GST Refund FAQs — Section 54, Inverted Duty, Export Refund & Interest

These questions are drawn from real GST compliance scenarios, litigation, and common queries from practitioners. Answers reflect the law as amended up to Finance Act 2024.

• 1 What is the time limit to file a GST refund claim?

  Under Section 54(1) of the CGST Act, a refund application must be filed within 2 years from the 'relevant date'. The relevant date varies by refund category: for export of goods, it is the date of departure of the ship/aircraft; for services exported, it is the date of receipt of payment in convertible foreign exchange; for inverted duty structure refund, it is the last day of the financial year to which the claim relates; for excess tax paid, it is the date of payment of tax. Missing the 2-year limit renders the refund claim time-barred — courts have held this is a strict limitation and cannot be condoned.

• 2 What is the inverted duty structure refund and who is eligible?

  An inverted duty structure exists where the GST rate on inputs is higher than the GST rate on output supplies — causing accumulation of unutilised ITC in the electronic credit ledger. Section 54(3)(ii) allows a refund of this accumulated ITC. However, the Supreme Court in <em>VKC Footsteps</em> (2021) held that Rule 89(5) limits the refund to ITC on 'inputs' only — not input services. Sectors with high input services (like footwear manufacturing on contract basis) are significantly affected. Refund is also not available for supplies under Nil GST rate.

• 3 Is interest automatically payable if GST refund is not processed within 60 days?

  Yes. Section 56 of the CGST Act mandates interest at 6% per annum on the refund amount if it is not sanctioned within 60 days of the complete refund application. The interest is calculated from the date of expiry of 60 days to the date of payment of refund. Where a refund has been wrongly withheld and the taxpayer succeeds in appeal or writ — the interest rate is enhanced to 9% per annum. Courts have held that Section 56 interest is a statutory entitlement and cannot be denied even if the delay is administrative.

• 4 What is the difference between IGST refund on exports and ITC refund on exports?

  There are two export refund routes. Under the IGST payment route (with payment): the exporter pays IGST on export invoices and claims a refund of IGST paid — processed through ICEGATE-GSTN matching via shipping bill data. Under the LUT (Letter of Undertaking) route (without payment): the exporter exports without paying IGST and claims a refund of the accumulated ITC in the electronic credit ledger under Rule 89. The LUT route is generally preferred by large exporters as it avoids cash flow blockage, but requires prior filing of an LUT on the GSTN portal.

• 5 Can a refund claim be rejected without giving an opportunity of hearing?

  No. Rule 92 of the CGST Rules requires that before rejecting a refund claim wholly or partly, the proper officer must issue a notice (Form GST RFD-08) specifying the grounds for rejection and give the applicant an opportunity to respond. The applicant must reply within 15 days of receipt of the notice. Courts have consistently held that rejection of a refund claim without following this procedure violates natural justice and renders the rejection order void. Form RFD-06 is the final order for rejection or partial sanction.

• 6 Who are the 'specified persons' eligible for refund under Section 55?

  Section 55 allows specified persons who are not registered under GST to claim refund of GST paid on their inward supplies. The government notifies the eligible categories — currently: (a) the United Nations Organisation and its specified agencies; (b) multilateral financial institutions notified under international treaty; (c) consulates and embassies of foreign countries; and (d) any other body or authority notified. These entities must file the refund application in Form GST RFD-10 within 6 months of the end of the calendar quarter in which the supply was received.

• 7 What documents are required for filing a GST refund claim?

  The documentation requirement under Rule 89 depends on the refund category. Common documents include: refund application in Form GST RFD-01; copy of GSTR-3B for the relevant period; GSTR-1 for outward supplies; CA/CMA certificate for ITC refund above ₹2 lakh (self-certification for smaller amounts, since 2021); export invoices and shipping bills / BRC (Bank Realisation Certificate) for export refunds; LUT filing acknowledgement; and a statement of invoices (Annexure-B) for ITC refund. The GSTN portal now allows online filing with attachment of supporting documents.