GST Payments Process and Claiming GST Refunds

The GST council which is appointed by the Central Government has an important job of setting the GST rates in such a way that the state as well as centre revenues are least affected. The very first step in such a process was to come at the RNR (Revenue Neutral Rate). RNR calculation is done basically on the total consumption expenditure of the country and the total revenue desired.

Three different approaches were studied and analyzed be the Subramanian Committee to come at the RNR. As per the last recommendation of Subramanian Committee, the RNR needs to be pegged around 18%. Depending on the nature and type of the goods/ services, rate of GST is levied on them. The rates are 5%, 12%, 18% and 28%.

Under GST, there is a significant change in tax calculations. As per new tax law, three terms have come up which are IGST (Integrated Goods and Service Tax), CGST (Central Goods and Service Tax) and SGST (State Goods and Service Tax). At loanbaba, you will get detailed instructions on GST payments process and GST claiming process. You will also receive information on GST refunds and GST registration.

For trade within the state, CGST and SGST will be applicable however in inter-state trade IGST will be levied. This concept can be illustrated as, if a person in Mumbai sells goods in Delhi needs to pay IGST however if the same person sells goods in Mumbai itself or even anywhere within the state say Aurangabad, he needs to pay SGST and CGST both.

Payment of Tax under GST

Depending upon the area of work and turnover, currently the individuals pay VAT quarterly or monthly. In case of inter-state trade CST needs to be paid and under current tax law, input tax credit is not allowed. For capital goods, Excise Duty is being levied.

With new tax law, all these taxes will be subsumed by GST. Under GST, payment of tax will be taken to be due when goods are supplied. The GST law facilitates taxpayers to pay taxes via electronics modes viz. internet banking, Debit/ Credit Cards, NEFT or RTGS, the balance of which will be reflected in electronic cash ledger after the payment. Every person who is registered under GST needs to mandatorily maintain tax liability register, electronic input tax credit ledger and electronic cash ledger.

The electronic cash ledger will hold data of penalty, tax, fees paid, interest and payment under IGST, SGST and CGST. All the details pertaining to input tax credit under all heads will be accessible at Electronic Input Tax Credit Ledger. For any liability which arises out of general/ normal course of penalties, notices and return there is Tax Liability Ledger which caters to such requirements.

The credit which is available in electronic input tax credit ledger can be used by the taxpayer in the following ways:

  1. Any credit reversal due to mismatch in amount of credit and that of invoice.
  2. Payment of liabilities resulting out of receipts of demand notices
  3. Fulfilling regular return liability under GST

Input tax credit shall be considered expired if it is not claimed within one year from the date of tax invoice.

Refund under GST

Under the previous law, one could claim excess CST/ VAT annually. Similarly, excess Excise duty can be claimed through duty drawback scheme. The system of the refund for CST, VAT and Excise Duty was quite slow and time consuming.

Now, GST being implemented provides way for improved and fast system of application, calculation, processing and settlement of refunds. The separate returns for individual tax head (IGST, SGST and CGST) will be calculated. For filing such return, an application needs to be filed in GSTN portal. Due to electronic upload/ filing of the return, refund process is automated.

The processing time for refund applications is set to be 60 days under GST model law however the normal turnaround time is as quick as two weeks. GST law also provides provisions of payment of interest (as specified in notification issued by State or Central Government) in case of late payments of refund. The law says that if the individual is not paid with the refund amount within 60 days, the payment needs to be made along with the specified interest which needs to be levied from the date of application up to date of actual refund.