How to Claim GST Refund on Purchases

The Goods and Services Tax (GST) system in India has transformed the country’s taxation landscape by simplifying indirect tax collection and promoting ease of doing business. One of the most valuable provisions under GST is the ability to claim a GST refund on purchases, especially for exporters, unregistered buyers, or businesses dealing with zero-rated or exempt supplies. The concept of GST Custom Refund plays a crucial role for importers and exporters who pay GST at customs. Understanding how to claim a GST refund can lead to significant savings and better financial management.

Where Can You Claim GST Refund?

GST refunds can be claimed through the GST Portal . The process is designed to be digital, fast, and transparent. Here’s where GST refunds commonly apply:

1. Exporters – who export goods/services without payment of tax (under LUT) or with tax payment (claim refund later).
2. Unutilized Input Tax Credit (ITC) – when the tax rate on inputs is higher than on output.
3. GST on Imports (Custom Refunds) – GST paid at the time of importing goods via customs.
4. Refund of excess GST paid – due to clerical or technical errors.
5. Refund due to cancellation of services – such as airline tickets, hotel bookings, etc.

For businesses importing goods, GST Custom Refund is vital, especially under IGST paid at ports.

Advantages of Claiming GST Refund

Claiming GST refunds offers several financial and operational advantages:

• Improved cash flow – Helps businesses get back blocked capital.
• Increased working capital – Essential for SMEs and exporters.
• Compliance benefits – Establishes the company as GST-compliant, boosting credibility.
• Cost efficiency – Reduces the actual tax burden and prevents double taxation.
• Encouragement for exports – Helps in recovering taxes paid, making exports competitive.

Steps to Claim GST Refund on Purchases

Here is a step-by-step guide to claim a GST refund on purchases:

Step 1: Log in to the GST Portal

• Visit www.gst.gov.in
• Enter your login credentials (username, password, and captcha)

Step 2: Navigate to Refund Application

• Go to Services > Refunds > Application for Refund

Step 3: Choose the Type of Refund

• Select the appropriate category (e.g., refund of excess balance in cash ledger, ITC on exports, IGST refund, etc.)

Step 4: Fill in the Refund Application (Form GST RFD-01)

• Provide invoice details, shipping bills (for exporters), tax payment proofs, and other required information.

Step 5: Upload Supporting Documents

• Required documents include:
  • Copy of invoices
  • Shipping bill/Bill of export (for export-related refunds)
  • Bank account proof
  • LUT (Letter of Undertaking), if applicable
  • Custom clearance certificates (for GST Custom Refund)

Step 6: Submit the Application

• Verify via DSC or EVC and submit the refund application.

Step 7: ARN Generation and Acknowledgement

• Once submitted, an Acknowledgement Reference Number (ARN) is generated.
• Track the status using this ARN on the GST portal.

Step 8: Refund Processing and Disbursement

• The refund claim is processed by the GST officer within 60 days.
• Refund is credited to the applicant’s bank account electronically.

Types of GST Refunds

To understand better, let’s look at the types of GST refund claims, including those linked to GST Custom Refund:

1. Refund on Exports (with or without payment of tax)

• Under LUT – no tax paid during export, refund of ITC claimed.
• With payment of IGST – refund of IGST paid.

2. Inverted Duty Structure

• When the tax rate on inputs is higher than the output tax rate.

3. Excess Balance in Cash Ledger

• Refund of the surplus amount in the electronic cash ledger.

4. GST Paid on Imports (GST Custom Refund)

• IGST paid at customs while importing goods.
• Exporters or SEZ units often claim this under zero-rated supply rules.

5. Refund for Deemed Exports

• Supplies made to SEZs or EOUs (Export Oriented Units).

6. Refund Due to Order from Authority or Court

• Tax refunds ordered by a court or adjudicating body.

7. Refund for Tax Paid by Mistake or Excess Payment

• Common during filing errors or tax paid twice.

Important Points for GST Custom Refund

• Importers pay Integrated GST (IGST) on goods at the time of customs clearance.
• This IGST is refundable when:
  • The goods are later exported.
  • The importer is eligible to claim ITC and files for a refund.
• Make sure:
  • Shipping bill matches the invoice.
  • Bank details in the GST profile are correct.
  • All GSTR-1 and GSTR-3B returns are filed correctly.

Conclusion

Claiming a GST refund on purchases, especially under the GST Custom Refund category, is a strategic way to ensure tax efficiency and maintain healthy cash flow in a business. With the digital GST portal and simplified refund process, businesses and individuals can now claim refunds seamlessly. However, attention to detail in documentation, timely filing, and compliance with GST norms is crucial to avoid delays or rejections. Whether you’re an importer, exporter, or a business paying excess GST, understanding the refund procedure empowers you financially and keeps you tax compliant.

FAQs

Q1. What is a GST Custom Refund?
A GST Custom Refund refers to the refund of GST (usually IGST) paid at the time of importing goods via customs, especially relevant for exporters or SEZ suppliers.

Q2. Can individuals claim a GST refund?
Yes, if individuals have paid GST on purchases and later canceled the transaction or returned goods, they may be eligible for a refund, provided proper documentation is submitted.

Q3. How long does it take to receive a GST refund?
Generally, GST refunds are processed within 60 days from the date of application. However, exporters receiving IGST refund on exports often get it faster (within 7–15 days).

Q4. What happens if there’s an error in the refund application?
The GST officer may issue a deficiency memo, and you’ll be required to file a fresh application after correcting the errors.

Q5. Is refund under Inverted Duty Structure applicable to all goods?
No, certain goods are notified by the government as ineligible for refund under Inverted Duty Structure.

Q6. How do I claim IGST refund for exports?
If you’ve paid IGST during exports, the shipping bill will be treated as the refund application once the GSTR-1 and GSTR-3B are filed. Ensure invoice details match.

Q7. Do I need a CA certificate for claiming GST refund?
For refunds exceeding ₹2 lakh, a certificate from a Chartered Accountant or Cost Accountant may be required.

Q8. Can I claim GST Custom Refund for services imported?
No, GST Custom Refund generally applies to goods, not services. For services, the input tax credit can be claimed if eligible.

Q9. What if my refund is delayed beyond 60 days?
If the refund is not issued within 60 days, the government will pay interest at the rate of 6% per annum on the refund amount.

Q10. Can GST refunds be adjusted against future tax liability?
Yes, in some cases, you can request to adjust the refund against your future GST liabilities instead of a cash payout.