Payment of Tax under GST – Input Tax Credit and Refund

The Goods and Services Tax (GST) has been implemented in India with the aim of simplifying the indirect tax structure for businesses. One of the key features of GST is the Input Tax Credit (ITC) mechanism. In this article, we will discuss the payment of tax under GST along with ITC and refund.

Payment of Tax under GST

Under GST, the payment of tax is done through the online portal of the GST Network (GSTN). The taxpayer has to first login to the GSTN portal using their credentials and then click on the ‘Payment’ tab. They can then select the tax period for which they want to make the payment and the type of tax they want to pay. The portal will then generate a challan which the taxpayer can use to make the payment.

The payment of GST can be made through various modes such as net banking, debit card, credit card, NEFT/RTGS, etc. After the payment is made, a receipt will be generated which the taxpayer can download and keep for their records.

Input Tax Credit (ITC)

ITC is a mechanism whereby a taxpayer can claim credit for the tax they have paid on their purchases of inputs used in the course of their business. This credit can be used to offset the tax liability on the output supplies made by the taxpayer. ITC is available for all goods and services used in the course of business, except for a few exceptions such as motor vehicles and goods used for personal consumption.

To claim ITC, the taxpayer must have valid tax invoices and other documents such as debit notes and credit notes. They must also ensure that their suppliers have filed their GST returns and paid the tax they have collected from the taxpayer. The ITC claimed by the taxpayer is subject to verification by the tax authorities and any discrepancy can result in penalty and interest.

Refund

Under GST, a taxpayer can claim refund of the tax paid on their purchases if the input tax credit exceeds the output tax liability. This can happen if the taxpayer’s business is incurring losses or if their output supplies are exempt or zero-rated. The refund can also be claimed if the taxpayer has paid tax on their exports or if they are a supplier providing goods or services to a Special Economic Zone (SEZ) unit or developer.

To claim refund, the taxpayer has to file an application in the prescribed form on the GSTN portal. The application has to be supported by relevant documents such as invoices, bank statements, etc. The refund will be processed by the tax authorities and credited to the taxpayer’s bank account. Any delay in processing the refund can result in interest payable to the taxpayer.

Conclusion

The payment of tax under GST, along with the ITC mechanism and refund, can be complex and time-consuming for businesses. It is important for businesses to be aware of the rules and regulations related to GST and follow them diligently to avoid any penalties or interest. The GSTN portal has made the process of payment and refund easier for taxpayers, but it is important to ensure that all the documents and details are accurate and up-to-date.