GST Refund – Claims, Payment of Wrong Tax, Documentation 2020

aaaaaaaaàaGST Refund – Refund of tax, interest, penalty, fees or any other amount. GST Refund Draft Rules. Procedure of Refund in GST is time bound and if not paid in time will be subject to interest. It seems to be simple . Circumstances are defined under which tax payer shall be eligible to file for refund and same shall be process as per the prescribed law. Refund of GST is prescribed in Section- 54 of the CGST Act, 2017.

Hello Friends Check rules on GST Refund Issued by CBEC. Check all Refund Rules for Grant of provisional refund, Order sanctioning refundCredit of the amount of rejected refund claimOrder sanctioning interest on delayed refundsRefund of tax to certain persons. Now Scroll down Below n Check More details for GST Refund…..

Must Read – GST all Refund Formats

GST Refund

Timely refund mechanism is essential in tax administration, as it facilitates trade through the release of blocked funds for working capital, expansion and modernisation of existing business.

The provisions pertaining to refund contained in the GST law aim to streamline and standardise the refund procedures under GST regime. Thus, under the GST regime, there will be a standardised form for making any claim for refunds. The claim and sanctioning procedure will be completely online and time bound, which is a marked departure from the existing time consuming and cumbersome procedure.

Applicability and Procedure

Any person may make an application to the proper officer of IGST/CGST/SGST for refund of Tax and Interest, if any amount paid by him before the expiry of two years from the relevant date. But any taxable person , claiming any refund of any balance in electronic cash ledger u/s 49[6], may claim the same in return filed u/s 39.

Any specialized agency of United Nation Organisation , consulate or embassy of foreign countries or any multilateral Financial Institution or Organization or any person or class of person mentioned under u/s 55, may claim refund of tax paid by it on inward supply before the expiry of six months from the last day of the quarter in which supply was received.

Taxable person may claim unutilized input tax credit at the end of any tax period. But this can be claimed by

  • In case of export including zero rated supply without payment of tax.
  • where the rate of input tax credit is higher than the output tax [ other than nil rated and fully exempt supplies] .
  • No refund of input tax credit can be taken, if the export is on the payment of export duty.
  • No refund of ITC shall be allowed if supplier of goods or services or both avails duty drawback of central tax or claimed refund of integrated tax

Application of refund shall be filed along with documentary evidence which shall establish the amount of tax and interest and declaration of the act that the same has not been passed to any other person. Where the claim is less than rupees two lakh, it will not be necessary to file any documentary evidence but he may file declaration to certify that such tax and interest has not been passed on to any other person.

On receipt of application if proper officer is satisfy that the whole or part of refund is refundable and will pass the order and the amount so determine shall be credited to fund u/s 57 i.e consumer welfare fund. [Section 54[5] ]

Proper officer on zero rated supply of goods or services or both may refund 90% of the claim on provisional basis. And pass final order after due verification of documents.

The above claim of refund shall be issued within 60 days from the date of receipt of application.

However as mentioned in sub section 54[5], refundable amount instead of being credited to fund account , can be credited to applicant , if such amount is relatable to

  • Refund of tax paid on zero rated supplies of goods or services or both or on input or input services used in making such zero rated supplies.
  • Refund of unutilized input tax credit as per section 54[3].
  • Refund of tax paid on supply which has not been provided wholly or partially for which invoice has not been raised or refund voucher has been issued.
  • Refund of tax as per Section-77.
  • Tax interest paid by taxpayer and the same has not been passed on to any person.

Where refund is subject matter of appeal, proper officer may withheld the refund.

Where any refund is due on account of unutilized credit may be held if the return required has not been furnished or not paid the tax, interest and penalties and case has not bee stayed by any court. The amount due above may be deducted out of refund.

Where refund is withheld, applicant shall be eligible for interest at 6%, if he won the case in appeal.

Advance tax deposited by casual Taxable Person and Non resident taxable person will not refunded unless certificate granted to them remain in force and all return furnished by them.

No refund shall be process, if the amount is less than Rs. 1000.

Where the claim pertains to refund from Electronic cash ledger ,the proper officer shall provide the GST RFD-2 to the applicant as acknowledgement on the common portal.

Claims other than electronic cash ledger, application shall be forward to proper officer who will examine the correctness of the application within 15 days of filing and acknowledge the same on Form-GST RFD -2 clearly stating the date of filing the application.

Where any deficiency is noticed, the proper officer shall intimate the same on Form- GST RFD-3 to the applicant.

To avoid the holding of capital of exporters, it has been provided to refund the 90% of the claim with in 7 days of the acknowledgment of claim. And will pass Order on Form –GST RFD-4 to the effect.

Refund in case of international tourist ; [Section 15 of the IGST Act,2017]

  • IGST paid by any international tourist taking supply of goods out of India. Tourist means person not normally resident of India who enter into India for stay not more than six months.

“Relevant Date” as mentioned above

In case of export of goods out of India.

  • In case of goods exported by sea or aircraft, the date on which the sea or aircraft leaves India.
  • In case goods exported by land , the date on which goods pass the frontier.
  • In case goods exported by post , the date of dispatch by post office to place outside India.

In case of supply of goods treated as deemed export, the date of filing of return relating to such deemed export.

In case of export of services;

  • The receipt of foreign exchange where the services have been completed before the receipt of payment.
  • Issue of invoice where the payment of services received in advance.

Where tax becomes refundable on any court order, date of communication of order.

In case of refund of unutilized credit , end of financial year in which claim arises.

In any other case, date of payment of tax.

Situations Leading to Refund Claims

The relevant date provision embodied in Section 54 of the CGST Act, 2017, provision contained in Section 77 of the CGST Act, 2017 and the requirement of submission of relevant documents as listed in Rule 1(2) of Refund Rules is an indicator of the various situations that may necessitate a refund claim. A claim for refund may arise on account of:

  • Export of goods or services
  • Supplies to SEZs units and developers
  • Deemed exports
  • Refund of taxes on purchase made by UN or embassies etc.
  • Refund arising on account of judgment, decree, order or direction of the Appellate Authority, Appellate Tribunal or any court
  • Refund of accumulated Input Tax Credit on account of inverted duty structure
  • Finalisation of provisional assessment
  • Refund of pre-deposit
  • Excess payment due to mistake
  • Refunds to International tourists of GST paid on goods in India and carried abroad at the time of their departure from India
  • Refund on account of issuance of refund vouchers for taxes paid on advances against which, goods or services have not been supplied
  • Refund of CGST & SGST paid by treating the supply as intraState supply which is subsequently held as inter-State supply and vice versa

Thus, practically every situation is covered. The GST law requires that every claim for refund is to be filed within 2 years from the relevant date.

Credit Notes

Further, Section 34 of the CGST Act, 2017 provides for issuance of credit notes for post supply discounts or if goods are returned back within a stipulated time. When such credit notes are issued, obviously it would call for reduction in output liability of the supplier. Hence, the taxes paid initially on the supply would be higher than what is actually payable. In such a scenario, the excess tax paid by the supplier needs to be refunded. However, instead of refunding it outright, it is sought to be adjusted after verifying the corresponding reduction in the input tax credit availed by the recipient. Section 43 of the CGST Act, 2017 provides for procedure for reduction in output liability on account of issuance of such credit notes. This is another form of refund by adjustments in the output tax liability. Such refund is not governed under the general refund provisions contained in Section 54 of the CGST Act, 2017.

Treatment for Zero Rated Supplies

One of the major categories under which, claim for refund may arise would be, on account of exports. All exports (whether of goods or services) as well as supplies to SEZs have been categorised as Zero Rated Supplies in the IGST Act. “Zero rated supply” under Section 16 of the IGST Act, 2017 means any of the following supplies of goods or services or both, namely:

  • (a) export of goods or services or both; or
  • (b) supply of goods or services or both to a Special Economic Zone developer or a Special Economic Zone unit.

On account of zero rating of supplies, 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. Every person making claim of refund on account of zero rated supplies has two options. Either he can export under Bond/LUT and claim refund of accumulated Input Tax Credit or he may export on payment of integrated tax and claim refund of thereof as per the provisions of Section 54 of CGST Act, 2017. Thus, the GST law allows the flexibility to the exporter (which, will include the supplier making supplies to SEZ) to claim refund upfront as integrated tax (by making supplies on payment of tax using ITC) or export without payment of tax by executing a Bond/LUT and claim refund of related ITC of taxes paid on inputs and input services used in making zero rated supplies.

Grant of Provisional Refund in Case of Zero Rated Supplies

GST law also provides for grant of provisional refund of 90% of the total refund claim, in case the claim relates for refund arising on account of zero rated supplies. The provisional refund would be paid within 7 days after giving the acknowledgement. The acknowledgement of refund application is normally issued within a period of 14 days but in case of refund of integrated tax paid on zero rated supplies, the acknowedgement would be issued within a period of three days. The provisional refund would not be granted to such supplier who was, during any period of five years immediately preceding the refund period, was prosecuted.

Payment of Wrong Tax

Under GST it might happen that the taxable person may pay integrated tax instead of central tax plus state tax and vice versa because of incorrect application of the place of supply provisions. In such cases, while making the appropriate payment of tax, interest will not be charged and the refund claim of the wrong tax paid earlier will be entertained without subjecting it to the provision of unjust enrichment.

Claim by a Person who has Borne the Incidence of Tax

Any tax collected by the taxable person more than the tax due on such supplies must be credited to the Government account. The law makes explicit provision for the person who has borne the incidence of tax to file refund claim in accordance with the provisions of Section 54 of the CGST Act, 2017.

Refunds to Casual/Non-Resident Taxable Persons

Casual/Non-resident taxable person has to pay tax in advance at the time of registration. Refund may become due to such persons at the end of the registration period because the tax paid in advance may be more than the actual tax liability on the supplies made by them during the period of validity of registration period. The law envisages refund to such categories of taxable persons also. But the amount of excess advance tax shall not be refunded unless such person has filed all the returns due during the time their registration was effective. It is only after such compliance that refund will be granted.

Refund to UN Bodies and Other Notified Agencies

Supplies made to UN bodies and embassies may be exempted from payment of GST as per international obligations. However, this exemption is being operationalized by way of a refund mechanism. So, a taxable person making supplies to such bodies would charge the tax due and remit the same to government account. However, the UN bodies and other entities notified under Section 55 of the CGST Act, 2017 can claim refund of the taxes paid by them on their purchases. The claim has to be made before the expiry of six months from the last day of the quarter in which such supply was received.

Refund to International Tourist

An enabling mechanism has been introduced in Section 15 of the IGST Act, 2017 whereby an international tourist procuring goods in India, may while leaving the country seek refund of integrated tax paid by them. The term, “tourist” has been defined and refers to any person who is not normally a resident of India and who enters India for a stay of not more than 6 months for legitimate non-immigrant purposes.

Unjust Enrichment

Talking about unjust enrichment, a presumption is always drawn that the businessman will shift the incidence of tax to the final consumer. This is because GST is an indirect tax whose incidence is to be borne by the consumer. It is for this reason that every claim of refund (barring specified exceptions) needs to pass the test of unjust enrichment. And every such claim if sanctioned is first transferred to the Consumer Welfare Fund. The GST law makes this test inapplicable in case of refund of accumulated ITC, refund on account of exports, refund of payment of wrong tax (integrated tax instead of central tax plus state tax and vice versa), refund of tax paid on a supply, which is not provided or when refund voucher is issued or if the applicant shows that he has not passed on the incidence of tax to any other person. In all other cases, the test of unjust enrichment needs to be satisfied for the claim to be paid to the applicant. For crossing the bar of unjust enrichment, if the refund claim is less than Rs.2 Lakhs, then a self-declaration of the applicant to the effect that the incidence of tax has not been passed to any other person will suffice to process the refund claim. For refund claims exceeding Rs. 2 Lakhs, a certificate from a Chartered Accountant/Cost Accountant will have to be given.

Payment to be Credited Online

The refund claim, wherever due, will be directly credited to the bank account of the applicant. The applicant need not come to the authorities to collect the cheques or for any other issues relating to the refund claim.


In sum, the law envisages a simplified, time bound and technology driven refund procedure with minimal human interface between the taxpayer and tax authorities

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