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There is a golden rule of almost everything. The golden rule of GST refunds is that - “Give everything on platter”. It means that file a crispy and clear refund so that the departmental officer does not have anything to ask from you. File a crystal-clear speaking refund application which leaves no chances for raising any objection. Let me discuss the practical aspects of GST refunds that will help you to get refunds easily and quickly from the department. Kindly keep these points in mind while filing a GST refund.

1. Covering Letter 

Always file the refund application under a Covering Letter. Covering Letter work as a mouthpiece of your refund application. It lists out all the documents and statements enclosed with the refund applications. It conveys to the department about the documents you are submitting. To make it more robust and effective, follow these points: -

  1. Give annexure to all the documents you are submitting with it.
  2. Give numbering to every page and put an index in covering letter about it. For example - Statement -3 - Page No. 1 to 2, Annexure A - Page No. 3 to 5
  3. If you would like to say anything about the refund - covering letter is best medium of it. For example, if you wrongly shown export supply as exempted supply - you can mention the same in covering letter and give an undertaking regarding it for smooth processing.
GST Refund - Practical Guide

2. Adherence to Circulars - 125 and 135

Don't forget to follow the circular 125 and 135 issued by the department. Enclose all the documents, statements and records as asked by the department in these circulars.

You can also add the undertakings / declaration as your own. As I discussed in point no. 1, give undertakings / declarations about the mistakes in returns which you feel it affects your refund.


3. Statement-3 and Refund Calculation

Always submit a refund calculation sheet with the refund application. This refund calculation sheet must be linked with the documents submitted like FIRC and Export Invoices.

GST portal freezes the invoice and FIRC once entered in Statement-3 and submitted. So once the invoice is entered in GST portal, It locks the invoice and cannot be entered again, and then the problem arises where there are partial payments against the invoices and where the consolidate payments received again different invoices. The solution is to file a refund calculation sheet showing the actual particulars.

4. Foreign Remittance Advises and Export Invoice & Remittance Correlation Sheet

It is advisable to enclose a sheet detailing the foreign remittance advises and its correlation with the export invoices. It must contain the details of forex and INR received with its linking with invoice. Put your remarks wherever necessary.


5. Service Agreement / Nature of Business

How can department know what is your business and how your service qualify as export of services? For that purpose, you must enclose a brief nature of business and service agreement with foreign client.

Also enclose a note about how the services / goods are exporting. Mention that how you are satisfying all the export conditions and why the refund arises in your case. My sincere advise is that kindly vet the service agreement and nature of business from a good consultant before submission with the department so that it will not speak anything else and lead you into trouble.

6. Fresh Refund after issuance of Deficiency Memo

While filing the fresh refund application after issuance of deficiency memo always mention in covering letter how you have coverup the deficiencies which was pointed out by the department so that the refund application will be accepted by the department.  

7. Frequency of Refunds

 What should be the frequency of refunds - Monthly or Quarterly or Half Yearly or Annually?

GST law prescribe that refund should be filed for tax period. In the case, I prefer it to be filed as per monthly / quarterly return filing - whatever is filing frequency of taxpayer. In case of service export - where the remittances are not received in a particular month. Refunds can be clubbed for certain months.

8. Formats

There are no prescribed formats for undertaking and declaration in GST law which are to be submitted along with refund application. Cover all the points which are required to be satisfied as per the notification required.

9. Don't do silly mistakes!

List of silly mistakes

  1. For export turnover - Value of FIRC not to be considered. Consider Invoice Value. Always apply forex rate of booking invoice on foreign currency received. So, invoice value and invoice booking rate is important.
  2. ITC - Do not forget to claim refund of RCM credit. For other ITC remember - It should not increase beyond the amount appearing in GSTR-2A. Mere appearing in GSTR-2A is not important - Invoice Value and Tax Amount must be matched.
  3. Always upload all required documents as asked in Circular 125 and 135 of GST.
  4. Don't claim refund of Capital Goods in case of ITC refund under LUT route. It makes you to get a Show Cause Notice by department.

Getting GST refunds is not a cakewalk. It is like walking on tight rope, but by following the above points anyone can file the correct refund and get it sanctioned by the department easily.

The author can also be reached at gaauravarya@gmail.com

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Category GST, Other Articles by - Gaurav Arya