Home » GST » Articles » Provision related to Refund under GST Law

There are certain situations under which you can claim refund under GST law.  Due to zero rates on Export, and inverted tax on certain supply, i.e. inward supply is taxed more than outward supply.  As per section 54(1) of CGST Act, 2017 Application for refund can be made before expiry of two years from the relevant date.  The procedures through which refund will be granted are discussed as under.

Refund of Cash balance in Electronic Cash Ledger:-

In the proviso to the section 54 it is mentioned that claim for refund of balance in electronic cash ledger can be submitted through Return filed under section 39. However, the GSTR-3 is not active and so the application for refund of balance in electronic cash ledger needs to be submitted separately through GST portal. Further, the copy of ARN number is also required to submit to the jurisdiction office for getting refund of cash ledger.

Situations under which Refund From electronic credit ledger can be claimed??

  • Zero rated supplies made without payment of tax. If goods exported out of India are subject to Export duty, no refund shall be allowed.
  • Supplies made under inverted tax structure:- Where the credit has accumulated on account of rate of tax on inputs being higher than the rate of tax on output supplies.  Person cannot claim refund if supply is nil rated or fully exempted.
  • Refund shall be granted only if amount of refund is more than 1000 RS.
  • The advance taxes paid by Nonresident/casual taxable person shall be refunded only after filing of all the return under section 39 for the entire period for which registration is granted.

The application shall be accompanied by  documentary  evidence to establish that the amount of tax in relation to which such refund is claimed, the incidence of such tax had not been passed on to any other person.  If amount claimed as refund is less than two lakh rupees, it shall not be necessary for the applicant to furnish any documentary and other evidences but he may file a declaration, based on the documentary or other evidences available with him, certifying that the incidence of such tax had not been passed on to any other person.

If the person had defaulted in filing the return or defaulted in payment of under the Act, he may hold the refund till the return is filed or tax is paid. The officer has right to deduct the refund amount due to any tax is payable by taxpayer but remains unpaid.

Section 56 Interest if refund is delayed:-

 If any tax ordered to be refunded to any applicant is not refunded within sixty days from the date of receipt of application, interest at such rate not exceeding six per cent as may be specified in the notification issued by the Government shall be payable in respect of such refund from the date immediately after the expiry of sixty days from the date of receipt of application till the date of refund of such tax:

If any claim of refund arises from an order passed by an adjudicating authority or Appellate Authority or Appellate Tribunal or court which has attained finality and the same is not refunded within sixty days from the date of receipt of application filed consequent to such order, interest at such rate not exceeding nine per cent as may be notified by the Government shall be payable in respect of such refund from the date immediately after the expiry of sixty days from the date of receipt of application till the date of refund.

As per Rule 89 CGST Rules Any person claiming refund of any tax, other than refund of integrated tax paid on goods exported out of India, may file an application electronically in FORM GST RFD-01/01A.

Refund in case of zero rated supplies will be calculated from following formula:

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

“Net ITC” means input tax credit availed on inputs and input services during the relevant period. Here refund of inputs services can be granted unlike the case in refund of inverted tax structure.

90% of the refund amount shall be granted on provisional basis in case of refund application is made on account of Zero rated supply of goods/services/both by registered persons. Final order for refund is made after verification of all evidences and settlement if any required is made by proper officer at the time of making Final Refund order.

Details in following format needs to be uploaded on GST Portal

Sr.  No.* Invoice details Goods/ Services  (G/S)* Shipping bill/ Bill of export/ Endorsed invoice no. EGM Details BRC/FIRC Count BRC/ FIRC
No.* Date*
(dd-mm-yyyy)
Value* Port Code No Date
(dd-mm-yyyy)
Ref No. Date
(dd-mm-yyyy)
No. Date
(dd-mm-yyyy)

Refund under Inverted tax

Maximum Refund Amount = {(Turnover of inverted rated supply of goods and services) x Net ITC ÷ Adjusted Total Turnover} – tax payable on such inverted rated supply of goods and services.

Net ITC‖ shall mean input tax credit availed on inputs during the relevant period other than the input tax credit availed for which refund is claimed under sub-rules (4A) or (4B) or both. Here it is need to be noted that Net ITC shall not include the ITC relating to services and capital goods. Here refund of only inputs is granted.

Adjusted total turnover here exclude turnover of exempt supplies.

In case the refund amount is more than 2 lakh Rupees, certificate from CA/CMA to the effect that the incidence of tax amount claimed as refund has not been passed on any other person.

In case refund under inverted tax structure statement in following format needs to be uploaded on GST Portal.

Sr.  No.* Details of invoices of inward supplies received Tax paid on inward supplies Details of invoices of outward supplies issued Tax paid on outward supplies
GSTIN of Supplier* No.* Date*
(dd-mm-yyyy)
Taxable Value* Integrated Tax Central Tax State/Union Territory Tax No* Date*
(dd-mm-yyyy)
Taxable Value* Integrated Tax Central Tax State/Union Territory Tax

Once the application is submitted online for refund of Input tax credit, Electronic credit ledger is debited for the amount of refund. If at the time of passing the refund order, if any claim of refund is partially or wholly rejected, the same is re accredited to electronic credit ledger.  The refund granted to the tax payer will be credited to the bank accounts of the tax payer. Refund order shall be issued by the officer within sixty days from the date of receipt of complete application.

Disclaimer: – The above discussion is our view under the certain provisions of GST law. Readers may take due precaution and consider the provision of GST Law before taking the decision. The above article cannot be considered as our professional advice.

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