New
February 20, 2023
By
Pranjal Gupta

GST Refund of unutilised Input Tax Credit (ITC) in India

Goods and Services Tax (GST) is an indirect tax that has replaced all the previous indirect taxes in India. GST has made tax compliance easier for businesses, but there are still many issues that businesses face. One such issue is the refund of unutilised Input Tax Credit (ITC).

What is Input Tax Credit (ITC)?

Input Tax Credit (ITC) is the credit that a business can claim for the taxes paid on the inputs used in the production of goods or services. In simple terms, it is the tax paid on inputs that can be set off against the tax liability of the business. For example, if a business purchases raw materials worth Rs. 1000 and pays a GST of Rs. 180 (18%), it can claim an ITC of Rs. 180 and set it off against its GST liability. If the business has a GST liability of Rs. 200, it can pay only Rs. 20 (200 – 180) as GST.

What is GST Refund of unutilised Input Tax Credit?

When a business has an ITC that is more than its GST liability, it can claim a refund of the unutilised ITC. For example, if a business has an ITC of Rs. 5000 and a GST liability of Rs. 4000, it can claim a refund of the unutilised ITC of Rs. 1000.

Conditions for claiming the GST Refund of unutilised Input Tax Credit

There are certain conditions that a business must fulfill to claim the GST refund of unutilised ITC:

  1. The business should not have any pending tax liabilities or returns.
  2. The business should have filed all the GST returns for the relevant period.
  3. The business should have paid all the taxes due for the relevant period.
  4. The business should have a positive balance of ITC in its electronic credit ledger.

How to claim the GST Refund of unutilised Input Tax Credit?

A business can claim the GST refund of unutilised ITC by filing an application in Form GST RFD-01A on the GST portal. The application should be filed within two years from the end of the relevant financial year in which the ITC arose. The application should be accompanied by the following documents:

  1. Statement of inward supplies for the relevant period.
  2. Statement of outward supplies for the relevant period.
  3. Statement of ITC for the relevant period.
  4. Copy of the GST return filed for the relevant period.
  5. Copy of the invoice or bill of supply for which refund is claimed.
  6. Any other document as may be prescribed.

After filing the application, the business will receive an acknowledgement in Form GST RFD-02A. The application will be processed by the GST department, and if everything is found to be in order, the refund will be granted within 60 days from the date of filing the application.

Conclusion

GST has made tax compliance easier for businesses, but there are still many issues that businesses face. The refund of unutilised ITC is one such issue. Businesses should ensure that they fulfill all the conditions for claiming the GST refund of unutilised ITC and file the application with all the required documents to avoid any delay in getting the refund.

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