Procedure to claim refund on export under GST

Procedure to claim refund on export under GST

A proper refund mechanism is necessary for effective tax administration, as trade is facilitated via the release of blocked finances for modernization, expansion and working capital requirements of a business. Here we are discussing about the options available for exporters to claim the refund but for that we firstly need to understand the “Meaning & taxability of export of Goods & Services”.

Meaning of Export of Goods & Services

Export of Goods means taking goods from India to any place which is outside the domestic territory of India.

Export of Services means the supply of any service when,-

  • the supplier of service is located in India,
  • the recipient of service is located outside India,
  • the place of supply of service is outside India,
  • the payment for such service has been received by the supplier of service in convertible foreign exchange, and
  • the supplier of service & recipient of such service are not merely establishments of a distinct person.

Therefore in following situations supply of services not to be termed as export of services

Situation 1: Where the place of supply of service is within India but to a person located outside India.

Situation 2: Where the consideration for the supply of such services is received in Indian currency.

Taxability of Export of Goods & Services

As per the provisions of IGST law, export of goods or/and services are to be treated as “zero-rated supplies” and a person being a registered taxable person is entitled to claim the refund of the GST paid on export of goods or/and services.

Where, “zero rated supply” means any of the following supplies of goods or services or both, namely:

(a) Export of goods or services or both; or

(b) Supply of goods or services or both to a Special Economic Zone developer or a Special Economic Zone unit.

Zero-rated supply does not mean that the goods and services have a tariff rate of ‘0%’ but the recipient to whom the supply is made is entitled to pay ‘0%’ GST to the supplier.

So, following are the two modes for a exporter to claim refund

Mode 1: Export of goods or/and services on the payment of Integrated tax & then exporter can claim the refund of GST paid on such goods or services exported.

Mode 2: Export of goods or/and services under bond or Letter of Undertaking (LUT) without paying any Integrated tax & can claim the refund of unutilized input credit.

 

Mode 1: Export of goods on the payment of Integrated tax & then exporter can claim the refund of GST paid on such goods exported.

Under this mode, the exporter would first pay IGST and then claim refund after the goods are exported. The exporter should comply with the following before applying for the refund

  1. The shipping bill is required to be filed which would also qualify as the application for refund. However, shipping bill is valid only when the person in charge of the conveyance carrying the export goods duly files an export manifest or an export report covering the number and the date of shipping bills or bills of export
  2. The applicant needs to furnish valid GST returns in form GSTR 3/3B & GSTR 1

The details as filed in the GST returns would be transmitted electronically by the GST common portal to the system designated by the Customs, and this would generate a confirmation that the goods covered by the said invoices have been exported out of India. 

Upon the receipt of the information regarding the furnishing of a valid return in Form GSTR-3/Form GSTR-3B from the common portal, the system designated by the Customs shall process the claim for refund and an amount equal to the integrated tax paid in respect of each shipping bill/bill of export shall be electronically credited to the registered bank account of the applicant.

 

Mode 2: Export of goods or/and services under bond or Letter of Undertaking (LUT) without paying any Integrated tax & can claim the refund of unutilized input credit.

Under this mode, the exporters can export the goods without payment of IGST, by submitting a LUT and further they can claim the refund of unutilized input credit.

Following procedure needs to be adopted

  1. An exporter, before making the export, would be required to furnish a a bond or a Letter of Undertaking in FORM GST RFD-11 Bond and LUT Format to the jurisdictional Commissioner.
  2. The applicant needs to furnish valid GST returns in form GSTR 3/3B & GSTR 1

The details as filed in the GST returns would be transmitted electronically by the GST common portal to the system designated by the Customs, and this would generate a confirmation that the goods covered by the said invoices have been exported out of India.

Process of refund to exporter

Step 1: Filling Form GST RFD-01/1A:

First step for refund is to file refund application in GST FORM – 01 or GST FORM – 1A on common portal.

Step 2: Submission of application to Jurisdictional officer:

 The common portal shall generate Acknowledgement receipt number which would be submitted to jurisdictional proper officer along with GST RFD FORM – 01/1A along with supporting documents.

Step 3: Initial scrutiny of the documents by the proper officer:

 After scrutiny of application, Deficiency Memo in GST RFD-03 or Acknowledgement in GST RFD-02 will be issued within 15 days from the date of application submitted under Step – 2.

Step 4: Grant of Provisional Refund:

Provisional refund shall be granted within 7 days of acknowledgement and shall be credited directly to the bank account of applicant of acknowledgement in GST RFD-04. Payment advice shall be issued in FORM GST RFD – 05.

Step 5: Detailed scrutiny of refund application:

 Following will be scrutinised in detail by officer:

  • Refund statement detail with GSTR – 1 and GSTR-6A.
  • Shipping bill details shall be checked.
  • Detail of IGST paid on Inputs with GSTR-3 and GSTR-3B.
  • Refund applied should be less than IGST paid on Inputs.
  • Any adjustment in refund amount shall be made via GST RFD-07.

Step 6: Refund amount is less then refund claim:

In such case, Notice has to be issued to the applicant in FORM GST RFD-08 and the applicant has to be reply within 15 days of receipt of notice.

Step 7: Final order of refund:

Final order is to be made in form GST RFD-06.

 

 

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