GST Payments and Refunds: Process, Rules, and Filing Guidelines
- Rajesh Kumar Kar
- Dec 7, 2025
- 11 min read
Introduction
For any taxpayer, GST payments and refunds are essential as they involve money. The GST law outlines the procedures for filing forms and returns to request GST refunds and using challans to make GST payments. Depending on the net GST liability, GST payment is required when filing a GSTR-3B. At the same time, taxpayers can claim refunds later if they are eligible for them. Therefore, it is critical to be aware of both concepts to stay ahead of compliance and claim the rightful refund amounts.
Table of Contents
What are GST Payments?
All GST-registered firms are required to make monthly GST payments. According to current GST regulations, GST returns must be filed each month, and GST payments must be made each month after accounting for any available input tax credits that are listed in the GSTR-3B. According to the current GST regulations, monthly GST payments must be completed by the 20th of the following month; for example, December 2018 GST payments must be made by January 20th, 2019.
Types of GST Payments
The tax that must be paid under GST is primarily split into three categories:
IGST: IGST is due at the time of interstate supply (paid to centre).
CGST: When making supplies within the state, CGST must be paid (paid to centre).
SGST: When producing supplies within the state, SGST must be paid (paid to state).
A dealer must make these payments in addition to the ones mentioned above.
Tax Deducted at Source (TDS): This method allows the dealer to deduct tax before paying the supplier. For instance, a government organisation contracts with a contractor to lay a road, with the contract value being Rs. 10 lakh. TDS at the rate of 1%, or Rs 10,000, will be subtracted from the total sum when the government agency pays the builder.
Tax Collected at Source (TCS): E-commerce aggregators are the primary users of TCS. This implies that every dealer who sells online will be paid after a 2% TCS deduction. As of right now, this clause has been loosened and will not apply to government notifications.
Reverse Charge: The recipient becomes responsible for paying taxes instead of the supplier of goods and services.
Interest, penalty, fees, and other payments.
Calculation of GST Payments
A few crucial elements determine how much GST a supplier or recipient must pay:
Gross GST Liability: This represents the registered business's or individual's gross GST liability.
TDS (Tax Deducted at Source): The dealer uses this method to deduct taxes before paying the supplier. If TDS is paid, it is subtracted from the gross GST obligation.
TCS (Tax Collected at Source): E-commerce aggregators frequently employ the TCS method for sales made on their website. If paid, TCS is subtracted from the gross GST obligation.
ITC (Input Tax Credit): This unique GST structure allows registered firms and individuals to lower their overall tax burden. To the extent that GST has been paid on inputs acquired by the registered business or individual, the adoption of ITC reduces the GST burden on a supplier's output.
Net GST Payable = Gross GST – (TDS/TCS+ITC)
Additionally, interest and late fees are not eligible for ITC. It is necessary to pay interest and late fees in cash. Different sorts of dealers require different methods of computation.
Regular Dealer: A regular dealer can claim Input Tax Credit (ITC) on his purchases and is responsible for paying GST on outgoing shipments. The difference between the external tax liability and the ITC is the amount of GST that an ordinary dealer must pay.
Composition Dealer: A composition dealer's GST payment is relatively easier. When a dealer chooses to use the composition plan, they must pay a set proportion of GST on the entire amount of supplies they send out. Depending on the nature of a composition dealer's operation, GST must be paid.
Electronic Ledgers for GST Payments
Three different kinds of electronic ledgers are used in the GST site to handle payments and refunds. Businesses and individuals who have registered for GST can access these by logging into their accounts on the official GST portal. Some further information about these electronic GST ledgers is as follows:
Cash Ledger: This ledger includes information on all deposits made by the taxpayer, including cash deposits and TCS/TDS transactions conducted by third parties on behalf of the GST-registered individual or entity. Several GST-related payments can be made using the cash ledger balance.
Credit Ledger: The GST credit ledger mainly shows information on input tax credit, or ITC, that is relevant to the registered firm or individual. This ledger's credit balance can only be used to pay GST-related taxes. However, penalties, late fees, and interest cannot be paid with the remaining amount.
Liability Ledger: This electronic GST ledger includes information on the registered business's or individual's whole monthly tax liability. Any late fees or interest that the taxpayer may be subject to will also be included in this ledger. This can be viewed and accessed from the GST taxpayer's dashboard, along with information on the other ledgers.
Who Should Make GST Payments?
These dealers must pay the GST.
If there is a GST liability, a registered dealer must pay the tax.
Under the Reverse Charge Mechanism (RCM), registered dealers must pay taxes.
Dealers required to deduct TDS
E-commerce operators must collect and pay TCS.
How to make GST Payments?
There are two ways to pay GST.
Using the Credit Ledger for Payment: Dealers may use the ITC credit to pay GST. Only tax payments are eligible for the credit. ITC cannot be used to pay interest, penalties, or late fees.
Using the Cash Ledger for Payment: You can pay GST online or offline. For both online and offline GST payments, the challan must be created on the GST Portal. Online tax payment is required when the tax liability exceeds Rs 10,000.
When to Make GST Payments?
GST must be paid by the 20th of the next month, which is when the GSTR 3 is filed.
Penalties on Delayed GST Payments
According to the GST Act's existing rules, each month's GST payment is due on the 20th of the following month; for example, December 2018's GST must be paid by January 20th, 2019. The penalties for late or incomplete GST payments are as follows:
There are late costs of Rs. 200 per day for late GST payments (Rs. 100 for late CGST and Rs. 100 for late SGST). However, there isn't a late fee for paying IGST beyond the deadline. In this instance, the maximum late fee is Rs. 5000.
In addition to the late fee, unpaid taxes are subject to interest charges of 18% annually. These interest costs must be computed by the taxpayer and paid as appropriate.
A larger fine is associated with short-term GST payment, or paying less than what is due according to the GST computation. In certain situations, the penalty is the greater of Rs. 10,000 and 10% of the unpaid GST. In addition, the shortfall must be paid back, plus any relevant interest at an annual rate of 18%.
What are GST Refunds
If registered taxpayers have paid more Goods and Services Tax than their actual tax burden, they can apply for a GST refund from tax authorities. The GST-registered entity must submit a refund application in order to be eligible for the due refund.
Reasons to Apply for a GST Refund
Some of the main justifications for obtaining a GST refund are as follows:
If an export supplier's input tax credit (ITC) surpasses the amount of GST due or if that an export rebate claim is made.
If the GST-registered taxpayer unintentionally paid extra tax.
If there is a pending balance in the GST credit ledger as a result of a tax exemption or zero tax.
By UN agencies and foreign embassies when they make purchases in India.
By international visitors who are eligible for a refund of GST.
If the supplier receives credits or discounts as a result of credit notes being issued.
If a refund is required following the completion of the provisional assets.
GST Refund Application Processing Times
According to current regulations, a GST refund application must be processed within 30 days of the claim being filed. The review of the refund application may take longer in some circumstances, such as when an audit is requested for whatever reason.
Calculation of GST Refunds
Let's consider a straightforward example of an overpayment of taxes. For the month of September, Mr. X owes Rs 30,000 in GST. However, Mr. X accidentally paid Rs 3 lakh in GST. Mr. X can now request a reimbursement for the excess GST payment of Rs 2.7 lakh that he made. Refund claims must be made within two years of the payment date.
Time Limit to Claim GST Refunds
Refund claims must be made within two years after the relevant date. In each instance, the pertinent date varies. In certain instances, the following dates are pertinent:
Reason for claiming GST Refund
| Relevant Date
|
Excess payment of GST | Date of payment |
Export or deemed export | Date of despatch/loading/passing the frontier |
ITC accumulates as output is tax exempt or nil-rated | Last date of financial year to which the credit belongs |
Finalisation of provisional assessment | Date on which tax is adjusted |
Documents Required to Apply for GST Refund
The essential paperwork needed to submit a GST refund claim is shown below:
Form GST RFD 01: This form is accessible on the Official GST Portal and can be completed and filed online via the common GST portal or electronically through a Facilitation Centre that has been notified. The main form that must be completed and filed in order to request a GST refund is the GST RFD-01.
Copy of Order: If a GST refund is owed owing to a court or appellate authority's order, supporting documentation is required. The order reference number and a copy of the order must be submitted with the refund application as supporting documentation.
Statement of Shipping Invoices: A statement containing the date and quantity of shipping bills or bills of export, as well as copies of pertinent export invoices, must be submitted as supporting documentation if an export provider requests a GST refund.
Statement of Invoices: A statement with the date and quantity of invoices is the relevant documented proof of reimbursements if the GST-registered company supplies products made in a SEZ (special economic zone).
Copy of Final Assessment Order: If the GST refund is being processed as a result of the finalisation of the provisional assessment, a copy of the final assessment order and the assessment order reference number must be submitted.
Form GST RFD 02: This form is essentially an acknowledgement that GST RFD 01 was used to file and submit the claim for a GST refund. Based on data supplied by the taxpayer in GST RFD-01, the GST RFD-02 is automatically generated and accessible through the common GST Portal. It is crucial to remember that the GST RFD-02 does not ensure that the taxpayer will receive GST refunds; rather, it is merely an acknowledgement of receipt of the refund application.
Interest on GST Refunds
The government is responsible for paying interest on the outstanding refund amount at a rate of 6% annually in addition to the refund itself if there has been a delay in crediting the refund to the registered firm or individual based on prior GST payments. Section 54 (section 12) and Section 56 of the GST Act, 2017 govern the applicability of GST refunds. If a delayed refund is provided due to an order from an appropriate appeal authority, the government is required by Section 56 to pay a higher interest rate of 9% on GST refunds.
Form GST RFD-05, which is created by the relevant government agency, is used to give the taxpayer information about the interest due on GST refunds. The total amount, the time frame for which interest on the refund is due, and the total amount payable as interest are important details found in the GST RFD-05. According to current regulations, the government only has to pay interest on the amount that has to be reimbursed; it does not have to pay interest on any unused input tax credit that is present in the taxpayer's computerised ledger.
Latest Updates on GST Refund
8th May, 2025: The GSTN has produced a new advisory. The procedure for filing refunds for services exported with tax payment, supply to SEZ units or developers with tax payment, and presumed export has been modified. Refund applications can now be submitted without a tax period declaration. Rather, choose the refund category, submit invoice-based information, upload qualifying invoices, and refer to statements 2 (exports), 4 (SEZ supplies), and 5B (Deemed exports). Make sure that GSTR-1 and GSTR-3B have been submitted up to the refund application deadline. The recipient of the considered export makes the same adjustments for the return.
28th August, 2025: In order to clarify system modifications for permitting refunds due to assessment, enforcement, appeal, revision, or any other order (ASSORD), GSTN has released an advisory. The modifications are listed below:
Refunds can only be claimed when the demand amount is negative, regardless of the Demand ID status.
If the cumulative balance is positive or zero, taxpayers are eligible for refunds even if the minor head has a negative balance.
RFD-01 refund applications only automatically fill in with negative balances.
The most recent demand order associated with a negative balance, such as an order-in-original, rectification order, or appeal order, is automatically suggested by the GST portal.
Conclusion
Accuracy and promptness are crucial whether filing for a refund or paying GST. Missed refund opportunities can tie up important operating capital, and payment delays result in fines and operational disruptions. Businesses may maintain compliance, lower stress levels, and maximise the GST regime by using best practices and utilising dependable accounting software for automation.
Frequently Asked Questions
What is a GST payment?
The tax that companies pay on the supply of goods and services is referred to as GST. According to the GST law, it is an obligatory payment to the government.
How do I make a GST payment?
Create a challan for the GST payment you want to send by logging into the GST system. Click "Make Payment" after selecting a payment method.
How to check GST payment status?
You do not need to log in to see the payment status. Go to the Services tab after visiting the GST portal. After selecting Payments, select Track Payment Status. Enter your captcha code, CPIN, and GSTIN. Select "Track Status."
What is a refund under the GST Act?
A refund under GST may comprise the following, per Section 54 of the CGST/SGST Act:
Any remaining funds in the electronic cash ledger following the filing of a GST return;
Any input tax credit that was not used, such as nil-rated supplies that were supplied without paying taxes;
Tax paid on any inward supplies made by an embassy, consulate, or organisation covered by the United Nations Privileges and Immunities Act, 1947.
What is the time limit for claiming a refund under GST?
Generally speaking, you have two years from the relevant date to file a valid refund claim under GST. Section 54 of the CGST/SGST Act defines the term "relevant date," which might change depending on the kind of supply.
What is the minimum amount for a GST refund?
The GST refund threshold is Rs. 1000. The excess GST paid for smaller amounts is shown as a balance in the electronic cash ledger and can be used by the GST-registered firm to offset future GST obligations.
Can a GST refund claim be rejected without any reason?
No. If the assessing officer rejects the GST refund application, the applicant must be given a valid explanation in the form GST RFD-08.
What is the amount of the provisional refund and how soon does it have to be provided?
For nil-rated products that the applicant has submitted, the provisional refund amount under GST is up to 90% of the refund amount claimed. According to the most recent GST regulations, a provisional refund must be given within seven days of the date the completed refund claim application is acknowledged.
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