Chapter XI - Refunds [Sections 54 to 58] of the CGST Act, 2017 and Chapter X – Refund [Rule 89 to 97A] of the CGST Rules, 2017 stipulates the provisions relating to refunds.

State GST laws also prescribe identical provisions in relation to refunds.

Further, section 15 of the IGST Act, 2017 prescribes for the refund of integrated tax paid on supply of goods to tourist leaving India.

Export/supply to SEZ developer/unit on payment of IGST

Refund of unutilized ITC– In case of export/supply to SEZ developer/unit without payment of IGST or in case of inverted duty structure, refund of unutilized ITC is available.

Refund of tax paid on the supply of goods regarded as deemed exports may be claimed.

Refund of any balance in the electronic cash ledger after payment of tax, interest, penalty, fee or any other amount payable under this Act or the rules made there under may be claimed [Section 49(6)]

Refund on account of tax paid on a supply which is not provided, either wholly or partially, and for which invoice has not been issued (tax paid on advance payment).

Refund of tax wrongly collected and paid to the Government (i.e. CGST & SGST paid by treating the supply as intra-State supply which is subsequently held as inter-State supply and vice versa) [Section 77 of the CGST Act and section 19 of the IGST Act].

Refund of the IGST paid by tourist leaving India on any supply of goods taken out of India by him [Section 15 of IGST Act].

Tax becomes refundable as a consequence of judgment, decree, order or direction of the Appellate Authority, Appellate Tribunal or any Court.

On finalization of provisional assessment, if any tax becomes refundable to taxpayer (on account of assessed tax on final assessment being less than thetax deposited by the taxpayer) [Section 60]

Refund of taxes on purchases made by UN bodies or embassies etc. [Section 54(2)]

Refund of taxes to the retail outlets established in departure area of an international airport beyond immigration counters making tax free supply to an outgoing international tourist

Refund of advance tax deposited by a casual taxable person/ Non-resident taxable person [Section 54(13)].

Refund of excess payment of tax.

The list is only indicative and not exhaustive. Detailed provisions relating to some of the sections referred above have been discussed in the other chapters at respective places.

Section 54(1)

Any person claiming refund of any tax and interest or any other amount paid by him,

may make an application before the expiry of two years[i] from the relevant date in such form and manner as may be prescribed:

Provided that a RP, claiming refund of any balance in the electronic cash ledger as per section 49(6) may claim such refund in [1][such form and] manner as may be prescribed.

Explanation 2 to Section 54

In following cases “relevant date” means—

(a) Goods exported out of India

where a refund of tax paid is available in respect of goods themselves or, as the case may be, the inputs or input services used in such goods,––

(b) Supply of goods regarded as deemed exports

where a refund of tax paid is available in respect of the goods, the date on which the return relating to such deemed exports is furnished;

[2][(ba) Zero-rated supply of goods or services or both to a SEZ developer/ unit

where a refund of tax paid is available in respect of such supplies themselves, or as the case may be, the inputs or input services used in such supplies, the due date for furnishing of return u/s 39 in respect of such supplies;]

(c) Services exported out of India

where a refund of tax paid is available in respect of services themselves or, as the case may be, the inputs or input services used in such services, the date of––

Other Cases

.

Explanation 1 to Section 54

“refund” includes

- refund of tax paid on zero-rated supplies of goods or services or both or

- on inputs or input services used in making such zero-rated supplies, or

- refund of tax on the supply of goods regarded as deemed exports, or

- refund of unutilised ITC as provided u/s 54(3).

In general cases, Refund may be filed in RFD-01

Rule 89(1)

Any person except persons covered under notification issued u/s 55,

claiming refund of [5][any balance in the electronic cash ledger as per section 49(6) or] any tax, interest, penalty, fees or any other amount paid by him,

other than refund of integrated tax paid on goods exported out of India,

may file [6][, subject to the provisions of rule 10B] an application in RFD-01.

P

Refund of tax paid on export of goods

there is no need for filing a separate refund claim in refund application Form GST RFD 01 since the shipping bill filed by the exporter is itself treated as a refund claim.

Shipping bill filed by an exporter shall be deemed to be an application for refund of integrated tax paid on the goods exported out of India [Rule 96].

[7][1^st Proviso to Rule 89(1)

RP, claiming refund of any balance in the ECaL u/s 49(6),

may claim such refund in the return furnished u/s 39 for the relevant tax period

in GSTR-3 or GSTR-4 or GSTR-7.

Presently, the application for refund of balance in the ECaL is also being filed in Form GST RFD-01A. While filing refund application, the applicant needs to select the reason of refund as ‘Refund on account of excess balance in cash ledger’. Thereafter, the balance amount available in ECal is auto-populated in said refund application. The applicant enters the amount of refund to be claimed and ECal is debited for the amount claimed as refund

After amendments wef 01-10-2022, application can also be made in form RFD-01

2^nd Proviso to Rule 89(1)

in respect of supplies to a SEZ unit or a SEZ developer,

refund application shall be filed by the –

(a) supplier of goods after such goods have been admitted in full in the SEZ for authorised operations, as endorsed by the specified officer of the Zone;

(b) supplier of services along with such evidence regarding receipt of services for authorised operations as endorsed by the specified officer of the Zone.

SM

Export/supply to SEZ developer/unit on payment of IGST

In case where goods and/or services are exported or, goods and/or services are supplied to an SEZ developer/unit, on payment of IGST, subject to such conditions, safeguards and procedure as may be prescribed, refund of such IGST paid on goods and/or services supplied is available [Section 16(3)(b) of IGST Act]

3^rd Proviso to Rule 89(1)

[8][in case of deemed exports, the application may be filed by, -

(a) the recipient of deemed export supplies; or

(b) the supplier of deemed export supplies in cases where the recipient does not avail of ITC on such supplies and furnishes an undertaking to the effect that the supplier may claim the refund]

[9][Explanation to Rule 89(1)

For the purposes of this sub-rule, ― specified officer means a specified officer or an authorised officer as defined under rule 2 of the SEZ Rules, 2006.]

Meaning of Zero Rated Supplies

On finalization of provisional assessment, if any tax becomes refundable to taxpayer (on account of assessed tax on final assessment being less than thetax deposited by the taxpayer) [Section 60].

Refund of taxes to the retail outlets established in departure area of an international airport beyond immigration counters making tax free supply to an outgoing international tourist.

Section 54(2) provides that

A specialised agency of the UNO[ii] or any MFI[iii] and Organisation notified under the United Nations (Privileges and Immunities) Act, 1947, Consulate or Embassy of foreign countries or any other person or class of persons, as notified u/s 55,

entitled to a refund of tax paid by it on inward supplies of goods or services or both,

may make an application for such refund, in such form and manner as may be prescribed, before the expiry of 6 months from the last day of the quarter in which such supply was received.

Section 54(3) provides that

Subject to section 54(10), RP may claim refund of any unutilised ITC at the end of any tax period:

Provided that no refund of unutilised ITC shall be allowed in cases other than––

(i) zero rated supplies made without payment of tax;

(ii) where the credit has accumulated on account of rate of tax on inputs being higher than the rate of tax on output supplies (other than nil rated or fully exempt supplies), except supplies of goods or services or both as may be notified by the Government on the recommendations of the Council:

Provided further that no refund of unutilised ITC tax credit shall be allowed in cases where the goods exported out of India are subjected to export duty.

Provided also that no refund of ITC shall be allowed, if the supplier of goods or services or both avails of drawback in respect of central tax or claims refund of the integrated tax paid on such supplies.

Question & Answer

PO may withhold refund or deduct any tax or interest from refund

Section 54(10)

Where any refund is due u/s 54(3) to a RP

who has defaulted in furnishing any return or

who is required to pay any tax, interest or penalty, which has not been stayed by any court, Tribunal or Appellate Authority by the specified date,

the proper officer may—

(a) withhold payment of refund due until the said person has furnished the return or paid the tax, interest or penalty, as the case may be;

(b) deduct from the refund due, any tax, interest, penalty, fee or any other amount which the taxable person is liable to pay but which remains unpaid under this Act or under the existing law.

Explanation.––For this sub-section, “specified date” shall mean the last date for filing an appeal under this Act.

Section 54(4) provides that

The application shall be accompanied by—

(a) such documentary evidence as may be prescribed to establish that a refund is due to the applicant; and

(b) such documentary or other evidence (including the documents referred u/s 33) as the applicant may furnish to establish that the amount of tax and interest or any other amount paid in relation to which such refund is claimed was collected from, or paid by, him and the incidence of such tax and interest had not been passed on to any other person:

Provided that where the amount claimed as refund is less than Rs.2 lacs, it shall not be necessary for the applicant to furnish any documentary and other evidences but he may file a declaration, based on the documentary or other evidences available with him, certifying that the incidence of such tax and interest had not been passed on to any other person.

Rule 89(2) provides that

The application u/r 89(1) shall be accompanied by any of the following documentary evidences in Annexure 1 in GST RFD-01, as applicable, to establish that a refund is due to the applicant, namely:-

Certificate from Chartered/Cost Accountant

(m) a Certificate in Annexure 2 of GST RFD-01 issued by a chartered accountant or a cost accountant to the effect that the incidence of tax, interest or any other amount claimed as refund has not been passed on to any other person, in a case where the amount of refund claimed exceeds two lakh rupees:

Provided that a certificate is not required to be furnished in respect of cases covered u/c 54(8) (a) or (b) or (c) or (d) or (f)

Explanation – For this rule-

(i) in case of refunds referred to section 54(8)(c) “invoice” means invoice conforming to the provisions contained in section 31;

(ii) where the amount of tax has been recovered from the recipient, it shall be deemed that the incidence of tax has been passed on to the ultimate consumer.

Section 54(5) provides that

If, on receipt of any such application, the PO is satisfied that the whole or part of the amount claimed as refund is refundable, he may make an order accordingly and the amount so determined shall be credited to the Fund referred to in section 57.

Section 54(7) provides that

The PO shall issue the order u/s 54(5) within 60 days[11] from the date of receipt of application complete in all respects.

Section 54(6) provides that

Notwithstanding anything contained in sub-section (5),

in the case of any claim for refund on account of zero-rated supply, other than such category of RPs as may be notified by the Government,

the PO may refund on a provisional basis, 90% of the total amount so claimed, excluding the amount of ITC provisionally accepted,

in such manner and subject to such conditions, limitations and safeguards as may be prescribed and

thereafter make an order under sub-section (5) for final settlement of the refund claim after due verification of documents furnished by the applicant.

Section 54(8) provides that

Notwithstanding anything contained in sub-section (5),

refundable amount shall, instead of being credited to the Fund, be paid to the applicant, if such amount is relatable to—

(a) refund of tax paid on [12][export and exports] of goods or services or both or on inputs or input services used in making such zero-rated supplies;

(b) refund of unutilised input tax credit under sub-section (3);

(c) refund of tax paid on a supply which is not provided, either wholly or partially, and for which invoice has not been issued, or where a refund voucher has been issued;

(d) refund of tax in pursuance of section 77;

Refund of tax wrongly collected and paid to the Government ( i.e. CGST & SGST paid by treating the supply as intra-State supply which is subsequently held as inter-State supply and vice versa) [Section 77 of the CGST Act and section 19 of the IGST Act]

(e) the tax and interest, if any, or any other amount paid by the applicant, if he had not passed on the incidence of such tax and interest to any other person; or

(f) the tax or interest borne by such other class of applicants as the Government may, on the recommendations of the Council, by notification, specify

No refund shall be made other than those mentioned to Section 54(8)

Section 54(9) Notwithstanding anything to the contrary contained in any judgment, decree, order or direction of the Appellate Tribunal or any court or in any other provisions of this Act or the rules made thereunder or in any other law for the time being in force, no refund shall be made except in accordance with the provisions of sub-section (8).

SM

Refund of the IGST paid by tourist leaving India on any supply of goods taken out of India by him [Section 15 of IGST Act].

[13][Rule 89(4) provides that

In the case of zero-rated supplies without payment of tax under bond or LUT as per section 16(3) of the IGST Act, 2017,

refund of ITC shall be granted as per the following formula –

(A) "Refund amount" = Maximum refund that is admissible;

(B) "Net ITC" = ITC availed on inputs and input services during the relevant period other than the ITC availed for which refund is claimed u/r 89(4A) or 89(4B) or both;

[14][(C) “Turnover of zero-rated supply of goods" =

Lower of

value of zero-rated supply of goods made during the relevant period without payment of tax under bond/LUT or

value which is 1.5 times the value of like goods domestically supplied by the same or, similarly placed, supplier, as declared by the supplier,

other than the turnover of supplies in respect of which refund is claimed us/r (4A) or (4B) or both.]

(D) "Turnover of zero-rated supply of services" means the value of zero-rated supply of services made without payment of tax under bond/LUT, calculated as follows

Zero-rated supply of services is the aggregate of the payments received during the relevant period for zero-rated supply of services and zero-rated supply of services where supply has been completed for which payment had been received in advance in any period prior to the relevant period reduced by advances received for zero-rated supply of services for which the supply of services has not been completed during the relevant period;

[15][[(E) “Adjusted Total Turnover” means the sum total of the value of-

(a) turnover in a State/UT, as defined u/c 2(112) excluding the turnover of services; and

(b) turnover of zero-rated supply of services determined in terms of clause (D) above and non-zero-rated supply of services,

excluding-

(i) value of exempt supplies other than zero-rated supplies; and

(ii) turnover of supplies in respect of which refund is claimed u/sr (4A) or (4B) or both, if any,

during the relevant period.]

(F) “Relevant period” means the period for which the claim has been filed.]

Refund of ITC in case of Deemed Export

[16][Rule 89(4A) provides that

In the case of supplies received on which the supplier has availed the benefit of deemed export vide Notification No. 48/2017-Central Tax dt. 18-10-2017,

refund of ITC, availed in respect of other inputs or input services used in making zero-rated supply of goods or services or both, shall be granted.]

Refund of ITC in case of Export at concessional rate

[17][Rule 89(4B) provides that

Where the person claiming refund of unutilised ITC on account of zero rated supplies without payment of tax has –

(a) received supplies on which the supplier has availed the benefit of supply of goods to merchant exporters at the concessional rate of 0.1% as notified by Notification No. 40-2017-Central Tax (Rate) dt. 23-10-2017 or notification No. 41/2017-Integrated Tax (Rate), dt. 23-10-2017; or

(b) availed the benefit of exemption from IGST and Compensation Cess, in respect of the goods imported by EOU[iv] or for the goods imported under Advance Authorisation (AA)/ EPCG[v]

the refund of ITC, availed in respect of inputs received under the said notifications for export of goods and the ITC availed in respect of other inputs or input services to the extent used in making such export of goods, shall be granted.]

Rule 89(5) provides that

In the case of refund on account of inverted duty structure,

Maximum refund of ITC shall be granted as per the following formula:-

Explanation:- For this sub-rule, 

(a) Net ITC = ITC availed on inputs during the relevant period other than the ITC availed for which refund is claimed u/sr (4A) or (4B) or both; and

[18][(b) Adjusted Total turnover‖ and ―relevant period‖ shall have the same meaning as assigned to them in sub-rule (4)]

Rule 89(3) provides that

In case of refund of ITC, electronic credit ledger shall be debited by the applicant by an amount equal to the refund so claimed.

[19][Section 54(8A)

 The Government may disburse the refund of the State tax in such manner as may be prescribed.]

Section 54(11)

Where an order giving rise to a refund is the subject matter of an appeal or further proceedings or where any other proceedings under this Act is pending and the Commissioner is of the opinion that grant of such refund is likely to adversely affect the revenue in the said appeal or other proceedings on account of malfeasance or fraud committed, he may, after giving the taxable person an opportunity of being heard, withhold the refund till such time as he may determine.

Entitlement of Interest on withhold interest

Section 54(12)

Where a refund is withheld u/s 54(11), the taxable person shall, notwithstanding anything contained in section 56, be entitled to interest at such rate not exceeding 6%. as may be notified on the recommendations of the Council, if as a result of the appeal or further proceedings he becomes entitled to refund.

Section 54(14)

Notwithstanding anything contained in this section, no refund under sub-section (5) or sub-section (6) shall be paid to an applicant, if the amount is less than one thousand rupees.

Refund of Advance Tax by CTP[vi] or NRTP[vii]

4^th Proviso to Rule 89(1) provides that

refund of any amount, after adjusting the tax payable by the applicant out of the advance tax deposited by him u/s 27 at the time of registration, shall be claimed in the last return required to be furnished by him.

Section 54(13)

Notwithstanding anything to the contrary contained in this section, the amount of advance tax deposited by a casual taxable person or a non-resident taxable person under sub-section (2) of section 27, shall not be refunded unless such person has, in respect of the entire period for which the certificate of registration granted to him had remained in force, furnished all the returns required under section 39.

PO

Proper Officer

RP

Registered Person