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Refund Under GST / How to Apply for Refund under GST / Export of goods with payment of Tax / Procedure to file Refund Application under Goods and Services Tax

By Yogesh Verma (CS/LLB) / 2 min read / GST Article

Exporting goods from India involves several compliance requirements, and one of the key concerns for exporters is the refund of taxes paid. The Indian GST law provides a mechanism for exporters to claim a refund of the Input Tax Credit (ITC) accumulated on the purchase of goods used for exports.

Exporters can claim a refund in two ways:

1.     By exporting goods without payment of tax under a Letter of Undertaking (LUT) or Bond and claiming a refund of unutilized ITC.

2.     By paying Integrated Goods and Services Tax (IGST) on the export of goods and then claiming a refund of the IGST paid.

This article explains the process and mechanism for claiming a refund under the second option, where the exporter pays IGST on the export of goods and subsequently claims a refund.

Legal Provision: Rule 96 of CGST Rules, 2017

The manner of claiming a refund of IGST paid on export of goods is governed by Rule 96 of the CGST Rules, 2017. As per this rule:

• There is no requirement to file a separate application for claiming a refund.
• The shipping bill filed by the exporter is automatically considered as the refund application.
• The details of the export invoices filed in Form GSTR-1 are transmitted electronically to the Customs system.
• The Customs system verifies the export and sends confirmation to the GST portal, after which the refund is processed automatically.

Step-by-Step Process for Exporting Goods with Payment of IGST

To simplify the process, let’s take an example:

Example: DPX is an Exporter

1.     Purchase of Goods: DPX purchases goods from XYZ and pays IGST of INR 166.

2.     Availing ITC: DPX claims input tax credit on the IGST paid to XYZ.

3.     Issuing Invoices: DPX issues two invoices:

o    One invoice in USD ($10) for the importer.

o    Another invoice in INR (INR 800), calculated based on an exchange rate of INR 80 per USD (as per Section 14 of the Customs Act, 1962).

4.     Charging IGST on the Invoice:

o    DPX charges IGST at 18% on the INR invoice.

o    IGST calculation: 800 * 18% = INR 144.

5.     Payment of IGST:

o    DPX pays INR 144 using the Electronic Credit Ledger (if sufficient balance is available) or the E-Cash Ledger.

6.     Proof of Export:

o    DPX must provide proof of export and comply with all required conditions.

7.     Automatic Refund Processing:

o    Once DPX files FORM GSTR-3B, GSTR-1, and the Export General Manifest (EGM), Customs processes the shipping bill, and the refund of INR 144 is credited automatically.

Preconditions for Claiming Refund

Before claiming a refund, an exporter must fulfill the following conditions:

1. Filing of Export General Manifest (EGM)

• The refund application is deemed to be filed only when the person in charge of the conveyance carrying the export goods files the Export General Manifest (EGM).
• The EGM must contain details of the shipping bill numbers and dates.
• Filing a correct EGM is mandatory for the shipping bill to be treated as a refund claim.

2. Filing of Valid GST Returns

• The exporter must file Form GSTR-1 and GSTR-3B correctly.
• The details in the shipping bill must match those in the GSTR-1 outward supply statement.
• Any mismatch must be corrected. The refund application will be considered filed only after rectification.

3. Aadhaar Authentication

• The exporter must undergo Aadhaar authentication as per Rule 10B of the GST Rules.

Common Reasons for Delay in Refund Processing

Despite the automated refund mechanism, delays may occur due to the following reasons:

1.     Mismatch in Invoice Details:

o    Discrepancies between the shipping bill and GSTR-1 details may cause delays.

o    The exporter must ensure that the invoice details match across all records.

2.     Incorrect Filing of EGM:

o    If the EGM is not filed or filed incorrectly, the refund process may be halted.

o    Exporters should follow up with the shipping line to ensure EGM filing is done correctly.

3.     Bank Account Issues:

o    The refund is credited to the bank account linked to the GST registration.

o    If the account details are incorrect or inactive, the refund will not be processed.

4.     ITC Utilization Issues:

o    The IGST must be paid using either the Electronic Credit Ledger or the E-Cash Ledger.

o    Any incorrect utilization of ITC may lead to rejection of the refund claim.

Automatic Credit of Refund in the Bank Account

• If all returns are correctly filed and the EGM details are furnished, the refund is automatically credited to the bank account provided in the GST registration details of the exporter.
• Exporters can log in to ICEGATE to check for deficiencies in returns or EGM filings and rectify them accordingly.

FAQs on IGST Refund for Exports

Q1. What is the time limit for claiming an IGST refund on exports?

The refund must be claimed within two years from the relevant date, which is the date of export.

Q2. Can an exporter claim a refund without filing GSTR-1 and GSTR-3B?

No, filing GSTR-1 and GSTR-3B is mandatory. Refunds will not be processed unless both returns are filed.

Q3. How can an exporter track the refund status?

Exporters can track the refund status on the ICEGATE portal or the GST portal under the “Track Refund Status” section.

Q4. Can an exporter amend errors in the shipping bill after submission?

Yes, amendments can be made through the Customs portal or via an application to the jurisdictional GST officer.

Q5. Will the refund be processed if the bank account details are incorrect?

No, the refund will not be credited if the bank details are incorrect. Exporters must ensure that the bank account linked to their GST registration is updated and active.

Q6. What happens if the refund is delayed beyond the prescribed time?

If the refund is delayed beyond 60 days from the date of application, interest at 6% per annum may be payable by the government.

Conclusion

Exporters opting to pay IGST on their exports can benefit from a streamlined refund process under Rule 96 of the CGST Rules, 2017. By ensuring compliance with the conditions mentioned, such as filing accurate returns, matching invoice details, and correctly submitting the EGM, exporters can smoothly claim refunds without delays.

Understanding the IGST refund process is essential for optimizing working capital and improving cash flow. Exporters should regularly monitor their refund status on ICEGATE and rectify any discrepancies promptly to avoid unnecessary delays.

By following these steps, exporters can efficiently navigate the refund mechanism and ensure timely receipt of their funds, thereby enhancing the ease of doing business in the international market.

Disclaimer: All the Information is based on the notification, circular and order issued by the Govt. authority and judgement delivered by the court or the authority information is strictly for educational purposes and on the basis of our best understanding of laws & not binding on anyone.

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