Sections 54 to 58 of GST Act makes the provisions for granting refund. Situations leading to GST refunds are explained below.

1. Situations leading to GST refunds

2. Time limit for claiming refund

3. Brief summary and discussion on various situations

4. Refund application process

5. Delay in sanctioning refund and interest

6. Grant of provisional Refund

7. Formulae for determining refund amount

1. Situations leading to GST refunds

a. Export of goods/ services under claim of rebate or refund of accumulated input credit  when goods/ services are exported

b. Taxes paid on goods to SEZ units / developers / Deemed Exports

c. Refund of accumulated credit on account of inverted duty structure i.e due to tax rate differential between output and inputs

d. Refund of Pre- deposit for filing an appeal

e. Other refunds like excess payment of tax due to mistake or inadvertence taxes paid, purchases made by Embassies, UN bodies, Refund for International tourists, Refund of balance in Electronic Cash ledger

2. Time limit for claiming refund under various situations

a. As per section 54(1) of CGST Act, 2017, every claim for refund as listed above is to be filed within 2 years using the form Form GST RFD-01from the relevant date.

b. Section 54(2) of the GST act provides for refund of taxes paid on inward supplies of goods and services of an agency of the United Nations Organization or any multilateral financial institution and organizations notified under the United Nations, Consulate or Foreign embassies is six months from the last date of the quarter in which the supply was received.

Proviso to Rule 89(1) specifies the time limit when refund can be claimed:

c. Supply of goods to SEZ – Application for refund for supply can be made to a developer of SEZ or unit in SEZ shall be filed after the goods have been admitted in full in SEZ and the specified officer of the zone has endorsed admission of goods on the documents

d. Export of goods – Refund for export of goods shall be filed only after the export manifest/ export report is delivered under Section 41 of Customs act. The refund claim can be filed after the shipping bill is endorsed

3. Brief summary and discussion on various situations:

a. Export of goods/ services under claim of rebate or refund of accumulated input credit  when goods/ services are exported

Every person making claim of refund on account of zero rated supplies has two options.

i. Export under bond and claim of refund of accumulated Input tax credit or

ii. Export on payment of duty and claim refund thereof as per the provisions of Section 54 of CGST Act, 2017.

The supplier will be entitled to claim input tax credit in respect of goods or services or both used for such supplies even though they might be non-taxable or even exempt supplies.

No refund of input tax credit shall be allowed under section 54, 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.

b. Taxes paid on goods to SEZ units / developers

As per section 26 of SEZ Act, developers and unit holders are entitled to receive inputs or input services without payment of duty.

As per second proviso to rule 89, application for refund shall be filed by the –

i) Supplier of goods after such goods have been admitted in full in the special economic zone for authorized operations as endorsed by the specified officer of the zone.

ii) Supplier of services along with such evidence regarding receipt of services for authorized operations as endorsed by the specified officer of the zone.

Details of application made by supplier to SEZ unit or developer are required to declare in GSTR-1. SEZ unit or developer is required to obtain separate registration to file details of inward supplies in Form GSTR-2. I.e. Inward receipt declared by the SEZ unit or developer in Form GSTR-2 will be matched with GSTR-1 filed by the supplier for granting the refund. This is different process than the process followed that in case of export.

C. Refund of accumulated credit on account of inverted duty structure i.e due to tax rate differential between output and inputs.

Unutilized input tax credit due to inverted duty structure can be applied for refund. This is when the rate of tax on inputs is higher than the rate of tax on output supplies. In the current tax regime, this is not allowed for refund. However, in the GST regime, this scenario is eligible for claim of tax refund. Note that in this case, refund is not applicable when supplies are NIL rated or fully exempt.

As per Notification No. 5/2017- Central Tax (Rate) provides that the refund of accumulated credit shall not be granted in respect of specified goods. These specified goods are in the category of Woven fabrics of specified clothes and some material from 86 series.

Also, as per Notification no 15/2017 – Central Tax (Rate) provides that the refund shall not be available to builder / developer for credit being higher than the tax payable on input services.

Applicant seeking to claim refund of the unutilized credit under this clause shall submit the statement containing the number and date of invoices received and issued during the tax period. The said details are as follows:

Tax Period
Sr. No Details of Invoices IGST CGST SGST
Date UQC Qty Value Goods/ Services HSN/SAC Taxable Value Rate Amt Rate Amt Rate Amt

D. Refund of Pre- deposit for filing an appeal

As per section 107 of CGST Act, 2017, Any person aggrieved by any decision or order passed under this Act or the State Goods and Services Tax Act or the Union Territory Goods and Services Tax Act by an adjudicating authority may appeal to such Appellate Authority as may be prescribed within three months from the date on which the said decision or order is communicated to such person.

Different quantum of amount need to be paid as per CGST Act and SGST Act for filling the appeal. Pursuance of an appellate authority’s order, when the appeal is decided in favor of the appellant, then the amount of pre-deposit/ the amount paid in during investigation becomes refundable to the assesse. The assesse is required to file the refund claim within a period of two years from the date of receipt of the order.

As per section 115 of CGST Act, Where an amount paid by the appellant under sub-section (6) of section 107 or sub-section (8) of section 112 is required to be refunded consequent to any order of the Appellate Authority or of the Appellate Tribunal, interest at the rate specified under section 56 shall be payable in respect of such refund from the date of payment of the amount till the date of refund of such amount.

E. Other Refunds

E.1. Refunds to Casual/Non-Resident Taxable Persons

As per section 27 of GST Act, Casual/Non-resident taxable person has to pay tax in advance at the time of registration. The tax paid in advance may be more than the actual tax liability on the supplies made by them. Thus, such person becomes entitled to get their excess tax refund.

E.2 Refund to International Tourist

As per section 15 of the IGST Act,  IGST paid on supply of goods to outbound tourist shall be refunded if such goods are taken out of India. The officer shall be satisfied that the goods mentioned in the invoice is same which are being taken out of India.

tourist’ means a person not normally a resident in India and who enters India for a stay of not more than six months for legitimate non-migrant purposes

E.3 Payment of tax by mistake

Applicant has to make an application of refund in GST-RFD-01 and submit the appropriate documents substantiating that applicant are entitled to a refund. The proper officer may sanction or reject the application after scrutiny.

E.4 Refund when transaction considered intra- state as against inter-state.

Section 77(1) provides for refund when transaction is initially considered as intra- state, but afterword’s held in assessments to be inter-state. Thus in such case, the person will have to pay IGST separately and claim refund of CGST and SGST paid by him. No interest will need to be paid when the taxpayer pays the correct tax later on. Penalty will not apply in these scenarios.

Rule 89(2)(j) provides that such person shall submit statement showing the details of transactions considered as interstate, but which is subsequently held to be inter-state.

4. Refund application process:

The procedures of refund application are covered by Chapter X of CGST Rules, 2017.

a. Application for refund shall be filed electronically in Form GST-RFD-01

b. The application under sub-rule (1) shall be accompanied by any of the following documentary evidences in Annexure 1 in Form GST RFD-01, as applicable, to establish that a refund is due to the applicant, namely:-

i. A statement containing the number and date of shipping bills or bills of export and the number and the date of the relevant export invoices, in a case where the refund is on account of export of goods

ii. A statement containing the number and date of invoices and the relevant Bank Realization Certificates or Foreign Inward Remittance Certificates, as the case may be, in a case where the refund is on account of the export of services

iii. a statement containing the number and date of invoices as provided in rule 46 along with the evidence regarding the endorsement specified in the second proviso to sub-rule (1) in the case of the supply of goods made to a Special Economic Zone unit or a Special Economic Zone developer.

iv. a declaration to the effect that the Special Economic Zone unit or the Special Economic Zone developer has not availed the input tax credit of the tax paid by the supplier of goods or services or both, in a case where the refund is on account of supply of goods or services made to a Special Economic Zone unit or a Special Economic Zone developer;

v. a statement containing the number and date of invoices along with such other evidence as may be notified in this behalf, in a case where the refund is on account of deemed exports;

vi. a declaration 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

vii. a Certificate in Annexure 2 of FORM GST RFD-01 issued by a Chartered 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:

5. Delay in sanctioning refund and interest

If any tax ordered to be refunded to any applicant is not refunded within a period of sixty days from the date of receipt of an application, the interest on such rate not exceeding 6% as may be specified.

6. Grant of Provisional Refund:

Section 54(6) of the GST Act also provide for grant of provisional refund subject to restriction that such supplier was not during the any of the five years immediately preceding the refund period prosecuted. In case the claim relates for refund arising on account of zero rated supplies. The provisional refund would be paid within seven days after giving the acknowledgement.

7. Formulae for determining refund amount

Rule 89 of CGST Rules specify following formula for determining the quantum of refund of input tax credit when exports are made without payment of duty

Refund Amount = (Turnover of zero-rated supply of goods + Turnover of Zero-rated supply of services) / Adjusted total turnover x Net ITC

Rule 89 of CGST Rules specify following formula for determining the quantum of refund available when refund to be applied is on account of inverted duty structure

Refund Amount = (Turnover of Inverted rated supply of goods x Net ITC / Adjusted total turnover x Net ITC) minus tax payable on such inverted rated supply of goods.

( CA Vaibhav Samdani, +919665933598 , http://sraindia.co.in/contact-us/ )

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Qualification: CA in Practice
Company: Sachin Ranbhise and Associates
Location: PUNE, Maharashtra, IN
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One response to “GST- Refund Process”

  1. Mrudul says:

    In case of Refund of Un – Utilized Input Tax Credit (ITC) due to Inverted Tax Structure, Refund is required to be filed with 2 years from the end of the financial year in which such claim for refund arises. Is it correct sir?

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