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Refund for Zero Rated Supply for suppliers supplying goods/services out of India i.e. (Export of Goods / Services) or supplying goods to SEZ unit / Developer without payment of Tax


As per Section 16(1) of the IGST Act 2017, the Supplies made outside India or to the SEZs are treated as zero-rated supplies hereby an option has been provided to the suppliers for not charging the GST on the supplies made outside India or to the SEZ unit (provided the supplier have applied for the Letter of Undertaking (LUT).

As the supplier will not charge any tax in respect of the outward taxable supplies supplied outside India or to the SEZ units/developers, the credit in respect of inputs/input services used in respect of such supplies would be lying in the electronic credit ledger of the suppliers.

Thereby to encash the credit being accumulated on account of supplies made outside India or to the SEZ unit, the government has provided an option to claim under Section 54 of the CGST Act 2017.

In this article an attempt is made to understand the calculation, the documents required and the process involved in claiming of refund for the input tax credit available in the Electronic Credit ledger for the input and input services used in making the supplies outside India and to SEZ Unit / Developer if no Tax has been charged on the invoice.

GST Refund Amount calculation formula on account of supplies without payment of duty

Refund of ITC on account of supplies without payment of duty shall be granted as per the following formula –

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


(A) “Refund amount” means the maximum refund that is admissible;

(B) “Net ITC” means input tax credit availed on inputs and input services during the relevant period;

(C) “Turnover of zero-rated supply of goods” means the value of zero-rated supply of goods made during the relevant period without payment of tax under bond or letter of undertaking;

(D) “Turnover of zero-rated supply of services” = Payments received during the relevant tax period + Zero-rated supplies completed in the relevant tax period for which payment has been received in prior periods – Advances received during the relevant tax period for which Zero-rated supplies has not been completed during relevant tax period

(E) “Adjusted Total turnover” means the turnover in a State or a Union territory, as defined under clause (112) of section 2, excluding the value of exempt supplies other than zero-rated supplies, during the relevant period;

Adjusted Turnover in a state = The aggregate value of all Taxable supplies + SEZ supplies/Export of goods or services or both – Central tax, State tax, Union territory tax, integrated tax, and cess;

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

Documents to be submitted along with GST refund application in case of Zero Rated Supply

(As per Circular 125/44/2019 – GST dated 18.11.2019)

1. Endorsement(s) from the specified officer of the SEZ regarding receipt of goods/services for authorized operations under the second proviso to rule 89(1)

2. Self-certified copies of invoices entered in Annexure-A whose details are not found in GSTR-2Aof the relevant period

3. Self-declaration regarding non-prosecution under sub-rule (1) of rule 91 of the CGST Rules for availing the provisional refund

4. Declaration under the second and third proviso to section 54(3)

5. Declaration under rule 89(2)(f)

6. Statement 4 under rule 89(2)(d) and rule 89(2)(e)

7. Undertaking in relation to sections 16(2)(c) and section 42(2)

Procedure for filing GST refund application in case of Zero Rated Supply

1. Within 15 days of filing the application, the proper officer scrutinizes the completeness of the application and issues an acknowledgment in FORM GST RFD-02 through the common portal intimating the date of filing for a claim of refund. If not the department will issue a deficiency memo for which we shall have 15 days-time to rectify the same.

2. The officer may refund 90% of the amount claimed as a refund, on satisfaction with condition

3. On satisfaction of the above condition the proper officer makes an order in FORM GST RFD-04 sanctioning the provisional refund within 7 days from the date of acknowledgment

4. The proper officer shall issue a payment advice in FORM GST RFD-05 for the provisional amount sanctioned and the same shall be credited to the bank as mentioned in GST registration and as specified in the application for refund.

5. The department may issue the SCN and provide the opportunity for a personal hearing if there is any doubt with respect to the refund claim. On being satisfied the department will issue the final order for the refund of the balance amount within 60 days from the date of filing the refund application.

(Republished with Amendments)

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April 2024