GST Payments and GST Refunds
All GST registered businesses are required to make GST payments every month. According to the current rules of GST, all GST returns need to be filed every month and all dues of GST need to be completed every month; taking into consideration input tax credit, if any, which is declared in the form GSTR-3B.
As per the existing rules of GST, payments of GST for the month made by the 20th of the next month. If the GST paid as of December 2018, payment is to be made by 20th January 2019.
Types of GST payments
According to the GST Act, applicable types of GST payments are mentioned below in the table:
In most of the case, the supplier makes the GST payment of goods and services to the government and recovers the charge at the applicable rate from the receiver.
In a few cases, buyers make a direct payment of GST to the government instead of the seller.
The process by which GST liability of the supplier is shifted to the receiver of goods/services is termed as the reverse charge mechanism.
Understanding the calculation of GST Payments
The GST payments to be made by a supplier/receiver depends on a few key factors:
- Gross GST Liability – This is the gross GST liability of the registered business/individual
- TDS (Tax Deducted at Source) – Within the TDS mechanism, the dealer makes the tax deduction before making any payment to the supplier. TDS if paid, deduction takes place from Gross TDS liability.
- TCS (Tax Collected at Source) – E-commerce aggregators commonly use the TDS mechanism on sales made through their website. TDS if paid, deduction takes place from Gross TDS liability.
- Input Tax Credit – It is a kind of special mechanism introduced under the GST which can be availed by registered businesses and individuals to decrease the overall burden of tax. By implementation of ITC, the GST burden on a supplier’s output is decreased to the extent GST has been paid on inputs purchased by the registered business/individual.
Thus, Net GST Payable = Gross GST – (TDS/TCS+ITC)
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Electronic Ledgers for GST Payments
All refunds and payments in the GST portal are managed through 3 types of electronic ledgers. These ledgers can be accessed by the GST registered businesses and individuals when they log into their account that is maintained on the official GST portal.
Cash Ledger: This ledger provides all details of deposits done by the taxpayer which includes cash deposits, TCS or TDS transactions made on behalf of GST registered person/ business by others. The cash ledger balance can be used to make various GST related payments.
Credit Ledger: This credit ledger reflects details of Input Tax Credit i.e. applicable to the registered business or individual. The credit balance reflected in this ledger can be utilized not only for making GST tax payments but can also be used for making payments of late fees, interest or penalties.
Liability Ledger: It is an electronic GST ledger which contains details of total tax liability of the registered business or individual for the specific month. This ledger will also contain any late payment charges and interest applicable to the taxpayer. This along with details of the other ledgers can be accessed and viewed from the GST taxpayer’s dashboard.
How to make GST payments?
According to the existing provisions of the GST Act, after the net GST payable starts displaying in the liability ledger of the GST registered taxpayer. There are two ways to make payment of the due amount:
Using Balance in the Credit Ledger: GST registered business or individual can make GST payment with the credit ledger balance available instead of Input tax credit received. This credit ledger balance cannot be used for making other GST related payments such as late fees, interest, etc.
Using the balance of credit ledger: The taxpayer makes use of cash ledger balance to pay dues of GST via online or offline route. As per the currently applicable rules, it is mandated to pay GST dues via online mode, if the total tax paid is above Rs 10,000. It is mandated to have GST payment challan when making a GST payment.
Penalties on Delayed GST Payment
As per the current provisions of the GST Act, GST payment for every month is due on the 20th of next month. If not, then following penalties applicable to the late or short payment of GST.
In the case of late GST payment, late fees are applicable at the rate of Rs 200 on a per-day basis.Rs. 100 for late CGST + Rs. 100 for late SGST payment.
However, there is no late payment fee for making late IGST payments. Late fee is applicable in this case, is capped at Rs 5000. For a late fee, interest charges are also levied on unpaid tax at 18% per annum. The taxpayer needs to do calculation of interest charges and pay them as applicable.
In case of, short GST payment: It means making payment of fewer taxes than owed as per the GST computation feature as heftier fine. The penalty in such cases is the higher amount among Rs 10,000 and 10% of the GST short paid.
Apart from this, the short-paid amount also needs to be repaid along with applicable interest at 18 % per annum.
How to get GST refund
A GST registered business or person may be eligible for a GST refund in case the tax paid exceeds the actual GST liability. Under the GST rules, the process of claiming refunds has been standardized with the time limits applicable to the submission of GST refund claims. The process of GST refunds is different from the process of ITC or input tax credit.
Why apply for GST Refund?
- If export’s supplier input tax credit exceeds GST payable or in case of a claim of rebate on exports.
- In case of payment of excess tax by the GST registered taxpayer.
- In case the balance is pending in the GST credit ledger due to tax- exempt or zero tax.
- Foreign embassies and UN bodies for making purchases in India.
- Foreign tourists who are subject to a GST refund.
- In case credits or discounts are received by the supplier due to issue of the credit notes.
- In case of refund is due after the finalization of provisional assets.
*The above list is indicative and there may be other instances where GST refunds are issued.
GST Refund Filing Time Limit
The time limit set to apply for GST refund is 2 years as per the existing rules and provisions of the GST Act which is to be calculated from the ‘relevant date’.
The definition of this relevant date varies depending on the reason for the issue of the GST refund. The following are some examples of “relevant date” depending on the reason for GST refund claim:
| Reason for GST Refund Claim | Relevant Date |
Finalization of provisional assessment
| Date on which tax is adjusted
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Export/ deemed export of goods
| Date of dispatch or passing over border/ loading.
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Excess tax paid
| Date of tax payment
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Refund for un-utilized Income Tax Credit
| End of financial year for which refund is claimed
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Refund due to order or judgement of courts
| Date of issue of the court order
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Processing time of GST refund applications
According to the current norms, the processing time of the GST refund application is 30 days from the day of filing the claim of the GST refund claim.
In certain cases, the scrutiny of the refund application may take longer such as in cases when an audit is ordered for any reason.
Documents required for GST refund
Form GST RFD 01: This document one can find on the official portal of GST. It can be filled out and submitted electronically via notified facilitation Centre or online through the common GST portal. The GST RFD-01 is the primary document that needs to be filled out and submitted to claim a GST refund.
Copy of order: Supporting documentary evidence is mandatory if the GST refund is due as a result of an order passed by an applicable appellate authority or court. The reference number of the order needs to be given along with the refund application as documentary evidence.
Statement of shipping invoices: Supporting documentary evidence is mandatory if the GST refund is due as a result of an order passed by an applicable appellate authority or court. The reference number of the order needs to be given along with the refund application as documentary evidence.
Statement of invoices: In case supply of the goods and services done by GST registered business in Special Economic Zone, applicable documentary evidence of refunds is a statement containing date and number of invoices.
Copy of assessment order: A copy of the final assessment order is also required along with the reference number of the assessment order.
Form GST RFD 02: This form is an acknowledgment that the application for the GST refund has been filed and submitted using GST RFD 01. It is available on the GST portal and is automatically generated based on information provided by the taxpayer in GSTRFD-01.
It is important to note that the GST RFD-02 is only an acknowledgment of the refund application receipt and does not guarantee that GST refunds will be provided to the taxpayer.
*The above list of documents is indicative and other documents may be required to process a GST refund claim depending on the type of applicant.
Calculation of GST Refund on Input Tax Credit
In case, the refund is being provided based on the input tax credit receivable by the registered business/individual, the maximum permissible amount payable as GST refund is:
Refund = (Turnover of zero-rated services + turnover of zero-rated goods) *(Net Input Tax Credit)/Adjusted total turnover In the above formula, Refund = Maximum permissible refund for the relevant period Net ITC = Input tax credit availed by the taxpayer on various inputs/input services for the relevant period Adjusted Total Turnover = The value of turnover in a state excluding the value of exempt supplies for the relevant period Relevant Period = Period for which refund is being applied for |
Interest on GST Refunds
If any kind of delay has taken place in crediting the refund to the registered business or person based on GST Payments made previously. The government is liable to pay interest on the refund amount outstanding at 6% per annum along with refund itself. The applicability of the GST refund is governed by Section 54 (Section 12) and Section 56 if the delayed refund is issued as a result of an order from an applicable appellate authority.
The details of the interest payable on GST refunds are provided to the taxpayer using Form GST RFD-05 which is prepared by the appropriate government authority.
Key details included in the GST RFD-05 are the total amount, the period for which interest is payable on the refund and the total amount payable as interest. Under existing rules, interest is payable by the government only on the amount to be refunded and not on any unused input tax credit available in the taxpayer’s electronic ledger.
