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September 8, 2025

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Basics of GST

GST Refund Guidelines for Home Buyers & Insurance Holders

Indian indirect tax regime has been simplified by Goods and Services Tax (GST), but at the same time, it has also been distressing people such as flat purchasers and insurance policyholders as well. The most common issue is the payment of additional GST either due to flat booking cancellation, policy cancellation, or due to excess charging by the service provider. To a property buyer, one percent of GST on a costly property translates into lakhs of rupees. To insurance policy holders, 18% GST would typically be levied over premium, and in case policies are requested to be cancelled within free-look period, refund process becomes the requirement.

The silver lining? GST law under Section 54 of the CGST Act, 2017 clearly defines refund eligibility, timelines, and procedures for such situations. This blog is a step-by-step guide to GST refund rules for homebuyers and insurance policyholders in 2025, with rules of compliance and real-life scenarios to ease your journey. At the end of it, you will precisely know who is eligible to recover refunds, how to recover them, what documents are required, and how much time it would consume.

GST Refund Basics

It is crucial to know the basics of GST refund prior to delving into lengthy cases.

What is GST Refund?

A refund of GST is the recovery of excess paid GST by the government. Refund can be due to the cancellation of services, incorrect payment of tax, export transactions, or due to availability of Input Tax Credit (ITC). Refund under GST law has to be made within 2 years from the "relevant date." It is made online through the GST portal in the form of some forms.

Forms for Refund

1. RFD-01 / RFD-01A – Straightforward application for refund of GST.‍

2. RFD-11 – In case of exporters filing a claim under LUT.

Refunds are tracked against an ARN (Application Reference Number).

Table: Types of GST Refund Claims

GST Refund Rules for Home Buyers

Purchasing a house is amongst the largest investments in India, and GST impacts the price of the house considerably. GST was imposed on under-construction homes from July 1, 2017, at 1% (affordable housing) and 5% (other residential property) without allowing for Input Tax Credit (ITC). In actual real-life situations, however, the owners are left to pay additional GST or get pushed into a situation where the refund cycle has to be undertaken.

Under what circumstances is Home Buyer Entitled to Refund of GST

1. Flat Cancellation – If you had booked a flat under construction, paid GST but cancelled it afterwards, you are entitled to refund of GST paid.For a deeper breakdown of how unregistered individuals can claim GST refunds in such cases, check our detailed guide here: GST Refund on Flat and Insurance Cancellations for Unregistered Buyers.

2. Builder's Project Cancellation – If the project itself was cancelled or put on hold forever, the buyers have to be refunded GST paid.

3. Wrong GST Collected – If builder mistakenly collected excess GST (e.g., 18% where only 5% is due), you are eligible to claim a refund.

4. Surplus Input Tax Credit (Builder's side) – Builders, at times, recover GST from customers inappropriately; refund claims are allowed.

Refund Process for Home Buyers

1. File refund application in Form RFD-01A on GST portal.

2. Adjoin invoices, cancellation notice, builder's certificate, and payment receipts.

3. Refund is given by jurisdictional GST officer.

4. Refund is deposited in buyer's bank account within 60 days.

Refund Procedures of GST for Insurance Holders

Insurance is a service, and 18% GST on the premium (health, life, general insurance). But in case the policy is surrendered or cancelled. Policyholders can then claim back the GST value of the premium in such cases.

When Insurance Holders Can Claim Refund

1. Free-Look Cancellation (within 15 days) – If someone cancels a new insurance policy within the free-look, insurers need to refund premium as well as GST.
2. Policy Surrender (Life Insurance) – You are eligible for claiming GST on unused premium balance if you surrender the policy during the pre-maturity period.
3. Wrong GST Charged – Example: GST at 28% when actually it is 18% by mistake.
4. Double GST Deduction – In case of deduction of GST twice in one premium transaction.

Refund Process for Insurance Holders

1. Insurer refunded directly (and not policyholder filing RFD-01).
2. While insurer does not, policyholder submits on GST portal along with receipts and insurer's declaration.
3. Refund in 30–60 days.

Key Takeaway: Insurance holders must always verify GST on premium receipts as an incorrect GST rate is a frequent error. Easy claim of refund is done through e-records. And, Insurance refunds are just one part. To fully understand GST on insurance claims, ITC eligibility, and compliance rules for health, motor, fire, and business insurance.

Documents Mandatory for GST Refund Applications

Lack of documents or inadequate documents are some of the largest causes refund is taken or postponed. Be you a house purchaser or insurance policyholder, proper documents you require.

Essential Documents for GST Refund

1. GST Refund Application (RFD-01A) submitted on GST portal.
2. PAN & Aadhaar information of Claimant.
3. Bank account information (for crediting refund).
4. Evidence of payment – challans, bills, receipts.
5. Declaration by the supplier (builder/insurer) in event of cancellation or excess amount paid under GST.
6. CA Certificate (in the event of refundable amount exceeding ₹2 lakh).

Step-by-Step Refund Filing Process under GST

Applying for a GST refund is a lengthy process, but now thanks to the GST portal, it's extremely simple. Just follow this easy step-by-step procedure.

Step 1: Login to GST Portal

1. Go to www.gst.gov.in

2. Login with GSTIN/credentials (for buyers/insurers, usually on supplier side; but citizens can do so too in exceptional circumstances).

Step 2: Visit Refund Section

1. Go to Services → Refunds → Application for Refund

2. Select category – Excess GST paid, cancellation refund, incorrect GST charged, etc.

Step 3: Fill Form RFD-01A

1. Enter details such as supplier GSTIN, invoice number, date, value of transaction, GST charged.

2. Scan documents (invoice, cancellation letter, proof of payment) and upload.

Step 4: Uploading Supporting Documents

1. Emergency attachments are: invoices, declaration, CA certificate (if > ₹2 lakh).

2. Maximum size of attachment per file: 5 MB.

Step 5: ARN Generation

1. Then an Application Reference Number (ARN) is generated.

2. ARN allows status tracking of refund application.

Step 6: GST Officer Acknowledgement

1. Jurisdictional GST officer acts upon the application.

2. Queries (if any) are brought forth within 15 days.

Step 7: Refund Sanction Order

1. Files pending, refund is sanctioned.

2. Refund is credited to bank account of the applicant within 30–60 days.

Common Problems in Claiming GST Refunds

Even though GST refunds are statutory, operational problems tend to discourage the process. Home buyers and insurance policy holders are likely to fall prey to such problems:

Principal Challenges

1. Document mismatches – Invoice details not aligning with GST portal records.A common worry is when the seller doesn’t deposit GST. Here’s how to safeguard your Input Tax Credit (ITC): Buyer Not Responsible for Non-Payment of GST by Seller
2. Incorrect HSN/SAC code – Insurers or contractors with erroneous codes result in rejection.
3. Slow response by GST officers – In spite of defined clear timelines, processing takes more than 60 days.
4. Multiple follow-ups are required – Applicants are required to provide clarification.
5. Unaware of the provisions – A majority of buyers/holders are unaware that they are entitled to a refund.
‍

Key Takeaway: Active monitoring and record-keeping can reduce 70% of refund delay.‍

Smooth GST Refund Best Practices

Prevent delays, rejections, or disputes by house buyers and insurance holders with these best practices:

Pro Tips for Home Buyers

1. Always check builder's valid GSTIN before booking.
2. Ask for GST-compliant invoices (mention HSN code, GST rate, and GSTIN).
3. On cancellation, take official cancellation letter & builder declaration.
4. Track refund application thru ARN on GST portal.

Pro tips for Insurance Holders

1. Verify whether insurance product is exempt from GST (life and health insurance are exempted).
2. At the time of cancellation/surrender, obtain refund declaration from the insurer.
3. Keep receipts of premium for ITC eligibility (corporate insurance).
4. Use GST software or seek the assistance of consultants if refund amount exceeds ₹2 lakh.

Conclusion

Homebuyer and insurance policy holder refund policies are essential to the process of preventing consumers from overpaying and businesses from going rogue. Canceled property reservations, insurance policy surrender, or excessive GST payment — refunds are legal if they are made in time along with proper documentation.

FAQs

1. Is a home buyer eligible to claim GST refund in case cancellation of flat booking is made?

Yes. On cancellation, the builder will have to issue credit note and refund the GST paid back, which can be reclaimed by the buyer back.

2. How much time will it take after filing of RFD-01 to receive GST refund?

As a matter of normal practice within 60 days, unless documents are incomplete.

3. Whether GST is applicable on life insurance premium?

Yes. 18% GST is charged on life insurance, but refund is claimable on cancellation or surrender according to rules.

4. What is required for GST refund against insurance policy cancellation

Cancellation policy letter, payment of premium receipt, GST invoice, and insurer's declaration.

5. Can GST refund be claimed after 2 years?

No. Application for refund should be submitted within 2 years from the relevant date.

6. Is corporate consumer entitled to ITC on insurance GST?

Yes, business can avail Input Tax Credit (ITC) if insurance premia are to be paid on behalf of employees by law.

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