The Goods and Services Tax (GST) system in India has simplified the tax structure and made it more transparent. For exporters, one of the key benefits under GST is the ability to claim a refund on the GST paid on inputs used for export activities. This ensures that exports, which are considered a zero-rated supply, are not burdened by indirect taxes. However, to ensure that only eligible businesses can benefit from the GST refund system, the government has established specific eligibility criteria for exporters to follow when claiming GST refunds.
In this blog, we’ll dive into the detailed eligibility criteria exporters need to meet in order to claim their GST refunds.
Also Read: GST refund claim process
1. Export of Goods or Services
The most basic eligibility requirement for claiming GST refunds is that the business must be involved in the export of goods or services. Under the GST law, exports are treated as a zero-rated supply, meaning exporters do not have to pay GST on the goods or services they export. However, the exporters still incur GST on the inputs used in the production of exported goods or services. This input tax paid on raw materials, services, or any other inputs is refundable under the GST refund scheme.
To be eligible for the refund, exporters need to provide evidence that their goods or services have been exported and qualify as zero-rated supplies.
2. Valid GST Registration
Only businesses that are registered under GST are eligible to claim a refund. An exporter must have a valid GST registration to be part of the GST system and apply for a refund. This is essential because the refund process is linked to the GST mechanism. If an exporter is not registered under GST, they cannot claim the refund, regardless of whether they meet other criteria.
Furthermore, exporters must ensure that their GST registration details are up-to-date and in good standing before applying for refunds.
Also Read: GST Validator
3. Timely Filing of GST Returns
One of the most crucial aspects of claiming a GST refund is the timely and accurate filing of GST returns. Exporters must submit GSTR-1 and GSTR-3B returns, which include details of the exports made and the GST paid on inputs. These returns need to be filed on time to ensure that the refund application is processed without any delays.
GSTR-1: This return includes details of outward supplies, including exports.
GSTR-3B: This return is a summary of the input tax credit (ITC) claimed and taxes paid.
If exporters fail to file their returns on time or submit incorrect information, their refund claims may be rejected or delayed.
4. No Outstanding Tax Liabilities
Exporters can only claim GST refunds if they have no outstanding tax liabilities. This means that all their tax dues must be cleared before applying for the refund. If there are any pending dues or if the exporter has failed to comply with GST rules in the past, their refund application will not be processed until the dues are cleared.
It is essential for exporters to ensure that they have no pending liabilities when they apply for a GST refund.
5. Zero-Rated Supply Conditions
As mentioned earlier, exports are zero-rated supplies under GST, which means no GST is charged on exports. However, to claim a refund, the exported goods or services must meet the zero-rated supply conditions. Exporters must ensure that their exports qualify as zero-rated supplies. This also includes exports made to Special Economic Zones (SEZs). If the goods or services do not qualify as zero-rated, the exporter will not be eligible for a refund.
6. Proper Documentation
Proper documentation is crucial for any GST refund claim. Exporters must submit specific documents to prove that they have paid GST on inputs used for exports and that the goods have been exported. These documents include:
Sales or Export Invoices: These provide proof of the sale or export of goods and services.
Shipping Bills/SEZ Endorsement: These documents prove that the goods have been shipped out of India or exported to SEZs.
Proof of Payment of GST: Bank statements, challans, or receipts showing the GST paid on inputs.
Export General Manifest: A document that proves the goods have left the country.
Purchase Register: A detailed record of purchases made and the GST paid on these inputs.
Without these documents, the refund application may be delayed or rejected.
7. Timely Application for Refund
There is a time limit for claiming GST refunds. Exporters must apply for the refund within two years from the end of the financial year in which the export was made. Any claim made after this period will be rejected. Therefore, exporters need to keep track of the timelines and ensure that they submit their refund claims within the stipulated period.
8. Refund of Unutilized Input Tax Credit (ITC)
Exporters can claim a refund of the unutilized Input Tax Credit (ITC) on inputs used in the export process. However, if the exporter has already utilized the ITC for other tax liabilities, they may not be eligible for a refund. Refund claims are typically made for unused or unutilized ITC.
Also Read: GST Refund for Exporters
Conclusion
Claiming a GST refund is an essential process for exporters, enabling them to reclaim the taxes paid on inputs used for the production of exported goods or services. However, to ensure that their claims are processed smoothly, exporters must meet the eligibility criteria outlined by the GST law. These include being engaged in export activities, having a valid GST registration, filing returns on time, maintaining proper documentation, and ensuring there are no outstanding tax liabilities.
By adhering to these criteria, exporters can easily claim their GST refunds, improve their cash flow, and support the growth of their business.
For an easy and accurate way to claim your GST refund, use the MYGST Refund Calculator for GST Refund — a reliable tool that simplifies the refund process and gives you accurate estimates!
