Comprehensive Summary of Refunds Under GST

Comprehensive Summary of Refunds Under GST

The GST refund mechanism is designed to ensure timely release of blocked working capital, promote exports, and maintain liquidity in business operations. The system is online, standardized, and time-bound to reduce delays and manual intervention. Under the GST, the taxpayer must satisfy the following situations leading to refund claims. GST refunds may arise in several scenarios, including:

• Export of goods or services
• Supplies to SEZ units/developers
• Deemed exports
• Refund to UN bodies and embassies (Section 55)
• Refund due to appellate orders
• Accumulated ITC due to Inverted Duty Structure
• Finalisation of provisional assessment
• Refund of pre-deposit (appeal cases)
• Excess or mistaken tax payment
• Refund to international tourists (not yet operational)
• Tax paid under wrong head (Section 77 / Section 19)
• Any other reason

Zero‑Rated Supplies (Exports + SEZ) : Exports and SEZ supplies are classified as zero-rated supplies. Suppliers can export without payment of tax, claiming a refund of unutilized ITC, or export on payment of IGST, claiming a refund of IGST paid. Zero‑Rated Supplies (Exports & SEZ) : Two refund routes: Export under LUT/Bond → Claim refund of unutilised ITC and Export after IGST payment → Claim IGST refund. Key Conditions of Zero‑Rated Supplies (Exports & SEZ): is Actual export of goods/services must be demonstrable, SEZ supplies must be for authorized operations with officer endorsement, LUT must be Valid for full financial year, and LUT is Available to all except persons prosecuted for tax evasion ≥ ₹2.5 crore

Provisional Refund (90%) : Exporters may receive a 90% provisional refund within 7 days of acknowledgment—unless they were prosecuted for evasion over INR 250 lakh in the past 5 years.

Refund for Wrong Tax Payment (Section 77) : If IGST is paid instead of CGST (Central GST) and SGST (State GST) or vice versa due to incorrect POS, then the correct tax can be paid without interest. Wrongly paid tax can be refunded. Rule 89(1A) provides the procedure for the same.

Refund for Casual/Non‑Resident Taxable Persons : They pay advance tax at registration, leading to a possible refund after the registration period, provided all returns are filed.

Refund of Unutilized ITC for Export of Electricity : Rule 89 amended to allow such exporters to claim refund via Statement 3B.

Single Disbursement Authority : Refund sanctioned (CGST (Central GST) and SGST (State GST), IGST (Integrated GST)/Cess) is disbursed by the tax authority to which the taxpayer is assigned, eliminating the need to visit multiple departments.

Excess Tax Payment Refund Mechanism : Rule 92(1A) mandates that the refund for excess tax be partly in cash and partly by re‑crediting ITC, in the same ratio in which outward liability was discharged.

Withdrawal of Refund Application : GST refund application may be withdrawn even after acknowledgment, provided no refund order or notice has been issued. On withdrawal, ITC is re‑credited.

Interest on Delayed Refund  & Consumer Welfare Fund 

• If a GST refund is not issued within 60 days of the TRN/ARN, interest at 6% is payable and at 9% if the GST refund arises from appellate orders. (Interest calculated until the amount is credited to the bank account). Interest on Delayed Refund: If not GST refunded within 60 days, interest at 6%; If due to appellate order, 9%

Refund to UN Bodies/Embassies: UN bodies, embassies, and notified agencies can claim a refund under Section 55 within 2 years from the end of the quarter. CSDs can claim a 50% refund of CGST on inward supplies.

Unjust Enrichment Test : GST Refund is paid to the applicant only if the tax incidence is not passed to another person. Not applicable for exports, accumulated ITC, wrong tax payments, and non‑provided supply (refund voucher issued). For claims over INR 2 lakh, a chartered accountant/cost accountant certificate is required.

Gst Refund in Deemed Exports: The recipient or supplier can claim a refund with the required undertakings and documents under Notification 48/2017 and Rule 89(2)(g).

Standardized Electronic Refund Procedure : most claims are filed using FORM GST RFD‑01. GST refund Process steps:

• Acknowledgement: RFD‑02
• Deficiency memo (if any): RFD‑03
• Final sanction: RFD‑06
• Re‑credit order: PMT‑03 / PMT‑03A
• Rejection notice: RFD‑08
• Reply: RFD‑09 : GST Refunds must be disposed of within 60 days, or else interest applies.

Specialized Processes :

• IGST Refund on Export of Goods : Shipping bill = refund application if export manifest is filed. and a valid GSTR‑3B is submitted, invoice data (Table 6A of GSTR‑1) is matched with customs data for validation.
• Refund of Unutilized ITC for Zero‑Rated Supplies : Filed via RFD‑01, ITC is debited from the electronic credit ledger. Required statements (3 or 5) must be uploaded.
• Refund for Inverted Duty Structure: Filed tax‑period wise; GSTR‑1 and previous GSTR‑3B must be filed. The GST refund formula is based on Net ITC, covering all inputs.

Where to File Refund Claims :

GST refunds can be claimed for excess tax paid, zero‑rated supplies (exports/SEZ), inverted tax structure, deemed exports, wrong tax head paid (IGST vs CGST/SGST), excess balance in cash ledger, casual & non‑resident taxable persons, export under LUT/bond, supplies to merchant exporters at concessional rates, and refunds due to assessment/appeal orders. via filing the Refund claims (RFD‑01) filed on the GST Portal are assigned to the jurisdictional officer (Central/State) as per administrative GST orders. If not assigned, taxpayer may apply to either authority, or physically if unallocated