Complete Guide to GST Refund Under Section 54: Zero-Rated, IDS & Key Judgments

Refund of Tax under the Goods and Services Tax Laws – An In-Depth Analysis of Section 54 of the CGST Act, 2017 and Allied Provisions with All Relevant Circulars, Notifications and Case Laws

 1. Introduction and Legislative Framework

The Goods and Services Tax (GST) law introduced in India on 1 July 2017 was the most sweeping reform of indirect taxation since independence. At the heart of any VAT-based system lies the mechanism for refund of tax — a taxpayer should not bear a tax cost beyond what the law mandates. The refund provisions under GST are therefore not merely procedural but are constitutionally anchored in Article 265 of the Constitution of India, which mandates that no tax shall be levied or collected except by authority of law.

This article is a comprehensive, practice-oriented reference on refund of tax under the GST laws – primarily the Central Goods and Services Tax Act, 2017 (CGST Act), but also the Integrated Goods and Services Tax Act, 2017 (IGST Act) and the respective State Goods and Services Tax Acts (SGST Acts). It covers the legal framework, procedural requirements, all major CBIC circulars and notifications, and the evolving judicial jurisprudence from the Supreme Court and various High Courts up to 16 March 2026.

1.1 Legislative Architecture of Refund Provisions

The refund mechanism under GST is primarily governed by:

• Section 54 of the CGST Act, 2017 — the principal provision for claiming refund of tax, interest and other amounts
• Section 55 — special provision for refund of tax to certain persons (UN bodies, foreign consulates, multilateral institutions)
• Section56 — interest on delayed refund
• Section77 of the CGST Act read with Section 19 of the IGST Act — refund of tax wrongly collected and paid
• Rules 86 to 97 of the CGST Rules, 2017 — procedural framework including Forms RFD- 01 to RFD-11

Additionally, refund claims arising from export-related supplies involve Section 16 of the IGST Act, 2017 and Section 54 read together, since exports are treated as ‘zero-rated supplies’ under IGST. For supplies to SEZ developers and SEZ units, similar zero-rated treatment applies under Section 16(1)(b) of the IGST Act.

1.2 The Philosophy of Refund under GST

GST is fundamentally a destination-based consumption tax. The exporting country is not entitled to retain taxes on goods and services that will be consumed in another country or jurisdiction. This principle — commonly referred to as the ‘cross-border relief’ or ‘zero-rating at export’ — is the bedrock on which a large portion of GST refund law is built.

Beyond exports, refund entitlements also arise in situations where credits accumulate due to structural tax rate disparities (inverted duty structure), excess payment of tax, correction of tax heads, appellate orders, and payments by specified exempted persons. In all these cases, the legislature has provided for a systematic refund mechanism to prevent tax cascading and ensure neutrality of the GST system.

1.3  Constitutional Underpinning

The Supreme Court in Union of India v. Torrent Power Ltd. (Civil Appeal No. decided 17.02.2026) reaffirmed that Section 54 of the CGST Act is a ‘complete and exhaustive code’ for refunds and that no refund can be made contrary to its provisions. The Court simultaneously reiterated that where tax is collected without legal authority, its retention by the State violates Article 265 — a principle of fundamental constitutional importance. Every refund claim must therefore be evaluated against both the statutory text and the constitutional mandate.

2. Statutory Provisions: Section 54 — Clause-by-Clause Analysis

Section 54 of the CGST Act, as amended through the Finance Act (No. 2) 2024 (effective 16 August 2024), contains eleven sub-sections. The following is a detailed analytical overview of each sub-section.

2.1  Section 54(1) — Filing of Refund Application: The Foundational Clause

Section 54(1) reads: ‘Any person claiming refund of any tax and interest, if any, paid on such tax or any other amount paid by him, may make an application before the expiry of two years from the relevant date in such form and manner as may be prescribed.’

Key elements of this sub-section:

• The word ‘may’ has been authoritatively held by the Supreme Court to be directory in nature (Muskan Enterprises & Anr. v. State of Jharkhand, referred to in M/S. GTL Infrastructure Limited v. State of Jharkhand, W.P.(T) No. 5035 of 2024, Jharkhand HC, 20.08.2025).This is particularly important in the context of pre-deposit refunds following successful appeals.
• The ‘relevant date’ is defined in Explanation 2 to Section 54 and varies depending on the category of refund — exports, inverted duty, appellate orders, etc.
• ‘Anyother amount paid’ would include penalty, fee, or other sums deposited under the

2.2  Relevant Date under Explanation 2 to Section 54

Category of Refund	Relevant Date	Explanation
Export of goods by sea / air	Date of departure of ship / aircraft	Typically the Let Export Order date
Export of goods by land	Date of crossing the customs frontier	Corroborated by EGM / GSTR-1 data
Export of services (receipt of foreign exchange)	Date of receipt of foreign exchange by supplier	Evidenced by FIRC / BRC from bank
Export of services (advance receipt)	Date of issue of invoice	Where foreign exchange received in advance
Inverted duty structure (IDS)	Due date of GSTR-3B for the period in which claim arises	Inserted w.e.f. 01.10.2022 — Notification No. 18/2022-CT
Order of Appellate Authority / Court	Date of communication of judgment / order	Applied in GTL Infrastructure — HC held limitation directory
Provisional assessment — final order	Date of adjustment after final assessment	—
Person other than supplier	Date of receipt of goods / services	e.g., UN agencies, embassies under Section 55
Any other case	Date of payment of tax	Default provision

2.3. Section54(2) — Electronic Credit Ledger Refund

A registered person may claim refund of any unutilised balance in the electronic cash ledger under Section 49(6) in the prescribed form and manner. This is a separate and simpler category — there is no question of unjust enrichment where the taxpayer is merely reclaiming their own cash balance.

2.4 Section 54(3) — Unutilised ITC Refund

Refund of unutilised input tax credit (ITC) is admissible in the following two situations and no others:

• Clause(i): Zero-rated supplies made without payment of integrated tax
• Clause(ii): Where the credit has accumulated on account of rate of tax on inputs being higher than the rate of tax on output supplies (inverted duty structure)

First Proviso: No refund of ITC shall be allowed in cases where the goods exported are subject to export duty. This restriction was extended by the Finance Act (No. 2) 2024 — effective 16 August 2024 — to also cover cases where IGST was paid on zero-rated supply of goods subject to export duty.

Second Proviso: No refund shall be allowed if the supplier has availed drawback in respect of central tax, or claimed a refund of IGST paid on such supplies.

2.5 Section 54(4), (5), (6), (7) — Provisional and Final Sanction

Section 54(4) requires the proper officer to, after scrutiny, issue acknowledgement in Form GST RFD-02 within 15 days. If deficiencies are found, a deficiency memo in RFD-03 is issued. The important principle, confirmed by Circular No. 125/44/2019-GST (18.11.2019), is that once an acknowledgement is issued, a fresh deficiency memo cannot be raised on the same claim.

Section 54(5) provides that the refundable amount under Section 54(3) (ITC refund) shall be credited to the Consumer Welfare Fund (CWF) in terms of Section 57, unless the applicant establishes that the incidence of such tax has not been passed on — which is the doctrine of ‘unjust enrichment.’

Section 54(6) provides for provisional refund — the proper officer may sanction 90% of the total claimed refund on a provisional basis within 7 days of acknowledgement, in cases of zero-rated supplies. In the 56th GST Council meeting (03.09.2025), this provisional refund facility was extended to inverted duty structure refunds as well, with implementation from 01.10.2025 (vide Instruction No. 06/2025-GST).

Section 54(7) mandates that the final order granting or rejecting the refund claim must be issued within 60 days of receipt of the complete application. Failure to do so entitles the applicant to interest under Section 56.

2.6 Section 54(8) — Categories Exempt from Unjust Enrichment

Despite the general rule in Section 54(5) that refunds are credited to CWF, Section 54(8) carves out the following exceptions where the refund is paid directly to the applicant:

• (a)Refund of tax paid on zero-rated supplies, other than IGST paid on goods exported
• (b)Refund of unutilised ITC under Section 54(3)
• (c)Refund of tax paid on supply regarded as intra-State but subsequently held to be inter-State or vice-versa (Section 77 CGST / Section 19 IGST)
• (d)Refund of tax in pursuance of Section 55 (UN bodies, embassies)
• (e)Refund of tax / interest where incidence has NOT been passed on to another person
• (f)Refund of credit accumulated in ITC on account of inverted duty structure under Section 54(3)(ii)

This is the critical checklist: if a refund falls outside Section 54(8), the amount must be credited to the CWF, as conclusively upheld by the Supreme Court in Union of India v. Torrent Power Ltd. (17.02.2026).

2.7  Section 54(9), (10), (11) — Withholding and Deduction

Section 54(9): Non obstante clause — no refund except in accordance with Section 54(8). Courts cannot devise alternate refund routes (Torrent Power Ltd., SC, 2026).

Section 54(10): The proper officer may withhold any refund where the registered person has failed to furnish any return and until the return is filed.

Section 54(11): The proper officer may deduct any outstanding tax, interest, penalty, fee or other amount recoverable from the taxable person from the refund amount due.

3. Refund of Tax Paid on Zero-Rated Supplies

3.1  What are Zero-Rated Supplies?

Section 16 of the IGST Act, 2017 defines zero-rated supply as:

• (a)export of goods or services or both, and
• (b)supply of goods or services or both to a Special Economic Zone (SEZ) developer or an SEZ unit

A ‘zero-rated supply’ is taxed at a nil effective rate. However, unlike an ‘exempt supply’, the supplier is still entitled to claim ITC on inputs used for such supplies and is entitled to a refund of such accumulated credit. This is the fundamental distinction between zero-rated and exempt/nil- rated supplies — only zero-rated supplies carry the right to refund.

3.2  Two Routes for Export Refund

An exporter has two options for claiming refund under the GST law:

Route	Mechanism
Route A: Export with payment of IGST	Claim automatic refund of IGST paid on export under Rule 96- processed by customs on the basis of shipping bill data matched with GSTR-1
Route B: Export under LUT/Bond without payment of IGST	Claim refund of accumulated ITC through Form GST RFD-01 filing under Rule 89

Most exporters prefer Route B (LUT route) as it does not require upfront payment of IGST and avoids working capital blockage. The Letter of Undertaking (LUT) in Form GST RFD-11 must be furnished on the GST portal at the start of each financial year. Eligibility for LUT was liberalised vide Notification No. 37/2017-CT (04.10.2017) — any registered person can execute a LUT, except those prosecuted for tax evasion above Rs. 2.5 crore.

3.3  Exports of Services — Key Documentation Requirements

For services, zero-rating requires that the export qualifies under the definition of ‘export of services’ in Section 2(6) of the IGST Act — conditions include: (i) supplier located in India, (ii) recipient outside India, (iii) place of supply outside India, (iv) payment received in convertible foreign exchange (or Indian Rupees where permitted by RBI), and (v) supplier and recipient are not merely establishments of the same person.

The most critical document for export of services refund is the Foreign Inward Remittance Certificate (FIRC) or Bank Realisation Certificate (BRC) evidencing receipt of foreign exchange. CBIC has also issued guidance (Circular No. 24/24/2017-GST, 21.12.2017, as modified) on the certificate requirements.

3.4  Refund of IGST Paid on Goods Exported — Rule 96 Mechanism

Under Rule 96, the refund of IGST paid on exported goods is processed by the Customs Department (ICEGATE) in coordination with GSTN. The process involves:

1. Exporter files Shipping Bill at ICEGATE declaring IGST payment details

2. Exporter declares export invoices in GSTR-1

3. GSTN transmits invoice data to ICEGATE — cross-matching is performed

4. On successful matching, Customs processes refund and credits to the exporter’s bank account linked with ICEGATE

Where invoices are mismatched or rejected at ICEGATE, the exporter can view rejected invoices on the GST portal under Services > Refunds > Track status of invoice data. Circular No. 226/20/2024-GST (July 2024) has specifically dealt with the procedure for refund of additional IGST paid due to upward revision in price of goods after export — requiring filing of RFD-01 under the category ‘Any other.’

3.5  SEZ Supplies — Special Considerations

Supplies to SEZ developers / SEZ units are zero-rated. The refund can be claimed by:

• The DTA (domestic tariff area) supplier —where goods/services are supplied to SEZ with payment of IGST, and refund of IGST is claimed by the DTA supplier under Rule 89(1)(b)
• The SEZ entity (developer or unit) —where DTA supplier makes supply without payment of tax under LUT, the SEZ developer / unit can claim refund of ITC accumulated in their electronic credit ledger on inward supplies used for authorised operations

The documentation requirements are more stringent for SEZ refunds. Circular No. 48/22/2018- GST (14.06.2018) mandated the requirement of an endorsement certificate from the specified officer of SEZ verifying that the supply was for authorised operations. Rule 89(2)(e) and (f) prescribe specific statements (Statement 5 and 5A) for SEZ-related refund claims.

3.6  Statement of Invoices — Annexure to RFD-01

The following statements are to be filed as annexures to RFD-01 depending on the category of refund:

Statement No.	Category	Contents
Statement 1 / 1A	IDS Refund	Invoice-level ITC details for IDS claim
Statement 2	Export with payment of IGST (goods)	IGST-paid export invoices with shipping bill details
Statement 3	Export without payment of IGST (goods)	Shipping bill / export invoice details
Statement 3A	Export without IGST — auto- computed	Maximum refund ceiling auto- populated
Statement 4	Export of services with IGST payment	Invoice details of services exported with IGST
Statement 5	SEZ supplies — goods with IGST	Invoices for SEZ supply with IGST payment
Statement 5A	SEZ supplies — goods without IGST	SEZ supply invoices without IGST, under LUT
Statement 6	Tax paid on deemed exports	Invoices of deemed export supplies
Statements 9A, 9B	Additional IGST — upward revision	New — vide Circular No. 226/20/2024-GST

3.7  ITC Computation for Zero-Rated Supply Refund

The maximum refund admissible under Rule 89(4) for refund on account of zero-rated supplies (Route B — LUT) is computed by the following formula:

FORMULA (Rule 89(4)):

Refund Amount = (Turnover of zero-rated supply of goods + Turnover of zero-rated supply of services) x Net ITC

────────────────────────────────────────────── ──────────────────────────────────────────────

Adjusted Total Turnover

Where:

Net ITC = ITC availed on inputs and input services (excluding ITC on capital goods and blocked credits under Section 17(5))

Adjusted Total Turnover = Total turnover in a State or UT (as defined in Section 2(6) IGST Act) in the tax period

less: (a) value of exempt supplies; (b) turnover of zero-rated supplies (to avoid double-counting)

Note: For Rule 89(4), input services ARE included in Net ITC — this is a critical distinction from Rule 89(5) applicable for IDS refund where input services are excluded by the Supreme Court’s ruling in VKC Footsteps (2021).

 4. Refund under Inverted Duty Structure (Section 54(3)(ii))

4.1  Concept and Scope

An ‘Inverted Duty Structure’ (IDS) exists where the rate of GST on inputs is higher than the rate of GST on the final output supply. This results in ITC accumulation that cannot be utilised through normal set-off, creating a ‘stranded credit’ problem. Section 54(3)(ii) of the CGST Act provides the remedy — a refund of such unutilised ITC at the end of a tax period.

Common industries affected include: fertilisers, fabrics and textiles (prior to rate restructuring), footwear manufacturers, pharmaceuticals, printing and publishing, renewable energy (prior to 2022), and certain construction materials.

4.2  Conditions for IDS Refund — Section 54(3)(ii)

• The rate of tax on inputs must be higher than the rate of tax on output supplies
• The output supplies must be taxable supplies — neither exempt nor nil-rated
• The accumulation must arise due to the IDS — not merely due to excess ITC (e.g., seasonal variation in output)
• The goods/services must not fall within Notification  5/2017-CT(R) — which lists certain categories ineligible for IDS refund (e.g., fabrics, cotton, Man-made fibre — now modified)

Notification No. 9/2022-CT(Rate) dated 13.07.2022, effective 18.07.2022, restricted IDS refunds for goods under HS Chapters 15 (Oils and fats) and 27 (Mineral fuels) — applicable prospectively to refund applications filed on or after 18.07.2022 (Circular No. 181/13/2022-GST).

4.3  Formula under Rule 89(5) — Post-2022 Amendment

Notification No. 14/2022-CT dated 05.07.2022 amended Rule 89(5) in response to the Supreme Court’s direction in VKC Footsteps. The revised formula is:

REVISED FORMULA (Rule 89(5) — post 05.07.2022):

Maximum Refund = (Net ITC — ITC on Input Services) x (Turnover of IDS Supplies)

──────────────────────────────── ───────────────────────── ─────

Adjusted Total Turnover

Where:

Net ITC = ITC availed on INPUTS + INPUT SERVICES during the relevant period

–

ITC on Input Services = ITC availed specifically on input services during the period

Therefore: (Net ITC — ITC on Input Services) = ITC on Input Goods only

The formula effectively restricts refund to ITC on input goods only (confirming VKC Footsteps ruling)

but uses a proportional approach linking to turnover of IDS supplies.

CBIC Circular No. 181/13/2022-GST (10.11.2022) clarified that this amendment is prospective — applicable to applications filed on or after 05.07.2022. For applications filed before that date, the pre-amendment formula applies.

However, the Gujarat High Court in Ascent Meditech Ltd. v. Union of India & Ors. (2024) 12 TMI 511 held that the amended Rule 89(5) formula is clarificatory and retrospective, and quashed the contrary part of Circular 181. The Supreme Court did not interfere with this position when the Union’s SLP was dismissed in Union of India & Ors. v. M/s. Tirth Agro Technology Pvt. Ltd. & Ors., SC Order (2025) 7 TMI 1824. This creates a strong precedent — particularly in Gujarat jurisdiction – for IDS refund applicants who filed prior to 05.07.2022 to seek recalculation under the revised formula.

4.4  Exclusion: Same Goods at Different Rates

Circular No. 135/05/2020-GST (31.03.2020) clarified that IDS refund is not available where the input and output supplies are the same goods, but the differential in rate arises merely due to a retrospective tax rate reduction. This position was challenged across multiple High Courts.

Four High Courts — Gauhati (BMG Informatics, 2021), Rajasthan (Baker Hughes Asia Pacific Ltd., 2022), Calcutta (Shivaco Associates, 2022) and Telangana (Micro Systems & Services, 2022) -held that the law does not restrict refund to cases where input and output are different goods; the only requirement is that the rate on inputs is higher. Circular 135 was quashed or read down. Subsequently, CBIC issued Circular No. 173/05/2022-GST (06.07.2022) clarifying that IDS refund IS available where inversion results from a concessional notification imposing a lower output rate (not mere rate cut).

The Kerala HC in M/s. Malabar Fuel Corporation v. Asst. Commissioner (2024) 1 TMI 1203 held that refund under IDS is allowed even where inward and outward supplies are the same goods if inversion exists and Circular 135 cannot override the statute.

4.5  Restriction on IDS Refund for Certain Categories

The Government has, under the proviso to Section 54(3), notified certain categories where IDS refund is not available, primarily through Notification No. 5/2017-CT(Rate) as amended from time to time. Industries should verify the current list of exclusions applicable to their HSN chapter before filing claims.

5. Refund of Excess Balance in Electronic Cash Ledger

Section 49(6) of the CGST Act read with Rule 89(1) provides that a registered person may claim refund of any balance lying in the electronic cash ledger. This is a direct refund entitlement — there is no issue of unjust enrichment since the taxpayer’s own funds are deposited in the ledger. No unjust enrichment declaration is required for this category.

The refund application is filed in Form GST RFD-01 under the category ‘Refund of Excess Balance in Electronic Cash Ledger.’ The relevant date is the date of payment of tax. GSTN advisory dated 28.08.2025 introduced system changes allowing refund claims from ASSORD (assessment/enforcement/appeal/revision orders) where demand balance is negative — an important development for taxpayers who have reversed demands through appellate orders.

Procedurally, Section 54(10) and (11) may be invoked to withhold or adjust any outstanding liability before processing such refund. The proper officer has the authority to deduct outstanding amounts from the refund amount.

6. Refund of Tax Paid on Supplies to SEZ / Deemed Exports

6.1 SEZ Refunds

Supplies to SEZ developers and SEZ units qualify as zero-rated supplies under Section 16(1)(b) of the IGST Act. The DTA supplier may:

• Supply with payment of IGST and claim refund of IGST under Rule 89(1)(b)
• Supply under LUT without payment of IGST and carry forward ITC, or apply for refund under Rule 89(1)

The application must include a certificate from the specified officer of the SEZ that the supply was received for authorised operations. This requirement was first introduced by Circular No. 48/22/2018-GST and has been consistently enforced by tax authorities.

6.2 Deemed Exports

‘Deemed exports’ are certain specified domestic supplies treated as exports for the purposes of refund. The categories are notified under Section 147 of the CGST Act and currently include:

• Supply against Advance Authorisation (AA)
• Supply to Export Oriented Units (EOU)
• Supply of gold by a nominated agency to a jewellery exporter
• Supply against Export Promotion Capital Goods (EPCG) authorisation

In the case of deemed exports, the refund can be claimed either by the supplier or the recipient. The documentation under Rule 89(2)(g) requires a statement in Statement 6 of the Annexure to RFD-01, along with a declaration by the recipient that ITC of the tax paid by the supplier has not been availed.

7. Refund Consequent to Orders of Court or Appellate Authority

Where tax becomes refundable as a consequence of a judgment, decree, order or direction of an appellate authority, Appellate Tribunal, or any court, the taxpayer can file a refund application in Form GST RFD-01 within two years from the date of communication of such order (Explanation 2(d) to Section 54).

The Jharkhand High Court in M/S. GTL Infrastructure Limited v. State of Jharkhand, W.P.(T) No. 5035 of 2024 (20.08.2025) made two significant pronouncements:

• First, withholding the statutory refund of pre-deposit consequent to a successful appeal is unconstitutional — it violates Article 265 of the
• Second, the word ‘may’ in Section 54(1) (limitation of two years) is directory, not mandatory, in the context of pre-deposit refunds following successful appeals.

This judgment follows the earlier Division Bench ruling in M/s. BLA Infrastructure Private Limited v. State of Jharkhand, W.P.(T) No. 6527 of 2024. Tax authorities who reject pre-deposit refund claims solely on limitation grounds after successful appeals now face significant legal risk.

8. Unjust Enrichment Doctrine and the Consumer Welfare Fund

8.1 The Core Principle

The doctrine of unjust enrichment prevents a taxpayer from receiving a refund of tax the economic burden of which has already been passed on to the consumer through pricing. The law recognises that where the tax has been recovered from customers (i.e., included in the price charged), restoring it to the supplier would result in a windfall — the supplier would not have suffered the economic burden.

Section 54(5) provides the mechanism: a refund of ITC under Section 54(3) must ordinarily be credited to the Consumer Welfare Fund (CWF) under Section 57. The exception is Section 54(8 (e) – where the applicant establishes that the incidence of tax has NOT been passed on.

8.2 Supreme Court’s Definitive Ruling – Union of India v. Torrent Power Ltd. (2026)

The Supreme Court, in Union of India & Anr. v. Torrent Power Ltd. (Civil Appeal decided 17.02.2026), set aside the Gujarat High Court’s order and held:

• Section54 is a complete and exhaustive  Courts cannot devise alternate refund mechanisms not contemplated by the statute.
• Wherethe tax incidence has been passed on to consumers, Section 54(8)(e) does not apply, and the amount must go to the CWF.
• The Gujarat HC had directed the refund amount to be deposited in a designated bank account to compensate consumers —the Supreme Court held this was contrary to the express statutory scheme.
• Torrent Power  was directed to transfer Rs. 19,28,86,868 to the authorities for credit to the CWF within three months.

8.3 Practical Implications for Large Groups

For large corporate groups like the Kumar Mangalam Birla Group, the unjust enrichment analysis is critical whenever seeking refund on account of (a) excess tax collection, (b) erroneous classification, or (c) rate revision with retrospective effect. A cost audit-style analysis should be conducted to ascertain whether the tax burden was incorporated in the final price to consumers. If it was, the claim will be directed to the CWF and the corporate will not receive the refund.

8.4 Who Must Prove?

Rule 92(1) requires the proper officer to satisfy himself, based on the evidence on record, that the incidence of tax has not been passed on. The burden of proof lies on the applicant to establish non-passing of incidence through a CA certificate, price lists, cost statements, contractual arrangements, etc. The CBIC circulars and Form RFD-01 both require the applicant to give an undertaking and, in certain cases, a CA certificate.

9. Interest on Delayed Refunds (Section 56)

Section 56 provides: Where any tax ordered to be refunded under Section 54(5) to any applicant is not refunded within 60 days from the date of receipt of the application under Section 54(1), interest at the rate notified by the Government (currently 6% per annum under Notification No. 13/2017-CT) shall be payable from the date immediately after the expiry of 60 days from the date of receipt of such application till the date of refund.

The Proviso to Section 56 provides that where any claim of refund arises from an order passed by the proper officer, appellate authority, Appellate Tribunal, or court, interest shall be paid at the rate of 6% per annum from the date immediately after the expiry of 60 days from the date of receipt of application to the date of refund.

In M/s. Real Prince Spintex v. Union of India (Gujarat HC, 2022), the court criticised the department’s inaction and ordered processing of the refund with interest under Section 56, holding that excessive administrative delay in processing legitimate refund claims is unacceptable.

The Jharkhand HC in GTL Infrastructure (2025) directed refund of pre-deposit with 6% interest for the period of delay, in consonance with Section 56.

10. Withholding and Adjustment of Refund (Section 54(10) & (11))

Section 54(10): The proper officer may withhold the payment of any refund if a registered person defaults on filing returns. Refund is held until the returns are filed.

Section 54(11): The proper officer may deduct any outstanding recoverable amount from the refund. This is a set-off mechanism enabling the department to adjust unpaid dues against any refund payable.

These withholding powers do not give the department authority to indefinitely delay refunds. Judicial interpretation has been consistent that the power under Section 54(10) and (11) is a procedural tool and not a ground for outright rejection of a legitimate refund claim.

11. Refund for International Tourist (Section 15 IGST Act)

Section 15 of the IGST Act, 2017 provides for refund of integrated tax paid on any supply of goods given to a tourist leaving India. This scheme, however, has not yet been fully operationalised due to system and procedural implementation challenges.

CBIC had issued Circular No. 106/25/2019-GST which provided for refund of taxes paid on inward supply of indigenous goods by retail outlets at international airports. This circular was subsequently withdrawn vide Circular No. 253/10/2025-GST dated 01.10.2025.

12. Forms, Procedures and Timelines — The RFD Series

The entire refund process under GST is electronic, operated through the GSTN portal. The following table summarises the RFD form series:

Form	Purpose	Issued By
RFD-01	Application for refund — all categories	Taxpayer
RFD-02	Acknowledgement of refund application	Proper Officer (within 15 days of ARN)
RFD-03	Deficiency memo — pointing out defects in application	Proper Officer (within 15 days of ARN)
RFD-04	Provisional refund sanction order (90% for zero-rated / IDS)	Proper Officer (within 7 days of RFD-02)
RFD-05	Payment order — for crediting refund to bank account	Proper Officer
RFD-06	Final refund sanction or rejection order	Proper Officer (within 60 days of complete application)
RFD-07	Order for complete rejection of refund	Proper Officer
RFD-08	Show Cause Notice — for rejection of refund claim	Proper Officer
RFD-09	Reply to SCN in Form RFD-08	Taxpayer
RFD-10	Application for refund by embassies / UN bodies under Section 55	Notified persons
RFD-11	Letter of Undertaking (LUT) for export without IGST payment	Taxpayer (annually)

12.1  Key Procedural Timelines

Event	Deadline
Filing of refund application (RFD- 01)	Within 2 years from relevant date
Acknowledgement (RFD-02) or Deficiency Memo (RFD-03)	Within 15 days of ARN generation
Provisional refund order (RFD-04)- 90% for zero-rated / IDS	Within 7 days of RFD-02 (Instruction 06/2025-GST from 01.10.2025 for IDS)
Final refund order (RFD-06)	Within 60 days of receipt of complete application
Interest accrual begins on delayed refund	Day 61 from receipt of complete application
SCN for rejection (RFD-08) before rejection of claim	Prior to passing RFD-07; minimum 15 days’ notice

 12.2 Circular No. 125/44/2019-GST (18.11.2019) — Master Circular onRefund Processing

This comprehensive circular consolidated all prior clarifications on refund processing and remains one of the most referred circulars by practitioners and adjudicating authorities. Key clarifications include:

• ARN date = date of filing of refund  Limitation period computed from ARN date.
• Once RFD-02 (acknowledgement) is issued, a fresh deficiency memo RFD-03 cannot be issued for the same application.
• A rectified application after RFD-03 is treated as a fresh application with a new
• Provisional refund (RFD-04) is available for zero-rated supplies upon prima facie examination — 90% of claimed
• Where the final refund eligible (RFD-06) is less than the provisional refund (RFD-04), the excess must be recovered with interest via FORM GST DRC-07.
• Rejected ITC amount to be re-credited to electronic credit ledger through PMT-03 —only after undertaking from taxpayer that no appeal or appeal decided against taxpayer.

Circular No. 197/09/2023-GST modified para 7 of Circular 125 to update the undertaking to align with changes to Section 16 and the deletion of the provisional acceptance mechanism for ITC.

13. Key Notifications under CGST / IGST Acts — Comprehensive Reference

Notification No.	Subject Matter	Key Provisions
5/2017-CT(Rate) dt. 28.06.2017	Notification of goods / services ineligible for IDS refund	Lists categories where IDS refund not available — amended multiple times
13/2017-CT dt. 28.06.2017	Rate of interest under CGST Act	6% interest on delayed refund (Section 56); 18% on excess refund (Section 50)
16/2017-CT dt. 07.07.2017	Persons eligible to execute LUT for exports	Expanded LUT eligibility — all registered exporters except those prosecuted
37/2017-CT dt. 04.10.2017	Conditions and safeguards for LUT / Bond for export without IGST	LUT valid for one financial year; renewable annually
26/2018-CT dt. 13.06.2018	Retrospective amendment to Rule 89(5)	Restricted ‘Net ITC’ to input goods; input services excluded — retrospective from 01.07.2017
14/2022-CT dt. 05.07.2022	Amendment to Rule 89(5) — revised IDS formula	Post-VKC Footsteps amendment; CBIC Circular 181 says prospective
9/2022-CT(Rate) dt. 13.07.2022	Restriction on IDS refund for Chapters 15 and 27 goods	Oils & fats, mineral fuels — prospective from 18.07.2022
13/2022-CT dt. 05.07.2022	COVID-19 related limitation exclusion	Excludes period 01.03.2020 to 28.02.2022 from limitation computation for Section 54 refunds
18/2022-CT dt. 28.09.2022	Amendment to Explanation 2(e) – IDS relevant date	Relevant date for IDS refund = due date of GSTR-3B for the refund period; w.e.f. 01.10.2022
Notification No. 20/2025-CT dt. 31.12.2025	CGST Fifth Amendment Rules 2025	Various rule-level changes including refund related modifications
Finance Act (No. 2) 2024 — w.e.f. 16.08.2024	Amendment to Section 54(3) – export duty restriction extended	No refund of ITC / IGST on zero- rated supply of goods subject to export duty

 14. CBIC Circulars: Comprehensive Reference Table

The following table catalogues the major CBIC circulars on refund, organised chronologically, covering all relevant instructions in force as on 16.03.2026:

Circular No. & Date	Subject	Key Clarification / Impact
2/2/2017-GST dt. 04.07.2017	Export of goods — LUT / Bond procedure under Rule 96A	First circular on export without IGST; LUT on portal; procedural guidance
4/4/2017-GST dt. 07.07.2017	Issues related to furnishing of Bond / LUT for exports	Clarified which exporters can use LUT vs. Bond; removed pre-GST restrictions
24/24/2017-GST dt. 21.12.2017	Manual filing and processing of refund claims	Transition procedure before electronic system was ready
26/26/2017-GST dt. 29.12.2017	Manner of processing IGST refund for goods exported	Shipping bill — GSTR-1 matching; early process guidance
37/11/2018-GST dt. 15.03.2018	Refund processing — status, cases stuck, errors	Solutions for pending refund cases; addressed jurisdictional issues
45/19/2018-GST dt. 30.05.2018	Refund of ITC on zero-rated supplies — supply to SEZ units	Endorsed RFD-11 and SEZ officer certificate requirements
48/22/2018-GST dt. 14.06.2018	GST-related issues of works contract in relation to SEZ	Confirmed zero-rating for works contract to SEZ; endorsement certificate required
59/33/2018-GST dt.  04.09.2018	Clarification on SEZ / exports — various issues	FAQs on SEZ refund procedure, treatment of mixed supplies
70/44/2018-GST dt. 26.10.2018	Clarification on exports without IGST — certain cases	Clarified issues around e-commerce exports, postal exports
79/53/2018-GST dt. 31.12.2018	Electronic submission of RFD-01A with documents	Converted manual process to electronic submission
94/13/2019-GST dt. 28.03.2019	Refund of ITC for merchant exporters, job workers	Manufacturer exporter claiming refund where job worker in different State
104/23/2019-GST dt. 28.06.2019	Wrongly mapped taxpayers on portal — RFD-01A issues	Special procedure for cases where taxpayers incorrectly mapped jurisdictionally
110/29/2019-GST dt. 03.10.2019	NIL refund application already filed — fresh claim eligibility	Held that NIL refund filing does not bar subsequent actual refund application for same period
125/44/2019-GST dt. 18.11.2019	Comprehensive clarification on refund processing (MASTER CIRCULAR)	Single most important circular on refund; acknowledgement, deficiency memo, provisional, final orders
135/05/2020-GST dt. 31.03.2020	IDS refund — same goods at different rates	Restricted IDS refund where same goods at different rates over time — widely challenged and modified by Circular 173
147/17/2021-GST dt. 12.08.2021	Clarification of refund process for export of services	BRC / FIRC requirements; SEBI / RBI nexus with foreign exchange receipt
166/22/2021-GST dt. 17.11.2021	Restriction on refund of IGST on export of certain goods	Post-August 2021 insertion of Rule 96(10) — restriction on certain exporters availing IGST exemption on imports from claiming IGST refund on export
173/05/2022-GST dt. 06.07.2022	Clarification on IDS refund — same goods / rate cut scenario	Partially overruled Circular 135; IDS refund available where inversion is from concessional notification; not from rate revision over time
181/13/2022-GST dt. 10.11.2022	Revised Rule 89(5) formula — prospectivity clarification	Rule 89(5) amendment (Notif. 14/2022) is prospective; applications before 05.07.2022 use old formula — later challenged by Ascent Meditech (GHC 2024)
197/09/2023-GST dt. 17.07.2023	Modification to Circular 125 — removal of GSTR-2A reference	Undertaking in RFD-01 updated post-deletion of Section 42 / GSTR- 2 framework; GSTR-2B now reference point for ITC refund claims
202/14/2023-GST dt. 27.10.2023	Clarification on various refund issues	Addressed issues on manner of filing, jurisdictional assignment, interest computation
212/6/2024-GST dt. 26.06.2024	Evidence compliance for Section 15(3)(b)(ii) — discount conditions	Subsequently withdrawn by Circular 253/08/2025-GST (01.10.2025)
226/20/2024-GST dt. 2024	Refund of additional IGST on upward revision in price post-export	New category: Statements 9A and 9B under RFD-01; use category ‘Any other’ till dedicated category developed
249/06/2025-GST dt. 07.06.2025	Modification of Circulars 122/41/2019 and 128/47/2019	Modification to earlier circulars on specific issues; updated procedural instructions
253/08/2025-GST dt. 01.10.2025	Withdrawal of Circular 212/6/2024- GST	Full withdrawal — taxpayers may rely on pre-existing law
Instruction 06/2025- GST dt. 03.10.2025	Provisional sanction of refund based on risk-based system evaluation	Extension of 90% provisional refund to IDS claims filed on/after 01.10.2025; risk-based processing mechanism by GSTN

15. Finance Act (No. 2) 2024 — Amendments to Section 54

The Finance Act (No. 2) 2024 (Act No. 15 of 2024), which received Presidential assent and came into effect on 16 August 2024, introduced the following changes to Section 54:

15.1 Prohibition on Refund for Export-Duty Goods — Extended

The existing first proviso to Section 54(3) prohibited refund of unutilised ITC on goods exported if such goods were subject to export duty. The Finance Act 2024 extended this restriction to also prohibit:

• Refundof unutilised ITC on zero-rated supply of goods subject to export duty
• Refundof IGST paid on zero-rated supply of goods subject to export duty

This amendment closes a possible gap where IGST paid on exports (Route A — IGST payment route) could be claimed as refund even for goods on which export duty was payable. With the amendment, both ITC refund and IGST refund on export are barred for goods attracting export duty.

15.2 Omission of Sub-section — Section 54(8A)

A sub-section was omitted with effect from 1 October 2023 (Notification No. 28/2023-CT, 31.07.2023) — this related to the erstwhile IGST refund mechanism for exports through ICEGATE which has since been subsumed into the routine process.

15.3 Practical Advisory for Export-Oriented Groups

For large industrial groups where any product line involves export-duty goods (e.g., certain raw minerals, iron ore, cotton and fabrics, certain leather goods), a careful classification of refund eligibility is necessary. Tax teams must verify the current export duty schedule under the Customs Act before filing refund applications post-16 August 2024.

16. Recent 2025 Developments — 56th GST Council and CBIC Instructions

16.1 56th GST Council Meeting (03 September 2025)

The 56th GST Council meeting held on 3 September 2025 made several significant recommendations relating to refund:

• Extension of 90% provisional refund (earlier available only for zero-rated supplies under Section 54(6)) to IDS refunds — implemented via Instruction No. 06/2025-GST from 10.2025
• Removal of minimum threshold for sanctioning refund claims for exports made with GST payment — improving processing of smaller export refund claims
• Risk-based system evaluation by GSTN for provisional sanction — certain taxpayers identifiedas low-risk to receive faster refunds
• Raterationalisation measures expected to reduce IDS cases in multiple sectors

16.2 Instruction No. 06/2025-GST dated 03.10.2025

This instruction operationalised the provisional sanction facility for IDS refunds. Key features:

• Applicableto IDS refund applications filed on or after 10.2025
• Provisionalrefund of 90% of claimed amount (consistent with zero-rated supply treatment)
• ExistingRFD-01/RFD-02 procedure continues until system is updated
• Risk categorisation by GSTN — taxpayers identified as high-risk will be subject to detailedscrutiny before sanction

16.3 Hard Lock of GSTR 3B – Impact on Refund Period Computations

GSTN announced the implementation of hard-locking of auto-populated sales liability values in GSTR-3B from July 2025 onwards (filed August 2025). This means suppliers cannot manually edit Table 3 values auto-filled from GSTR-1. This reinforces the importance of timely and accurate GSTR-1 filing, particularly for exporters who claim refund under the LUT route — since the turnover figures from GSTR-1 directly impact refund computation in Statement 3A.

16.4 Three-Year Return Filing Bar — Impact on Refund Claims

The Finance Act, 2023 inserted a three-year time limit for filing GST returns. Accordingly, from 01.12.2025, returns for periods that are more than three years old cannot be filed. Since the entitlement to file an IDS refund claim depends on having filed GSTR-3B for the refund period, taxpayers with very old unfiled returns in respect of which IDS or other refunds may have been available should urgently file those returns before the applicable deadline.

17. Judicial Pronouncements: Supreme Court of India

The following Supreme Court judgments are considered binding precedents across India on the refund provisions under GST:

17.1 Union of India v. VKC Footsteps India Pvt. Ltd. — Civil Appeal No. 4810 of 2021 (SC, 13.09.2021)

Citation: [2021] 130 taxmann.com 193 (SC) / 2021 (9) TMI 626 (SC)

Facts: VKC Footsteps filed a refund claim for IDS under Section 54(3)(ii) including ITC on input services. The Gujarat High Court ruled in favour of the taxpayer holding Rule 89(5) ultra-vires for excluding input services. The Madras High Court in Transtonnelstroy Afcons Joint Venture had taken the contrary view.

Held: A Division Bench upheld the validity of Rule 89(5), ruling that: (i) refund is a statutory right, not an inherent right; (ii) Parliament consciously restricted IDS refunds to input goods; (iii) including input services would ‘do violence’ to the legislative text of Section 54(3); (iv) anomalies in the formula were acknowledged and the GST Council was urged to review. The Gujarat HC’s judgment was overruled; the Madras HC’s view was confirmed.

Impact: Settles definitively that ITC on input services cannot be claimed as IDS refund under Section 54(3)(ii) read with Rule 89(5). Affects textiles, pharma, fertilisers, and all service-intensive manufacturing sectors.

17.2 Union of India & Anr. v. Torrent Power Ltd. (SC, 17.02.2026)

Facts: Torrent Power Ltd. sought refund of tax that it had collected from consumers. The Gujarat HC fashioned an alternate refund mechanism — directing the refund to a designated account for consumer compensation.

Held: Section 54 is a complete and exhaustive code for GST refunds. Courts cannot devise equitable solutions contrary to express statutory provisions. Where incidence has been passed on, Section 54(8)(e) does not apply. The CWF is the default destination. The Gujarat HC’s alternate mechanism was held to be without statutory authority. Torrent was directed to deposit the amount in CWF.

Impact: Reaffirms the doctrine of unjust enrichment as a non-negotiable threshold; no refund to applicant where tax incidence has been passed on to consumers, regardless of equitable considerations.

17.3 Union of India & Ors. v. M/s. Tirth Agro Technology Pvt. Ltd. & Ors. — SLP dismissed, SC Order 2025 (7) TMI 1824

The Supreme Court dismissed the Union’s Special Leave Petition against the Gujarat HC’s ruling in Ascent Meditech Ltd. (2024) which had held that the amendment to Rule 89(5) by Notification 14/2022 is clarificatory and retrospective in nature. This dismissal strengthens the Gujarat HC’s ruling that IDS applicants may seek recalculation of refund for periods prior to 05.07.2022 under the revised formula.

17.4 CBIC v. M/s. Aberdare Technologies Private Limited and Ors. (SC, 24.03.2025)

Citation: (2025) as reported in cleartax.in and taxmann.com.

Held: The Supreme Court upheld that CGST Section 54(3) is valid in allowing refund of accumulated ITC for inverted tax structure only on goods purchased and not on services received. CGST Rule 89(5) is constitutionally valid. Impact sectors include e-commerce, construction, textiles, and fertilisers.

17.5 Muskan Enterprises & Anr. v. State of Jharkhand (SC)

Held: The word ‘may’ in statutory provisions is generally directory in nature and not mandatory. This ruling was relied upon by the Jharkhand HC in GTL Infrastructure (2025) to hold that the two- year limitation in Section 54(1) is directory in the context of pre-deposit refund following successful appeals.

 18. Judicial Pronouncements: High Courts — Jurisdiction- wise

18.1 Gujarat High Court

Ascent Meditech Ltd. v. Union of India & Ors. — (2024) 12 TMI 511 (GHC)

Held: The amendment to Rule 89(5) vide Notification 14/2022 is clarificatory and curative (not merely prospective as per Circular 181). The HC quashed the contrary portion of Circular 181/13/2022-GST. IDS refund applicants in Gujarat who filed before 05.07.2022 may seek recalculation under the revised formula. [Note: SLP dismissed by SC in 2025 — Tirth Agro case above.]

VKC Footsteps India Pvt. Ltd. v. Union of India — (2020) 7 TMI 726 (GHC)

Held (original HC): Rule 89(5) was ultra-vires to the extent it excluded input services. [Overruled by SC in VKC Footsteps, 2021.]

18.2 Madras High Court

Transtonnelstroy Afcons Joint Venture v. Union of India — WP No. 8596 of 2019 (Madras HC)

Held: Rule 89(5) is valid; input services cannot be included in Net ITC for IDS refund purposes. This view was subsequently affirmed by the Supreme Court in VKC Footsteps.

M/s. Suzlon Energy Limited (Madras HC)

Held: Where rate on input is 18% though it should have been chargeable at 5%, the recipient is entitled to refund under Section 54(3)(ii). Confirmed that IDS refund is available for genuine rate inversions.

VSM Weavess India (P.) Ltd. (Madras HC)

Held: A supplier can claim refund under both categories — export as well as other applicable grounds — provided double-benefit is not claimed.

18.3 Kerala High Court

M/s. Malabar Fuel Corporation v. Asst. Commissioner CT and Central Excise – (2024) 1 TMI 1203 (Kerala HC)

Held: Refund under IDS is admissible even where inward and outward supplies are the same commodity, as long as inversion exists in rates. Circular No. 135/05/2020 cannot override the statutory text. This is an important ruling for oil marketing companies and petroleum product dealers.

18.4 Jharkhand High Court

M/S. GTL Infrastructure Limited v. State of Jharkhand & Others — W.P.(T) No. 5035 of 2024 (Jharkhand HC, 20.08.2025)

Held: (a) Section 54(1) limitation is directory, not mandatory, in context of pre-deposit refunds flowing from successful appeals; (b) withholding statutory refund post successful appeal violates Article 265 of the Constitution; (c) refund with 6% interest within four weeks directed.

M/s. BLA Infrastructure Private Limited v. State of Jharkhand — W.P.(T) No. 6527 of 2024 (Jharkhand HC)

Held: Division Bench — confirmed that Section 54 limitation is directory. Pre-deposit refund is a statutory right and cannot be withheld on limitation grounds. (Relied upon in GTL Infrastructure above.)

18.5 Gauhati High Court

BMG Informatics (P.) Ltd. v. Union of India — (2021) 130 taxmann.com 182 (Gauhati HC)

Held: Circular No. 135/05/2020 is not in accordance with the law. IDS refund is available even where input and output are the same goods, as long as the rate on inputs is higher. GST law does not restrict refund only where input and output goods are different.

18.6 Rajasthan High Court

Baker Hughes Asia Pacific Ltd. v. Union of India — (2022) 140 taxmann.com 326 (Raj HC)

Held: The restriction in Circular 135 (same goods at different rates) is not in accordance with Section 54(3). IDS refund is a statutory entitlement wherever genuine rate inversion exists.

18.7 Calcutta High Court

Shivaco Associates v. Joint Commissioner of State Tax — (2022) 137 taxmann.com 213 (Cal HC)

Held: Circular 135 cannot restrict the statutory right to IDS refund. Even where same goods are involved, refund is admissible if rate on inputs exceeds rate on outputs.

18.8 Telangana High Court

Micro Systems & Services Sole Proprietorship v. Union of India — (2022) 143 taxmann.com 228 (Telangana HC)

Held: Circular No. 173/05/2022 is clarificatory in nature and applies retrospectively. IDS refund claims for concessional-rate inversions are eligible even for periods prior to the circular’s date.

18.9 Delhi High Court

Various decisions on export of services — FIRC / BRC requirements

The Delhi HC has in multiple cases addressed the documentation requirements for export of services refund, particularly in the context of foreign exchange receipt through the banking system. Courts have held that the statutory requirement of foreign exchange receipt must be substantively satisfied — procedural flexibility exists (e.g., receipt through payment aggregators) but economic substance is non-negotiable.

18.10  Other Notable Decisions

M/s. Vision Products Pvt. Ltd. v. Union of India (2021) — Portal Technical Failure Held: A taxpayer cannot be penalised for technological failures of the Government’s own portal. If the refund claim could not be filed due to GSTN glitches, the delay cannot be attributed to the taxpayer. Refund was allowed with direction to fix systemic inefficiencies.

M/s. Pentacle Plant Machineries Pvt. Ltd. v. Office of the GST Council (2020) — Wrong Category Filing

Held: Filing of refund application under an incorrect category does not invalidate the substantive refund entitlement. Technical errors cannot override legitimate rights. Authorities directed to consider the claim under the correct category.

19. Practical Audit Checklist and Common Pitfalls

19.1 Checklist for Zero-Rated Supply Refund Claims

5. Verify that the supplier holds a valid GST registration and that the LUT for the relevant financial year has been filed in Form GST RFD-11.

6. Confirm that GSTR-1 has been filed for all tax periods for which refund is claimed, and that all export invoices are correctly declared in Table 6A / 6B.

7. Ensure GSTR-3B is filed for all relevant tax periods — non-filing blocks refund applicationon the GSTN

8. Forex port of goods: verify Shipping Bill numbers and EGM data match GSTR-1; check for any invoices rejected at ICEGATE under GSTN-ICEGATE validation.

9. Forex port of services: ensure FIRC / BRC is obtained for all invoices; foreign exchange receipt within the statutory period; service qualifies as ‘export of services’ under Section 2(6) IGST Act.

10. Verify that the application is filed within 2 years from the relevant date for each

11. Apply Formula under Rule 89(4) to compute the maximum eligible refund; do not over-

12. Check for any outstanding returns or liabilities that could trigger withholding under Section 54(10)/(11).

13. Confirm that the goods exported are not subject to export duty (post Finance Act 2024 amendment from 16.08.2024).

14. Obtain CA certificate for unjust enrichment undertaking where required (particularly for direct tax refunds under Section 54(8)(e)).

19.2 Checklist for IDS Refund Claims

15. Map every input and output HSN code to verify that rate inversion genuinely exists on the refund application date.

16. Check that output supplies are not nil-rated or exempt — IDS refund is unavailable for exempt supplies.

17. Verify that the HSN codes for inputs / outputs do not fall within Notification  5/2017- CT(Rate) exclusion list.

18. Apply Rule 89(5) formula correctly —use revised formula (post 14/2022-CT) for applications filed on/after 07.2022; old formula for earlier applications. In Gujarat jurisdiction, consider Ascent Meditech approach with legal advice.

19. EnsureGSTR-2B data is used for ITC computation in refund application (post Circular 197/2023-GST).

20. The relevant date for IDS refund is the due date of GSTR-3B (per Explanation 2(e) as amended w.e.f. 01.10.2022 —Notification 18/2022-CT). Limitation is 2 years from that

21. Prepare Statement 1/1A for IDS refund applications with invoice-level

22. Provisional refund (90%) now available for IDS applications filed on/after 01.10.2025 — trackprovisional sanction via RFD-04 on

23. Keep copies of all acknowledgements (RFD-02) to monitor the 60-day timeline for final orders; calculate interest entitlement under Section 56 from day 61 if delay occurs.

19.3 Common Pitfalls in GST Refund Proceedings

Common Mistake	Correct Approach
Filing refund application after 2 years from relevant date	Maintain a limitation tracker for all active refund claims. For pre-deposit refunds following appeals, rely on the GTL Infrastructure (Jharkhand HC 2025) principle that ‘may’ is directory.
Claiming ITC on input services in IDS refund	Strictly exclude input service ITC from Net ITC for Rule 89(5) formula purposes (VKC Footsteps — SC 2021).
Using GSTR-2A (old) instead of GSTR-2B for ITC base in refund computation	Use GSTR-2B per Circular No. 197/09/2023-GST.
Not obtaining SEZ officer endorsement certificate	Mandatory per Circular 48/22/2018-GST and Rule 89(2)(e)/(f).
Filing refund for goods subject to export duty post 16.08.2024	Finance Act 2024 bars IGST and ITC refund for goods under export duty — verify export duty schedule before filing.
Claiming refund of IGST under Route A and ITC under Route B for the same period / invoice (double claim)	Rule 96(10) restriction and second proviso to Section 54(3) prevent double-benefit; system validation also detects this.
Not filing GSTR-1 before refund application	GSTR-1 filing for the refund period is mandatory prior to filing RFD-01.
Receiving RFD-03 (deficiency memo) and abandoning the claim	File rectified application within limitation period — treated as fresh application with new ARN; limitation restarts from new ARN date.
Accepting Section 54(10) withholding as final rejection	Section 54(10) is only a temporary withholding — file outstanding returns and follow up for refund processing.
Ignoring interest under Section 56 on delayed refunds	Calculate Section 56 interest from day 61; include in the refund order follow-up correspondence. Consider writ petition in High Court if refund is unreasonably delayed.

20. Conclusion and Recommendations

The GST refund framework is one of the most complex, litigation-prone, and commercially significant areas of indirect tax practice in India. The legislative structure under Section 54, while comprehensive in its design, has given rise to a rich body of case law and administrative guidance that continues to evolve at a rapid pace.

For large industrial and commercial groups — including entities in the Kumar Mangalam Birla Group — the strategic importance of GST refund management cannot be overstated. Hundreds of crores of working capital may be locked in pending refund claims across group companies. An organised, proactive refund monitoring system integrated with the finance and tax compliance function is essential.

20.1 Key Takeaways for Tax Practitioners

24. Section 54 is a complete code —no refund outside its framework is permissible (Torrent Power, SC 2026). Advise clients to structure transactions to fall within the defined refund categories rather than seeking equitable remedies.

25. The word ‘may’ in Section 54(1) is directory — particularly important in pre-deposit refund scenarios post successful appeals (GTL Infrastructure, Jharkhand HC 2025).

26. IDS refund is restricted to ITC on input goods — a settled legal position (VKC Footsteps, SC2021; Aberdare Technologies, SC 2025).

27. The Finance Act 2024 amendment (effective 08.2024) bars refund of ITC and IGST on exports of goods subject to export duty — a new due diligence check for all export- oriented clients.

28. The 56th GST Council (2025) extended provisional refund facility to IDS claims from 01.10.2025 —this significantly improves working capital for manufacturers in inverted rate sectors.

29. Circular181/13/2022-GST’s prospectively clause has been judicially weakened in Gujarat by Ascent Meditech (SC SLP dismissed in Tirth Agro, 2025) — there is now a viable argument for retrospective application of the revised Rule 89(5) formula for pre-July 2022 IDS claims.

30. Maintain a rigorous limitation calendar for all refund claims —although courts have shown willingness to condone delay in genuine cases, the 2-year period remains the statutory standard.

31. The unjust enrichment doctrine must be commercially evaluated before filing refund claims —filing for amounts where tax incidence has been demonstrably passed on only results in deposit to CWF and generates unnecessary legal costs.

20.2 Pending Issues and Future Outlook

Several issues remain unresolved or are expected to evolve further in the short term:

• GST rate rationalisation exercises by successive GST Councils are expected to reduce IDS situations progressively across multiple sectors.
• The constitutional challenge to Section 16(4) (ITC time-bar) — pending before the Supreme Court — has indirect implications for IDS refund computations where ITC itself may be disallowed.
• Greater automation of the IGST export refund process at ICEGATE, and the rollout of IMS (Invoice Management System), will change the evidentiary landscape for export refund claims.
• The proposed introduction of a dedicated portal category for additional IGST refund on price revision post-export (per Circular 226/20/2024-GST) is pending implementation.

As tax consultants advising major industrial groups, staying at the frontier of this evolving law — through regular monitoring of CBIC circulars, GSTN advisories, and High Court / Supreme Court pronouncements — is a core professional obligation. This article is intended to serve as a consolidated, authoritative reference to that end.