Payments & Refunds

Payments under GST

With Indian GST have three tax components, the taxpayer will have to take care of payment of all three components. These are CGST, SGST (or UTGST) and IGST. Plus at applicable places, interest, late fees and penalty may also be required to be paid. The tax is generally required to be paid by the supplier of goods and services. However, in certain cases, the recipient (reverse charge) or some third person (Electronic commerce operator) may be required to pay GST to the Government.

The GST portal will maintain the following three payment ledgers for every taxpayer to keep track of liabilities, credits, payments and refunds:

  • Electronic credit ledger
  • Electronic cash ledger
  • Electronic liability ledger

Electronic credit ledger

Electronic credit ledger will maintain the details of all input tax credits received by the taxpayer. It will be automatically updated by the GST returns and no manually entry would be allowed. Following key types of ITC’s would be updated in the electronic credit ledger:

  • Credit balance uploaded thorugh  TRANS 1
  • Credit on supplies received from registered persons
  • ITC distributed by ISD
  • ITC eligible after payment of tax under reverse charge

Electronic Cash Ledger

This will be like a e-wallet for the taxpayer wherein the taxpayer can deposit the money for use in payment of taxes. In case of deposit of excess money, the said amount can be easily sought as refund. Deposits in electronic cash ledgers can be made by any of the following ways:

  • Internet Banking through authorized banks
  • Credit card or Debit Card
  • Over Counter Payment up to 10,000

Electronic Liability Ledger

All tax, interest, penalty or late fee liabilities will be debited to the electronic payment ledger and will be available on the GST portal dashboard of the taxpayer.

Procedure to pay tax GST liabilities

First the balance in electronic credit ledger can be utilized for payment of GST liability appearing in electronic liability ledger. In case some liability still remains, the same can be paid using balance in electronic cash ledger.








Refunds under GST

Nowdays we all appreciate the speed with which the income tax refunds are disbursed to assesses. One of the reason of this is that the income tax returns are online and all credits of TDS are cross checked and displayed in Form 26AS. The Government intends to bring in an online and similar refund procedure under GST as well. Though refund applications will be state wise and separate refund calculations will have to be submitted for SGST, CGST and IGST, the procedure for refund would be simpler.

Refund can GST can arise primarily on account of two reasons:

  • Zero rates supplies (exports or supplies to SEZ)
  • Inverted duty structure i.e. tax on inward supplies is more than tax on outward supplies

Why does a refund arise in case of zero rated supplies

Exports or supplies to SEZ have been kept as zero rated supplies. This means that supplier is not required to pay GST on his outward supplies but at the same time, he is eligible to avail input tax  credit on inward supplies used for making such outward supplies. Now if no tax is payable on outward supplies, the tax paid on inward supplies will accumulate. The Government allows refund of this accumulated tax on inward supplies.

Another scenario is that the person making zero rated supply can opt to pay IGST on such supplies using his input tax credit or balance in cash ledger. The Government allows refund of IGST paid on such zero rated supply.

How soon will be refund sanctioned? 

It has been advertised by  the Government that 90% of the refund in case of exports will be sanctioned within 7 days and balance in 60 days of the refund application. However, if we critically examine the law, it is within 7 days after acknowledgement of receipt of claim in RFD-02 is issued. The time limit for issuance of RFD-02 is 15 days from the date of application of refund claim.

Documents to be submitted for refund claim

The refunds under GST will require submission of minimal documentation. Since all the credits will be matched online, physical submission of documents of all inward supplies would not be required.

Whether refund is available of all inputs, input services and capital good?

Refund is available of accumulated ITC on inputs and input services.

Refund in case of inverted duty structure

This is a one of the key benefits introduced in GST and will be helpful for industries such as pharma having inverted duty structure. The law allows refund of ITC where the rate of GST on inputs is more than the rate of GST on outward supplies. Such refund claims is proposed to be sanctioned within 60 days of the refund application.