How to Calculate GST Payments and Refunds in India

Narendra Kumar

01 Jun, 2023

Today in this article we will tell you about how to calculate the GST payments and Refunds in India. There is an ample number of benefits embed with the GST registration in India which you will come to acknowledge in our article. This article is describing How to Calculate GST Payments and Refunds in India.

Under GST Registration you need to file your return every month like GSTR-1 is to be filed to report Sales, GSTR-3B is required to be a file to report the ITC. Also if a refund is required to be claimed the same can be done by filing an RFD-1 form to the online GST portal^[1] .

The very first thing which we do after getting GST registration is the payment of the GST tax. Now let us learn how to calculate gst payment and refunds under GST registration in India.

A. Payments to be made in GST Registration –

1. What kind of GST payments to be made under GST registration?

GST mainly covers three taxes which are as follows-

• IGST- the tax paid at the time of interstate supply and paid to center
• CGST- the tax paid at the time of making supply within the state and paid to center
• SGST – tax paid at the time of making supply within the state and paid to the state

Take a Note

TDS or Tax Deducted at Source under GST Registration– apart from the payment one more payment is needed to be made by the dealer before making payment to the supplier that is TDS.

For an example-

A government agency gives a tender of road construction to the builder. The contract value is 20 lakhs. The government agency payment to the builder TDS@ 1% (which amounts to 20000) which will be deducted and balance amount will be paid.

• Tax Collected at Source – TCS is mainly for the e-commerce this means that any dealer if sell the product through e-commerce that will receive payment after deducting of TCS @2%
• Reverse Mechanism Charge- the liability of paying the tax shifts from the supplier of goods and service to the receiver.
• Interest, Penalty, Fees and the other payments

2. How to calculate the GST payment under GST registration?

Usually, the Input Tax Credit should be deducted from the Outward Tax Liability to calculate the total GST payment to be made. TDS/TCS will be deducted from the total GST to arrive at the net payable figure. Interest and late fees will be added to arrive at the final amount. However, ITC cannot be claimed on interest and late fees where both the Interest and late fees are required to be paid in cash.

• Regular Dealer

A regular dealer is liable to pay the GST on the outward supplies made and can also claim the Input Tax Credit on the purchase made by him. The difference between the outward tax liability and the ITC is the amount of GST you need to pay.

• Composition Dealer

The GST payment for a composition dealer is piece of cake. A dealer who has opted for the gst composition scheme need to pay the fixed percentage of the GST on the total outward supply he made in the course of business.  The type of business of a composition dealer decides the amount of GST paid.

Total = O.1% for the Manufacture or trader (Goods)

Total = 5% for the Restaurant not serving alcohol

The*Service provider is not eligible for composition scheme

3. Who should make the GST Payment?

The following are the dealers who are required to make the payment-

• A registered dealer who comes under the liability of GST payment, in case
• A registered dealer who covers under Reverse Charge Mechanism
• Every E-commerce operator who collect and pay TCS
• Dealers  that deducts TDS

4. What is the time limit for GST payment?

GST payment should be made when the GSTR 3 is filed that is 20^th of the next month.

5. What is Electronic Ledger in GST?

Following are the ledgers that are to be maintained on the GST portal through electronic mode-

• Cash ledger – this regular will reflect all the transactions that are made in the cash like Cash deposits, TDS or TCS on the account of the taxpayer. This ledger later uses for making any payment on the account of GST.
• Credit Ledger – the credit in this ledger are used for the purpose of payment of the tax only and no other payment like interest, penalty, fees would be paid from this ledger. In this ledger, the Input Tax Credit which you assessed in monthly return will be reflected here.
• Liability Ledger-the total tax liability of a taxpayer for the particular month is presented here. The ledger is displayed on a GST tax payer’s dashboard.

6. How to Make GST Payment?

There are two ways to make the GST payment in India

7. The penalty for non- payment or delay payment

A penalty of 18% is to be paid by the dealer if there is any delay in GST payment or GST paid late or unpaid. Into the bargain, a penalty of Rs 10,000 or 10% is charged on the short paid or unpaid of the tax.

B. Refunds Under GST –

1. What is a GST refund?

When you pay GST more than GST liability then the situation of GST refund comes into the picture. The process of claiming GST Refund is very easy and in a standardized form.  The process is online and set on a time limit.

2. When GST refund can be claimed?

Following are the cases where GST refund can be claimed-

• If payment is made due to mistake or omission
• If the dealer exports any goods or service that comes under the claim of rebate or refund
• Input Tax Credit due to goods being exempted goods or nil rated goods
• Any tax paid on purchase made by the Embassies or UN bodies
• Tax Refund for International Tourists
• Finalization of provisional assessment

3. How to calculate GST Refund?

Understand the calculation of GST refund will be more fun if we do this with an example-

Mr. Ram has the liability of Rs 2, 00,000 for the month of August and due to mistake, Mr. Ram paid Rs 2 Lakh as a GST payment. Now, Mr. Ram has made an excess GST payment of Rs 1, 80,000 which can be claimed as refund under GST payment by him.

4. What is the time limit for claiming the refund?

The time limit for claiming the refund is two years from the date of payment. The following are the relevant date of payment in different cases-

Important Notes to Ponder-

5. • Also if a refund is paid with delay an interest of 24%p.a. is payable by the government.
   • The refund application has to be made in Form RFD 01 within two years from the relevant date.
   • The form should be duly certified by a Chartered Accountant.