{"id":3937,"date":"2023-08-12T21:07:39","date_gmt":"2023-08-12T15:37:39","guid":{"rendered":"https:\/\/www.startupfino.com\/blogs\/?p=3937"},"modified":"2023-08-12T21:07:42","modified_gmt":"2023-08-12T15:37:42","slug":"refund-of-unutilised-itc-in-gst","status":"publish","type":"post","link":"https:\/\/www.startupfino.com\/blogs\/refund-of-unutilised-itc-in-gst\/","title":{"rendered":"Refund of Unutilised ITC in GST"},"content":{"rendered":"\n

The term ‘Input Tax Credit’ or ‘ITC’ refers to the Goods and Services Tax or GST that is paid by a taxpayer on any purchase of goods\/ services used or to be utilised for business. ITC basically means that when you pay tax on output, you can deduct the tax you already paid on inputs and pay the difference. However, in cases where such ITC is not utilised within the prescribed time limit under the Act, taxpayers can claim a refund of unutilised ITC in GST.<\/strong><\/p>\n\n\n\n

If certain conditions are met, taxpayers can seek a return of accrued ITC and refund of unutilised ITC in GST<\/strong>. Firstly, the applicant has to file form RFD-01<\/em><\/strong> with the necessary supporting papers required and within the time limit as specified under Section 54 of CGST Act as well as Rule 89 of CGST Rules.<\/em><\/strong><\/p>\n\n\n\n

<\/a>Refund of Unutilised ITC in GST: Eligibility and Limitations<\/h2>\n\n\n\n

The eligibility and limitations for Refund of unutilised ITC in GST are as follows:<\/p>\n\n\n\n

<\/a>Refund of unutilised ITC in GST: Eligibility Criteria<\/h3>\n\n\n\n

Taxpayers have the opportunity to request the refund of unutilised ITC in GST in the following circumstances:<\/p>\n\n\n\n

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  1. Inverted Tax Structure:<\/strong><\/li>\n<\/ol>\n\n\n\n

    When a business operates within an inverted tax structure, where the input tax rate surpasses the output tax rate.<\/p>\n\n\n\n

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    1. Export of Goods or Services:<\/strong><\/li>\n<\/ol>\n\n\n\n

      Refund can be claimed for goods or services exported without tax payment, facilitated by submitting a Letter of Undertaking (LUT) or bond.<\/p>\n\n\n\n

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      1. Supplies to Special Economic Zone (SEZ):<\/strong><\/li>\n<\/ol>\n\n\n\n

        Refund is applicable for supplies to SEZ units or developers without prior tax payment.<\/p>\n\n\n\n

          \n
        1. Foreign Embassies and International Organisations:<\/strong><\/li>\n<\/ol>\n\n\n\n

          Purchases of goods or services by foreign embassies and international organisations can qualify for refund claims.<\/p>\n\n\n\n

          <\/a>Non-Refundable Cases of ITC in GST<\/h3>\n\n\n\n

          In certain cases, the refund of unutilised ITC in GST is not permissible, including:<\/p>\n\n\n\n

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          1. Export-Related Excise Duty:<\/strong><\/li>\n<\/ol>\n\n\n\n

            Accumulated ITC left unutilised due to exported goods incurring excise duty is not eligible for GST refund<\/strong><\/a>.<\/p>\n\n\n\n

              \n
            1. Duty Drawback or IGST Refund Claim:<\/strong><\/li>\n<\/ol>\n\n\n\n

              If the supplier of goods has availed duty drawback on excise duty paid or obtained a refund of IGST paid on the respective supply.<\/p>\n\n\n\n

                \n
              1. Nil Rated or Exempt Inverted Tax Output:<\/strong><\/li>\n<\/ol>\n\n\n\n

                In scenarios where the output is nil rated or exempt from GST within an inverted tax structure.<\/p>\n\n\n\n

                <\/a>Time Limit and Procedure for Claiming Refund of unutilised ITC in GST<\/h2>\n\n\n\n

                Under Section 54 of the CGST Act<\/em><\/strong>, individuals seeking a refund of Goods and Services Tax (GST) or related interest payments must submit their application using form RFD-01<\/strong> within two years<\/em><\/strong> from the relevant date. The specific \u2018relevant date\u2019 varies depending on the type of refund applied for.<\/p>\n\n\n\n

                <\/a>Flexible Refund Period for Certain Cases<\/h3>\n\n\n\n

                For unutilised Input Tax Credit (ITC) attributed to exports or supplies to Special Economic Zones (SEZ), known as zero-rated supplies – the applicant is granted flexibility. Refund claims using form RFD-01<\/em><\/strong> can be filed at the conclusion of any tax period.<\/p>\n\n\n\n

                <\/a>Specific Timeline for Embassies and International Organisations<\/h3>\n\n\n\n

                Refund claims from foreign embassies or international organisations must adhere to a distinct timeline. The application for such refunds should be submitted before the expiration of six months from the final day of the quarter <\/em><\/strong>in which the respective goods or services were received. In these scenarios, the appropriate form to utilise is RFD-10<\/strong>, subsequent to the submission of the GSTR-11 return<\/strong>.<\/p>\n\n\n\n

                <\/a>Important Considerations for Filing Application for Refund of Unutilised ITC in GST<\/h2>\n\n\n\n

                While filing a refund application for unutilised Input Tax Credit (ITC), it’s important to consider the following points:<\/p>\n\n\n\n