Statutory basis of GST Refund Claims

• Section 54 of the CGST Act governs refund. It defines “refund” to include excess balance in electronic cash ledger and unutilized input tax credit (ITC) in prescribed cases.
• Refunds of IGST paid on export of goods are processed under Rule 96. Other refunds are processed under Rule 89 read with Rule 92 and allied provisions.
• Interest on delayed refund is under Section 56.
• Principles of unjust enrichment and credit to the Consumer Welfare Fund apply except for specified categories under Section 54(8).

Core categories of GST refund claim

1. Export of goods or services with payment of tax (IGST route)

• Goods: Shipping bill is deemed to be the refund application once a valid return is filed and Export General Manifest (EGM) is filed. Processing is via ICEGATE with credit through PFMS.
• Services: Refund is filed in RFD-01 with supporting documents, including realization evidence.

2. Export of goods or services without payment of tax (LUT/Bond) – refund of accumulated ITC

• Refund of unutilized ITC attributable to zero-rated supplies without payment of tax is claimed through RFD-01 with the prescribed statements.

3. Supplies to SEZ (zero-rated)

• With payment of tax (refund of tax paid), or without payment of tax (refund of accumulated ITC). Endorsement from the Specified Officer is mandatory.

4. Deemed exports

• Refund may be claimed by supplier or recipient, subject to documentary trail and declarations as notified.

5. Inverted duty structure

• Refund of unutilized ITC where rate on inputs is higher than rate on output supplies, subject to exclusions for notified goods and for ITC on input services and capital goods.

6. Excess balance in electronic cash ledger

• Refund of excess cash ledger balance through RFD-01.

7. Wrong head payment

• Refund when tax is paid under the wrong head (e.g., IGST instead of CGST+SGST or vice versa).

8. Other specified cases

• Refund of tax paid on advances where supply did not materialize; refund consequent to appeal or judgment; refund of tax paid by specialized agencies as notified.

Time limits and relevant date

• General limitation: two years from the “relevant date.”
• Relevant date (illustrative):
  • Export of goods (by sea/air): date on which the ship or aircraft leaves India as per shipping bill/EGM.
  • Export of goods (by land): date of crossing the frontier.
  • Export of services: date of receipt of payment in convertible foreign exchange (or INR where permitted) when payment is received after invoice; in other cases, as per explanation to Section 54.
  • Inverted duty structure and zero-rated supplies without payment: due date for furnishing return under Section 39 for the period in which the claim arises.
  • Excess cash ledger balance: date of payment into ledger.
  • Wrong head: date of payment of tax. Check notifications for any special extensions that may apply.

Unjust enrichment

• Refund is credited to the Consumer Welfare Fund unless the applicant proves that incidence of tax has not been passed on, or unless covered by categories in Section 54(8), such as refund of tax on zero-rated supplies or refund of excess cash ledger balance.
• Evidence may include a self-declaration up to the prescribed monetary threshold and a certificate from a chartered accountant/cost accountant beyond that threshold.

Documentation and statements for GST refund process

• RFD-01: refund application on the portal with category selection.
• RFD-02: acknowledgment in eligible cases.
• RFD-03: deficiency memo; a fresh application is filed after curing defects.
• RFD-04: provisional refund order (up to 90% for eligible exporters).
• RFD-05: payment order.
• RFD-06: final sanction/rejection order.
• RFD-07: order for withholding/adjustment of refund.
• RFD-08: show cause notice for rejection.
• RFD-09: reply to show cause notice.

Category-wise supporting material (indicative)

• Exports with payment (goods): shipping bills, EGM details, invoice–shipping bill mapping, GSTR-1 Table 6A and GSTR-3B correlation, bank account validation on PFMS.
• Exports with payment (services): invoices, agreements, FIRCs/BRCs, realization statement, place-of-supply analysis.
• Exports without payment (goods): LUT/Bond, shipping bills and EGM, Statement 3/3A, input tax credit ledger, GSTR-1 and GSTR-3B reconciliation.
• Exports without payment (services): LUT, invoices, FIRCs/BRCs, Statement 3, correlation of receipt dates with returns.
• Supplies to SEZ: endorsed invoices by the Specified Officer, proof of receipt of goods/services by SEZ unit/developer, relevant statements.
• Deemed exports: supplier declarations, recipient undertakings, officer certification where prescribed, proof of non-availment of ITC by recipient if supplier claims refund.
• Inverted duty structure: HSN-wise rate mapping, Statement 5 with turnover and net ITC details, working under Rule 89(5) formula, demonstration of exclusions for input services/capital goods.
• Excess cash ledger: challans (PMT-06), reasons for excess accumulation, ledger extract.
• Wrong head: payment challans, self-explanatory computation, evidence of correct tax treatment post-correction.

Computation for refund of accumulated ITC (Rule 89(5)) Maximum refund amount = (Turnover of inverted rated supply of goods and services × Net ITC ÷ Adjusted total turnover) − Tax payable on such inverted rated supply.

• Net ITC excludes ITC on input services and capital goods for this purpose.
• Exclusions for certain notified goods apply; confirm current notifications before computing.

Pre-application reconciliations

• Reconcile GSTR-1 with GSTR-3B for the relevant tax periods.
• Reconcile ITC ledger with GSTR-2B; exclude ineligible credits and blocked credits.
• For exports of goods, confirm that EGM is filed and shipping bills are error-free; resolve mismatch codes on ICEGATE.
• For export of services, confirm realization and retain BRC/FIRC and bank statements.

Processing timelines and interest

• Acknowledged refund claims should be processed within the statutory period. Provisional refund up to 90% for eligible zero-rated supplies may be granted at an early stage.
• Interest is payable to the applicant for delayed sanction beyond the prescribed period, computed from the date immediately following the expiry of the period till the date of refund.

Withholding and adjustment

• Refund can be withheld if there are recoverable dues, if the proper officer is of the opinion that the refund would adversely affect revenue due to fraud or serious irregularity, or if proceedings are pending. Orders are passed in RFD-07.
• Refund may be adjusted against outstanding dues, with reasons recorded.

Frequent issues leading to rejection or delay

• Mismatch between shipping bill data, EGM, and GSTR-1 Table 6A for IGST refund on exports.
• Non-correlation of invoices, BRC/FIRC, or SEZ endorsements with claimed amounts.
• Inclusion of ITC on input services or capital goods in inverted duty structure refund.
• Claiming refund for ITC blocked under Section 17 or restricted by Rule 36.
• Filing beyond limitation period based on the relevant date.
• Incomplete annexures leading to issuance of RFD-03 (deficiency memo).
• Claiming refund where export proceeds are not realized within FEMA timelines; refunds may be liable to recovery with interest on non-realization.

Evidentiary considerations

• Maintain a contemporaneous paper trail: tax invoices, shipping bills, e-way bills, delivery proofs, contracts, purchase orders, goods receipt notes, ledger extracts, and bank advices.
• For services exports, ensure that the place of supply qualifies the supply as zero-rated and that consideration is received as per permitted modes.
• For SEZ supplies, secure timely endorsements and proof of authorized operations.

IGST refund on export of goods (Rule 96)

• Shipping bill is the refund application; conditions include a valid GSTR-1, filing of GSTR-3B, EGM filing by the carrier, and bank account validation on PFMS.
• Common error codes relate to invoice mismatches, container/EGM errors, and bank validation failures; rectification involves amendments in GSTR-1 (with care to period), EGM corrections, or revalidation of bank details.

Export of services and receipt through intermediaries

• Receipt through permitted payment intermediaries does not, by itself, negate eligibility where convertible foreign exchange is ultimately realized in accordance with applicable regulations. Maintain documentary proof of realization and channel.

Deemed exports and SEZ

• Follow notification conditions strictly, including procurement procedures, endorsements, and declarations concerning non-availment of ITC where the supplier claims refund.

Wrong head payments and excess cash ledger refund

• Provide a clear computation of the tax paid under the wrong head and the corrected tax liability. Attach challans and returns evidencing the correction. Excess cash ledger refunds should be supported by ledger extracts and payment references.

Inverted duty structure nuances

• Confirm that the outward supplies are not fully exempt and that notified exclusions do not apply.
• Prepare HSN-wise rate comparison to establish inversion. Exclude ITC on input services and capital goods from Net ITC for the formula.
• Where rate changes create artificial inversion for part periods, compute period-wise.

Show cause notice and adjudication in refund matters

• If RFD-08 (SCN) is issued proposing rejection, respond in RFD-09 addressing jurisdiction, limitation, factual reconciliation, legal interpretation (including Rule 89(5) mechanics), and unjust enrichment.
• Orders should be speaking orders dealing with each contention. Deficiencies cannot be a ground for outright rejection if curable and not earlier pointed out through RFD-03.

Appeal and writ remedies for refund rejection or delay

• First appeal lies under Section 107 via APL-01 within limitation, with prescribed pre-deposit (not applicable to refund per se, but applicable where demand is raised on issues tied to refund).
• In the absence of an operational Tribunal or where there is patent illegality, writ jurisdiction of the High Court can be invoked for non-issuance of acknowledgment, non-disposal within statutory timelines, withholding without reasons, or mechanical rejection ignoring evidence.
• Interest for delayed refund can be claimed with computation from the statutory trigger date.

Compliance controls to reduce refund disputes

• Monthly reconciliation of GSTR-1/3B with 2B and with export/SEZ transaction registers.
• Standard operating procedures for LUT renewal, e-way bill generation, and documentation retention.
• Contract clauses addressing documentation deliverables for SEZ and deemed export transactions.
• Periodic review of classification and rate mapping to avoid ineligible ITC accumulation.

Practical checklist for a GST refund claim (RFD-01)

• Select correct category and period.
• Upload mandatory statements (Statement 2/3/5, as applicable).
• Attach invoices, shipping bills, EGM details, endorsements, BRC/FIRC, LUT/Bond.
• Provide CA/Cost Accountant certificate where required; otherwise self-declaration on unjust enrichment.
• Reconcile figures with GSTR-1, GSTR-3B, and ITC ledger; provide a reconciliation note.
• Validate bank account on PFMS and ensure active GST registration status for the period of claim.
• Keep portal acknowledgments and screenshots at each stage.

Notes and caveats

• Refund positions are sensitive to notifications and circulars that may amend computation, category eligibility, or documentation. Confirm current versions before filing.
• For export of services, non-realization within the permitted period can lead to recovery of a sanctioned refund with interest; maintain follow-up on remittances and evidence of realization.
• For IGST refunds on exports, any amendment in invoice data should be consistent across shipping bills and returns to avoid persistent mismatch.

This treatment is intended to give a precise and complete view of the GST refund claim landscape and the GST refund process, with emphasis on statutory requirements, documentary discipline, and procedural safeguards.

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