Top 10 Cases When GST Can Be Claimed
India, a very vast and developing country has always followed the old taxation system, which was more confusing, more overlays, etc. There are 2 types of taxes in India i.e. Direct tax and Indirect tax.
Direct tax is the tax that is payable on income and profits, and indirect tax is the tax payable on goods and services. Before the GST, we used to follow the VAT system. We always wonder when we see any restaurant bill that shows VAT, Sales tax, Service tax, excise duty, etc. Most of the mind gets confused until the biggest tax reform has happened in India GST.
What is GST?
GST (Goods and Service tax) was the biggest tax reform in the history of India. GST is an indirect tax that simplifies the old taxation system. It is basically the sum of all the indirect tax.
GST was passed in the parliament in 2017, and it took effect on 1st July 2017. Long time. After effect, no type of indirect tax needs to be paid, one tax in all makes it a simplified taxation system. 150+ countries have implemented the GST tax system.
Before moving to how to claim a GST refund, let’s learn some basics about GST and its components.
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Types of GST?
Forget those bundles of tax, we have got the new tax reform divided into 4 simple categories:
CGST, also known as Central goods and service tax is the part of the tax that is payable on intra-state transactions on goods and services. The Central government collects the amount raised from goods and services tax.
SGST, also known as state goods and services tax is the tax payable on intra-state transactions of goods and services. The revenues in the form of tax are collected by the state government.
You may want to know about the Top 10 Online GST Courses in India
IGST, also known as integrated goods and services tax is the part of the tax which is payable on inter-state transactions of goods and services. The amount here is collected by the central government.
UGST, known as Union territory goods and service tax is the tax payable on the transaction of goods and services between 2 or more union territories. The tax revenue is collected by the union territory government.
We, the common people, get happy when we think about or get a chance to claim something. It can be any type of claim i.e. life insurance claim, health claim, etc. But, we got happier when we heard that GST can also be claimed.
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GST can be claimed by 2 methods:-
- Input tax credit (ITC)
- Cases under which GST can be claimed.
In the following paragraph, we will understand how input tax credit and cases can help you claim part of the GST paid.
Input tax credit ( ITC)
What’s the first thing that struck your mind hearing the name ITC? ITC Sonar Bangla? Jokes apart. ITC stands for the input tax credit. An input tax credit is the part of the tax that has been paid on the purchase of inputs to convert into outputs.
Let’s get a clear understanding with the help of an example:
Rajiv is a manufacturer of mobiles. For manufacturing a mobile, he would require batteries, hardware, etc. He paid Rs 500 as the tax for purchasing the inputs. After purchasing, he manufactured the mobile and the final tax amount was Rs1000. So, will Rajiv need to pay Rs 1000 as the tax?
No! Here comes the main role of an input tax credit.
Through the input tax credit method, Rajiv only needs to pay Rs 500 as the tax amount because the 500 paid on the input can be claimed. This method makes sure no double amount of tax should be paid.
Also, check Are GST rebates taxable?
Who can claim ITC?
Businesses and individuals, both can claim ITC, only if he is a registered GST dealer. An input tax credit can be claimed under GST only after the following conditions are prescribed:-
- The buyer must have either a valid tax invoice, debit note, or any other documents given by the seller.
- The buyer must have received goods or services.
- The supplier must have filed the GST return.
- The Tax amount charged from the buyer must have been paid to the government in any form.
- If the goods are being received in installments, then ITC can only be claimed after the last and final lot has been received.
An input tax credit can only be claimed for business purposes. If goods or services are used for personal use, exempted supplies, etc, ITC cannot be claimed.
There are certain documents required to avail of the input tax credit, which is as listed below:-
- Invoices provided by the supplier.
- Debit note ( if any) provided by the supplier
- Bill of entry or any other similar documents provided by the customs departments.
- Invoice i.e, similar to a bill of supply, in circumstances where the total amount is less than Rs 200 or where the reverse charge is applicable under GST law.
- Documents provided by the input service distribution (ISD), it can be invoice as well as a credit note.
- Bill of supply issued by the suppliers.
The Time limit for claiming ITC.
There is a time-bound for claiming ITC. ITC can only be claimed on the tax invoices or debit note of supply with less than a year old. In other cases, the last date to claim the tax credit will be the earlier in the following points:
- Before filing the GST return of the September month following the end of the financial year.
- Before filing the annual return of the period in which the tax invoice or the debit note belongs.
How to claim the maximum credit.
There are several ways to claim the maximum credit applicable under GST laws:-
- You should regularly have contact with your vendors
- You should identify the tax which is payable on the reverse charge basis.
- Always keep your books of account well maintained and free from errors.
- There should be a regular reconciliation of the statements.
- To ensure that the suppliers are complying with the e-invoicing
If these points are kept in mind, one can claim the maximum credit out of it.
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2.Top 10 Cases under which GST can be claimed.
The GST council has provided us with a very simple and effective system to claim the GST refund, which will help the business to work immensely without the blocked working capital. The entire process of claiming the GST refund is done on GST online portal.
Following are the cases under which GST refund can be claimed:-
- Export of goods or services.
- Supply of goods or services to SEZ’s units and the developers.
- Deemed exports
- Purchase made by the UN or its embassies.
- Refund on the tax credit, if pre-deposited any
- If excess tax amounts have been paid by mistake.
- A Refund based on the judgment arising out from any tribunal, appellate, etc.
- After finalization of the provisional assessment.
- Tax amount paid in advance against which no goods or services have been supplied.
- Refund of CGST and SGST paid by showing the inter-state transactions as intra-state transactions.
- Refund of the accumulated tax amount, on the basis of duty structure other than fully exempted transactions.
- Refund to the international tourists who paid GST on goods and services in India and carried abroad while traveling.
These are the top cases under which GST can be claimed.
The Time frame for claiming the GST refund.
To claim the GST refund, the applicant needs to file the refund claim within 2 years from the filing date. If the claim is in the queue, the refund amount needs to be sanctioned within 60 days from the date of receipt of the claim.
The Interest rate on the suppressed refund should be 6%, and the 9% interest rate on the delayed refund ( after 60 days) if the claim is in the queue.
GST refund claims:-
On the exports:- The major part where the refund arises is on the account of exports. All the exports made ( goods or services), and the supplies to SEZ’s units i.e. special economic zones have been categorized under zero-rated supplies because the supplies are made at zero percent; one can claim a refund on tax paid.
On the purchase made by the UN or its agencies:- Supplies made by the UN or its agencies can be exempted from the payment of tax under the international obligations. It is organized on the way to the refund charge process. Section 55 of the CGST act clarifies that the UN or its embassies can claim the refund on the tax paid by them on account of purchase. However, the claim needs to be made before the expiry of 6 months from the last day of the quarter on which the transaction has been made.
To international tourists:– Under section 15 of the IGST act, an international tourist obtaining any goods in India may claim the refund while leaving the country on the integrated tax paid by them; as they are not permanent residents of India and do not stay for more than 6 months.
Excess tax paid:- While paying the tax, by mistake instead of paying the only CGST, IGST paid by mistake, then the excess amount paid can be claimed during the process of refund.
- For a GST refund on the exports, an individual needs to submit an invoice with a statement containing the number and date of shipping bills of export.
- For a GST refund on the supply to SEZ units, an applicant needs to submit approval from the officer, which clarifies the receipt of goods or services in SEZ. A declaration from the SEZ units states that the tax credit is yet to be availed.
- For the refund on the accumulated tax, the statement which contains the invoice details in the GST refund format needs to be submitted.
No refund of the unutilized tax credit will be available on CGST and IGST paid for the supply of services for the construction of buildings, offices, complexes, etc. Also, no refund, if the accumulated tax rate amount is higher on inputs than the tax rate amount on the outputs.
- For GST refund on the basis of order, the reference number provided for the refund process should be submitted along with a tax invoice.
Chartered accountant certificate for GST refund:-
In case the refund exceeds Rs 2 lakh, then a certificate from a Chartered accountant needs to be submitted along with the other documents listed above.
The Process to claim the GST refund.
Here, I’ll guide you step by step procedure to claim your GST refund:-
- Visit the GSTN web portal and fill the form for a refund claim.
- Acknowledgment number in the form of email or SMS will be received.
- The ledgers will be adjusted, and the carry-forward tax credit will be reduced.
- The application and the documents submitted will be scrutinized or audited by the authorities within a period of 30 days from filing the refund application.
- On the basis of unjust enrichment, the tax amount will be credited. If the applicant fails to fall under the concept of unjust enrichment, then the refundable amount will be donated to the consumer welfare fund.
- A pre-audit process may also be conducted before sanction of the refund amount to check whether an individual has claimed for excess than a pre-determined amount.
- The credit process will be done electronically through RTGS, NEFT, etc.
- In case of an amount less than Rs 1000, no refund shall be given.
These are the steps through which you can claim the tax refund.
Unjust enrichment is a concept where the business owners divide the tax with the final consumers as GST is an indirect tax and the consumers have to bear it. For this reason, it is required to pass the unjust enrichment test.
However, this concept is not applicable for a refund on the account of accumulated tax, exports, excessive tax, supply to SEZ units, etc. For other reasons, it is mandatory.
Getting a GST refund can be a little overwhelming, but if you follow the step-by-step process, then even a layman can claim it easily. There should be a proper filing of documents and a free from any kind of error for the simple process of refund claims. These are some of the cases and methods through which a GST refund can be claimed.