 1944. sanction of return.


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4. Deemed exports:


For getting a return of tax paid on deemed exports, the supplier or receiver is required to file an appeal in Form GST RFD – 01 with supporting documents. Online filing and processing of return claims in case of deemed export supplies are allotted. The rebate claim can be filed in two years from the date on which return associating with such deemed export supplies is equipped electronically.


5. Refund of taxes on purchases made by the UN or embassies etc.


In this section, the return process for certain specific foreign firms and businesses is discussed. Unlike the regular traders or export dealers under the GST regime, the Government grants separate benefits and schemes for these agencies and bodies.


Organizations like Agencies of United Nations (UN), Multilateral Financial Institutions, Embassies of foreign countries, Foreign Diplomatic Missions, and other related bodies are kept under this ambit. 


Are GST rates taxable for UN and embassies? The Government allows a rebate of taxes paid on the goods and services availed by them after payment of taxes given that the goods or services (or both) obtained are used for their official use.


What can be claimed as a refund? Are GST rebates taxable?


For any supplies made to the above-stated bodies or companies (goods or services or both), the element of tax imposed on such supplies can be claimed as a return by these companies. The procedure works in a way where the person making such supplies charges taxes on the invoice and remits the same to the Government. 


6. Refund of collected input tax credit due to inverted duty structure:


A taxpayer will end up giving added tax on purchases when compared with the tax on sales. The taxpayer is qualified for the return of collected input tax credit (ITC) due to the inverted tax structure.


Form RFD-01 has to be filed in two years from the end of the fiscal year in which such claim for refund arises. Further, a taxpayer can apply GST return for multiple months in a single rebate application. 


Important note: If the same is not presented within 15 days, the saved draft will be excluded from the GST portal. 


7.Finalization of provisional assessment:


Goods and Service Tax or GST combines all indirect taxes under one sunshade and helps Indian firms become globally competitive. To promote easy calculation and payment of taxes, GST has procurements for assessments such as self-assessment.


The taxpayer will have to pay interest on any tax payable under provisional evaluation which was not paid within the scheduled date. The interest periods extend from the day on which the tax was due to the final payment day, irrespective of payment being before or after the last assessment. The rate of interest will be a maximum of 18%. If the tax as per the final estimation is less than the provisional assessment then the chargeable person will get a rebate. He will also get interested in rebates. Further in this article, we will find more about- are GST rebates taxable?


8. GST refunds paid to foreign tourists on goods in India and carried abroad from India at the time of departure


Segment 15 of (IGST) Act deals with a rebate of integrated tax paid on the supply of goods to foreigners leaving India. Section 15 of the IGST Act states that:

Returns apply to the integrated tax paid by tourists leaving India on any supply of goods taken out of India. The rebate of the integrated tax refers to the purchase made by the foreign tourist leaving India as per the conditions guided in the IGST Act.


Explanation: For the objectives of this section, the term “tourist” indicates a person not ordinarily resident in India, who enters India for a visit of not more than six months for authorized non-immigrant purposes.


Hence, foreigners visiting India who enter and stay for not more than six moons on legitimate non-immigrant plans are qualified to claim a return of IGST paid on the supply of goods driven out of India.


It is essential to note that GST returns for visitors will not be permitted on goods or services that they consumed while in India. The refund applies only to the supply of goods carried out of India by the traveler, hence the product remains unconsumed in India.


9. Refund on the topic of refund vouchers for taxes charged on advances not provided with products or services that have not been supplied:


Usually, traders ask for a minimum advance for the delivery of bulk goods. Most of the service providers also ask for credit, before the fulfillment of service. There is uncertainty among people about the voucher to be issued for advance and treatment in case of withdrawal of service or delivery of goods.


The manufacturer would need to issue a receipt voucher at the point of accepting the advance. If the order is canceled anytime later, then there will be no tax receipt issued and the manufacturer would need to issue a return voucher for the advance obtained. In the case of an order for a service gets aborted after the payment of advance, then the service provider needs to issue a rebate voucher to the person who made the payment.


10.CGST & SGST refund paid by treating the supply as intrastate supply, which is subsequently held as inter-State supply and vice versa


As per the provisions of the CGST/SGST Act, the tax levied on the particular supply of goods and services can be claimed for a refund by the taxpayer. Likewise, a person having GST registration can claim a rebate on tax paid for the intra-state supply, which is consequently held to be inter-state supply and vice versa.


Intra-State Supply


When the place goods and services are supplied within the state or union territory, then this is known as Intra-state supply. If the location of the supplier and the place of the supply of goods or services are in various states, it will be counted inter-state supplies.


Method for Claiming GST Returns. Are GST rebates taxable?


The rebate form has to be submitted electronically in Form RFD-01 within 2 years from the respective date. The applicant should provide the return application certified by a Cost Accountant or Chartered Accountant if the amount of refund exceeds Rs 2 lakhs.


The GST rebate application may then either undergo review or an audit, as the case may be. After the consent of the return application, the taxpayer shall get the GST return amount claim in the registered bank account.


How can you check your rebate status?


The best place to check the status of your income tax refund is the TIN website maintained by the Income Tax Department. Details required to check the status on this website include the PAN of the taxpayer and the assessment year for which the status is being checked. Alternatively, you can verify the status at the e-filing portal of the Income Tax Department.


Final words: Are GST rebates Taxable?


Though there are many refunding conditions laid by the Government the question remains are GST rebates taxable? Amount of GST rebate refers to the excess tax that was paid by you and therefore is not considered as an income. Therefore, it is not taxable. Nevertheless, the interest acquired over the income tax refund is considered as an income and is subjected to income tax as per the applicable tax slab. 


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