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Refund under GST is dealt under Section 54 of CGST and SGST Act. GST refund is eligible for following cases 1) IGST paid on Zero rated supplies 2) Tax paid on inputs for Zero rated supplies (Export supplies) 3) Inverted Duty Structure 4) If taxable person has paid excess tax by mistake 5) Excess balance in electronic cash ledger 6) Purchase made by UN Agencies 7) Refund to International tourists etc.,

Refund of IGST paid on zero rated supplies:

An exporter has an option to either pay IGST at the time of exports or export against LUT/Bond without payment of IGST. Refund is granted on provisional basis for zero rated supplies on the IGST. As per section 54(6), 90% of the claim amount is released based on EGM (Export General Manifesto) filed within 7 days and balance 10% shall be released after verification of documents.

For the purpose of refund of IGST paid on exports, shipping bill filed by an exporter shall be deemed to be an application for refund and there is no separate application need to be filed. However, below conditions to be satisfied

  1. EGM (Export General Manifesto) being filed
  2. The applicant has furnished a valid return in Form GSTR – 1 & 3B

Refund of ITC on Zero rated supplies:

Taxable person can claim ITC on export supplies including on deemed supplies (supplies to SEZ). This benefit given to the taxable persons to promote exports.

Taxable person shall file the application in RFD – 01 (earlier RFD 01A) along with other documents as prescribed. The following needs to be taken care before filing RFD – 01 in case of Exports

1. Shipping bills and EGM available with respect to the exports

2. Details of Invoice number, date and value are matching to details in shipping bill and GSTR1

3. GSTR1 and 3B must have been filed for the period

4. A Chartered Accountant certification stating the incidence of tax has not been passed on to any other person – in cases amount claimed is more than Rs. 2 lakhs

5. Reconciliation of 2A to support the ITC claim

6. Declaration from vendor stating that they have not claimed the ITC/duty drawback on such goods

7. Cash and Credit ledger balance

8. Quantity reconciliation in case of merchant exporters

It is to be noted here that principle of unjust enrichment does not apply to zero rated supplies or Inputs on zero rated supplies. Also, Transitional credit cannot be claimed as refund

The refund is claimed for a relevant period. Relevant period means a period for which refund claim has been filed and can be different from tax period. Tax period is period for which return is required to be furnished under GST Act. As per circular No. 79/53/2018-GST dated 31.12.2018, it is clarified that taxable person is eligible to claim refund for the relevant period though credit may be pertaining to earlier tax period and the officer need not reject such claims.

Formula for calculation of refund is

Refund amount = (Turnover of zero rated goods + turnover of zero rated services) X Net ITC/Adjusted total turnover

Net ITC = ITC availed on inputs availed during relevant period other than input for which refund claimed under sub-rule (4A) & (4B)

Adjusted turnover = turnover in a State or a Union territory as defined under clause (112) of section 2 excluding

a) Value of exempt supplies other than zero rated supplies

b) Turnover of supplies in respect of which refund is claimed under rule 89 (4A) & (4B)

(Refund claimed under (4A) for deemed exports and (4B) for supplies to merchant exporters)

Refund has to be processed within 60 days, if there is no deficiency found in documents. However, there were delays observed in processing refunds. Finance Ministry has issued statement on 23rd August 2019 that pending GST refunds for MSME sector to be released within 30 days. Also has issued a statement on 26th September that GST for both state and Central shall be released as one disbursement instead of twice effective from 26th September 2019.

Refund application used to be filed online and also submitted manually earlier however from 25th September 2019, online processing  of application of refund in RFD – 01 and single authority disbursement has been implemented. Earlier form of RFD – 01A has been discontinued. The Refund Forms are:

  1. RFD – 01 : Refund application
  2. RFD – 02 : Acknowledgement
  3. RFD – 03 : Deficiency Memo
  4. RFD – 04 : Provisional Refund Order
  5. RFD – 05 : Payment Order
  6. RFD – 06 : Final sanction / Reject Order
  7. RFD – 07 : Withholding Order
  8. RFD – 08 : Show cause notice
  9. RFD – 09 : Reply to show cause notice
  10. PMT – 03 : Order for recredit or rejected amount


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One Comment

  1. Rajan K says:

    Pls. comment of the applicablity of subrule (10) Rule 96 where IGST paid export is restricted to other than advance authorization case. The formulae required for claiming refund under sub-rule 4A & 4B of rule 89 are also not set.
    It may help the if these areas are also addressed.

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July 2024