CGST Section 54 — Refund of tax

CGST Act  ·  Refund of tax

CGST 24 Case Laws 10 Amendments 117 views

Quick Answer

Section 54 of the CGST Act, 2017 governs Refund of tax. It provides the core statutory basis, outlining the essential legal principles, rights, and liabilities under Indian indirect tax law. Section 54 GST: Refund of tax — eligibility, conditions, case laws and compliance impact under Indian tax law.

Case Laws 24
Views 117
Amendments 10

Plain-English Explanation

Plain English Summary

Section 54 of the CGST Act deals with the process and conditions for claiming refunds of taxes, interest, or other amounts paid under the GST regime. It essentially outlines the rules for getting your money back from the government if you've overpaid or are eligible for a refund due to specific circumstances.

This section applies to any person who has paid tax, interest or any other amount and believes they are eligible for a refund. This includes registered GST taxpayers, specialized agencies of the UN, multilateral financial institutions, consulates/embassies, and any other person/class of persons notified under Section 55. The application for refund must be made within two years from the "relevant date." This relevant date varies depending on the type of refund being claimed, as defined separately within the GST rules. For instance, for refund of excess tax paid, the relevant date is usually the date of payment. For deemed exports, the relevant date is the date when return relating to such deemed exports is furnished.

Key conditions and exceptions related to Section 54 include:

  • Time Limit: The application for refund must be filed within two years from the relevant date. Missing this deadline means you likely forfeit your refund.
  • Refund of Unutilized ITC: A registered person can claim a refund of unutilized Input Tax Credit (ITC) at the end of any tax period, but only in specific cases. This primarily applies to:
    • Zero-rated supplies made without payment of tax (like exports).
    • Accumulation of ITC due to an inverted duty structure (where the tax rate on inputs is higher than the rate on output supplies).
  • No Refund if Drawback Availed: No refund of ITC is allowed if the supplier has availed drawback benefits on the central tax or claimed a refund of integrated tax paid on such supplies.
  • Documentary Evidence: The application must be accompanied by prescribed documentary evidence to prove the refund is due. However, if the refund amount is less than ₹2 lakh, a declaration can be furnished instead of detailed documentation, certifying that the tax incidence hasn't been passed on to any other person.
  • Provisional Refund: In the case of zero-rated supplies, the proper officer may grant a provisional refund of 90% of the claimed amount (subject to certain conditions and safeguards). The remaining amount is settled after due verification.
  • Refund Order Timeline: The proper officer should issue the refund order within 60 days from the date of receiving a complete application.
  • Refund Payment: The refundable amount will be directly paid to the applicant if it pertains to:
    • Export of goods or services.
    • Unutilized ITC.
    • Tax paid on a supply that wasn't provided.
    • Refund required due to tax paid under the wrong head (Section 77).
    • Tax and interest not passed on to any other person.
    • Any other class of applicants notified by the government.

Practical Examples:

  • Exporter: A garment exporter who exports goods can claim a refund of the ITC accumulated on the inputs used in manufacturing those exported garments.
  • Inverted Duty Structure: A manufacturer of footwear facing an inverted duty structure (higher tax rate on raw materials than on the finished footwear) can claim a refund of the unutilized ITC.
  • Service Not Provided: A company that paid GST on an advance payment for a service which was never provided can claim a refund once a refund voucher is issued.

Important Amendments:

Amendments have been made over time to streamline the refund process and clarify certain provisions. Some key amendments include changes to the time limit for filing refund applications, and procedures for claiming refunds of unutilized ITC. The Finance Act 2022 made changes to the language regarding the form and manner of claiming refunds. Taxpayers should always refer to the most recent notifications and circulars issued by the CBIC to stay updated on the latest changes. Furthermore, the Finance Act, 2024 has omitted a provision relating to denial of refund of unutilized input tax credit in certain cases.

Understanding Section 54 is crucial for businesses to effectively manage their working capital and ensure compliance with GST regulations. It enables them to claim refunds they are rightfully entitled to, thereby avoiding unnecessary financial burdens.

* Section54.Refund of tax.- **
(1)Any person claiming refund of any tax and interest, if any, paid on such tax or any other amount paid by him, may make an application before the expiry of two years from the relevant date in such form and manneras may be prescribed: Providedthat a registered person, claiming refund of any balance in the electronic cash ledger in accordance with the provisions of sub-section (6) ofsection 49, may claim such refund insuch form and1 manneras may be prescribed.
(2)A specialised agency of the United Nations Organisation or any Multilateral Financial Institution and Organisation notified under the United Nations (Privileges and Immunities) Act, 1947 (46 of 1947), Consulate or Embassy of foreign countries or any other person or class of persons, as notified undersection 55, entitled to a refund of tax paid by it on inward supplies of goods or services or both, may make an application for such refund, in such form and manneras may be prescribed, before the expiry oftwo years1 from the last day of the quarter in which such supply was received.
(3)Subject to the provisions of sub-section (10), a registered person may claim refund of any unutilised input tax credit at the end of any tax period: Providedthat no refund of unutilised input tax credit shall be allowed in cases other than-
(i)zero rated supplies made without payment of tax;
(ii)where the credit has accumulated on account of rate of tax on inputs being higher than the rate of tax on output supplies (other than nil rated or fully exempt supplies), except supplies of goods or services or both as may be notified by the Government on the recommendations of the Council: ****9
Provided also that no refund of input tax credit shall be allowed, if the supplier of goods or services or both avails of drawback in respect of central tax or claims refund of the integrated tax paid on such supplies.
(4)The application shall be accompanied by-
(a)such documentary evidenceas may be prescribedto establish that a refund is due to the applicant; and
(b)such documentary or other evidence (including the documents referred to insection 33) as the applicant may furnish to establish that the amount of tax and interest, if any, paid on such tax or any other amount paid in relation to which such refund is claimed was collected from, or paid by, him and the incidence of such tax and interest had not been passed on to any other person: Providedthat where the 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 and interest had not been passed on to any other person.
(5)If, on receipt of any such application, the proper officer is satisfied that the whole or part of the amount claimed as refund is refundable, he may make an order accordingly and the amount so determined shall be credited to the Fund referred to insection 57.
(6)Notwithstanding anything contained in sub-section (5), the proper officer may, in the case of any claim for refund on account of zero-rated supply of goods or services or both made by registered persons, other than such category of registered persons as may be notified by the Government on the recommendations of the Council, refund on a provisional basis, ninety per cent. of the total amount so claimed,****8, in such manner and subject to such conditions, limitations and safeguardsas may be prescribedand thereafter make an order under sub-section (5) for final settlement of the refund claim after due verification of documents furnished by the applicant.
(7)The proper officer shall issue the order under sub-section (5) within sixty days from the date of receipt of application complete in all respects.
(8)Notwithstanding anything contained in sub-section (5), the refundable amount shall, instead of being credited to the Fund, be paid to the applicant, if such amount is relatable to-
(a)refund of tax paid onexport2 of goods or services or both or on inputs or input services used in making suchexports1;
(b)refund of unutilised input tax credit under sub-section (3);
(c)refund of tax paid on a supply which is not provided, either wholly or partially, and for which invoice has not been issued, or where a refund voucher has been issued;
(d)refund of tax in pursuance ofsection 77;
(e)the tax and interest, if any, or any other amount paid by the applicant, if he had not passed on the incidence of such tax and interest to any other person; or
(f)the tax or interest borne by such other class of applicants as the Government may, on the recommendations of the Council, by notification, specify.
(8A)The Government may disburse the refund of the State tax in such manner as may be prescribed.3
(9)Notwithstanding anything to the contrary contained in any judgment, decree, order or direction of the Appellate Tribunal or any court or in any other provisions of this Act or the rules made thereunder or in any other law for the time being in force, no refund shall be made except in accordance with the provisions of sub-section (8).
(10)Where any refund is due***4 to a registered person who has defaulted in furnishing any return or who is required to pay any tax, interest or penalty, which has not been stayed by any court, Tribunal or Appellate Authority by the specified date, the proper officer may-
(a)withhold payment of refund due until the said person has furnished the return or paid the tax, interest or penalty, as the case may be;
(b)deduct from the refund due, any tax, interest, penalty, fee or any other amount which the taxable person is liable to pay but which remains unpaid under this Act or under the existing law .
Explanation.-For the purposes of this sub-section, the expression "specified date" shall mean the last date for filing an appeal under this Act.
(11)Where an order giving rise to a refund is the subject matter of an appeal or further proceedings or where any other proceedings under this Act is pending and the Commissioner is of the opinion that grant of such refund is likely to adversely affect the revenue in the said appeal or other proceedings on account of malfeasance or fraud committed, he may, after giving the taxable person an opportunity of being heard, withhold the refund till such time as he may determine.
(12)Where a refund is withheld under sub-section (11), the taxable person shall, notwithstanding anything contained insection 56, be entitled to interest at such rate not exceeding six per cent. as may be notified on the recommendations of the Council, if as a result of the appeal or further proceedings he becomes entitled to refund.
(13)Notwithstanding anything to the contrary contained in this section, the amount of advance tax deposited by a casual taxable person or a non-resident taxable person under sub-section (2) ofsection 27, shall not be refunded unless such person has, in respect of the entire period for which the certificate of registration granted to him had remained in force, furnished all the returns required undersection 39.
(14)Notwithstanding anything contained in this section, no refund under subsection (5) or sub-section (6) shall be paid to an applicant, if the amount is less than one thousand rupees.
(15)Notwithstanding anything contained in this section, no refund of unutilised input tax credit on account of zero rated supply of goods or of integrated tax paid on account of zero rated supply of goods shall be allowed where such zero rated supply of goods is subjected to export duty.10
Explanation.- For the purposes of this section,-
(1)"refund" includes refund of tax paid on zero-rated supplies of goods or services or both or on inputs or input services used in making such zero-rated supplies, or refund of tax on the supply of goods regarded as deemed exports, or refund of unutilised input tax credit as
provided under sub-section (3).
(2)"relevant date" means-
(a)in the case of goods exported out of India where a refund of tax paid is available in respect of goods themselves or, as the case may be, the inputs or input services used in such goods,-
(i)if the goods are exported by sea or air, the date on which the ship or the aircraft in which such goods are loaded, leaves India; or
(ii)if the goods are exported by land, the date on which such goods pass the frontier; or
(iii)if the goods are exported by post, the date of despatch of goods by the Post Office concerned to a place outside India;
(b)in the case of supply of goods regarded as deemed exports where a refund of tax paid is available in respect of the goods, the date on which the return relating to such deemed exports is furnished;
(ba)in case of zero-rated supply of goods or services or both to a Special Economic Zone developer or a Special Economic Zone unit where a refund of tax paid is available in respect of such supplies themselves, or as the case may be, the inputs or input services used in such supplies, the due date for furnishing of return undersection 39in respect of such supplies;5
(c)in the case of services exported out of India where a refund of tax paid is available in respect of services themselves or, as the case may be, the inputs or input services used in such services, the date of-
(i)receipt of payment in convertible foreign exchangeor in Indian rupees wherever permitted by the Reserve Bank of India6 , where the supply of services had been completed prior to the receipt of such payment; or
(ii)issue of invoice, where payment for the services had been received in advance prior to the date of issue of the invoice;
(d)in case where the tax becomes refundable as a consequence of judgment, decree, order or direction of the Appellate Authority, Appellate Tribunal or any court, the date of communication of such judgment, decree, order or direction;
(e)in the case of refund of unutilised input tax credit under clause (ii) of the first proviso to sub-section (3), the due date for furnishing of return undersection 39for the period in which such claim for refund arises;7
(f)in the case where tax is paid provisionally under this Act or the rules made thereunder, the date of adjustment of tax after the final assessment thereof;
(g)in the case of a person, other than the supplier, the date of receipt of goods or services or both by such person; and
(h)in any other case, the date of payment of tax. ** Kindly also refer toNotification No. 13/2022- CT dated 5thJul, 2022 (w.e.f. 01.03.2020).

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Frequently Asked Questions

What are the grounds on which a refund under CGST Section 54 can be claimed?

Refunds under CGST Section 54 can be claimed for various reasons, including: (a) Excess payment of tax due to mistake or inadvertence; (b) Export of goods or services; (c) Supply of goods or services to SEZ; (d) Refund of accumulated Input Tax Credit (ITC) on account of inverted duty structure; (e) Refund arising on account of assessment/provisional assessment/appeal/any other order; (f) Refund of tax paid on purchases made by UN bodies, embassies etc.; (g) Refund of excess balance in cash ledger; (h) Any other ground notified by the government.

What is the time limit to file a refund claim under CGST Section 54?

A refund claim under CGST Section 54 must be filed within two years from the relevant date. The 'relevant date' varies depending on the specific ground for the refund. For example, in the case of exports, it is the date on which the goods were actually exported or the date on which the return relating to export was filed.

What documents are required to be submitted along with the refund application under CGST Section 54?

The documents required vary depending on the nature of the refund claim. Generally, you'll need documents proving the eligibility for refund, such as invoices, export documents (if applicable), tax payment challans, self-declaration forms, and any other supporting documents as required under CGST Rules. Consult Circulars and Notifications issued by the CBIC for specific document requirements.

What is the process for claiming a refund under CGST Section 54?

The refund claim is filed electronically through the GST portal using Form GST RFD-01. After submitting the application, the tax authorities will scrutinize the application and may issue a deficiency memo if there are any discrepancies or missing documents. After the application is approved, the refund amount is credited directly to the taxpayer's bank account.

What happens if my refund application is rejected under CGST Section 54?

If your refund application is rejected, you have the right to appeal the rejection order within the prescribed time limit (usually three months) with the appellate authority. The order must clearly state the reasons for rejection. It is important to address the issues raised in the rejection order and present a strong case for appeal.

What is the treatment of interest on delayed refunds under CGST Section 54?

If the refund is not sanctioned within the prescribed time (generally 60 days from the date of receipt of the complete application), the government is liable to pay interest on the delayed refund amount. The interest rate is notified by the government, currently it is 6%. Interest is not payable if the delay is attributable to the claimant.

Can a refund claim be filed for Integrated Goods and Services Tax (IGST) paid on exports?

Yes, a refund claim can be filed for IGST paid on exports. This is generally done through the GST portal. The shipping bill itself is treated as the refund application in many cases, subject to certain conditions and validations by customs and GST systems. However, if the refund is not processed automatically, Form GST RFD-01 may be filed for claiming the refund.

Key Conditions & Requirements

ConditionDetails
Application Time Limit Application for refund must be made before the expiry of two years from the relevant date.
Form and Manner of Application Application must be made in such form and manner as may be prescribed.
Refund of Balance in Electronic Cash Ledger A registered person claiming refund of any balance in the electronic cash ledger in accordance with the provisions of sub-section (6) of section 49, may claim such refund in such form and manner as may be prescribed.
Refund for Certain Entities Specialized agencies of the UN, Multilateral Financial Institutions, Consulates/Embassies, or notified persons entitled to refund of tax paid on inward supplies, must apply within two years from the last day of the quarter in which the supply was received.
Unutilised Input Tax Credit Refund A registered person may claim refund of any unutilised input tax credit at the end of any tax period, subject to sub-section (10).
Conditions for ITC Refund Refund of unutilised input tax credit is allowed only for zero-rated supplies made without payment of tax; and where credit has accumulated on account of the rate of tax on inputs being higher than the rate of tax on output supplies.
Restrictions on ITC Refund No refund of input tax credit shall be allowed, if the supplier of goods or services or both avails of drawback in respect of central tax or claims refund of the integrated tax paid on such supplies.
Documentary Evidence The application shall be accompanied by documentary evidence to establish that a refund is due and evidence that the tax and interest were collected from or paid by the applicant, and the incidence of tax was not passed on.

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Amendment History

123456789+1 moreSuperscript numbers in the text mark amended passages — click them to jump here. Click "↑ view in text" to jump back.
1
2022↑ view in text

Substituted (w.e.f. 1st October, 2022 vide Notification No. 18/2022 - CT dated 28.09.2022 ) by s. 113 of The Finance Act 2022 (No. 06 of 2022).

2
2018↑ view in text

Substituted for " zero-rated supplies " by s. 23 of The Central Goods and Services Tax (Amendment) Act, 2018 (No. 31 of 2018) - Brought into force w.e.f. 01 st February, 2019.

3
2019↑ view in text

Inserted by s. 103 of The Finance (No. 2) Act, 2019 (No. 23 of 2019) - Brought into force w.e.f. 01 st September, 2019 vide Notification No. 39/2019 - Central Tax dt. 31 st August, 2019.

4
2022↑ view in text

Omitted (w.e.f. 1st October, 2022 vide Notification No. 18/2022 - CT dated 28.09.2022 ) by s. 113 of The Finance Act 2022 (No. 06 of 2022).

5
2022↑ view in text

Inserted (w.e.f. 1st October, 2022 vide Notification No. 18/2022 - CT dated 28.09.2022 ) by s. 113 of The Finance Act 2022 (No. 06 of 2022).

6
2018↑ view in text

Inserted by s. 23 of The Central Goods and Services Tax (Amendment) Act, 2018 (No. 31 of 2018) - Brought into force w.e.f. 01st February, 2019.

7
2018↑ view in text

Substituted for " (e) in the case of refund of unutilised input tax credit under sub-section (3), the end of the financial year in which such claim for refund arises; " by s. 23 of The Central Goods and Services Tax (Amendment) Act, 2018 (No. 31 of 2018) - Brought into force w.e.f. 01st February, 2019.

8
2023↑ view in text

Omitted ( w.e.f. 1st October, 2023 vide Notification No. 28/2023-C.T. , dated 31st July, 2023. ) by s. 146 of The Finance Act 2023 (No. 8 of 2023).

9
2024↑ view in text

Omitted (w.e.f. yet to be notified) by section 128 of The Finance Act (No. 2) Act, 2024 No. 15 of 2024 dated 16.08.2024.

10
2024↑ view in text

Inserted by section 128 of The Finance Act (No. 2) Act, 2024 No. 15 of 2024 dated 16.08.2024.

Guided Research Path (Statutory Dependencies)

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