Refund of tax under GST

[Ganeshan Kalyani]

Section 54 of CGST Act, 2017 provides for refund of tax.

Time-period to claim refund:

Any person claiming refund of any tax and interest which he has paid may make an application before the expiry of two years from the relevant date.

"Relevant date" is defined as under:

(a) in the case of goods exported with payment of tax (the tax paid is available as refund) or without payment of tax (the input tax credit used in such export is available as refund) then

 (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;

(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 exchange or in Indian rupees wherever permitted by the Reserve Bank of India, 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) i.e. refund of tax accumulated in case where input tax is higher than the output tax, the due date for furnishing of return under section 39 for the period in which such claim for refund arises;

(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.

If a registered person claiming refund of any balance in the electronic cash ledger after payment of tax, interest, penalty, fee or any other amount payable under this Act or the rules made thereunder may claim refund by filing return u/s 39 of the Act in the manner as may be prescribed.

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 under section 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 manner as may be prescribed, before the expiry of six months from the last day of the quarter in which such supply was received.

Refund of unutilised input tax credit - conditions and restrictions:

Sub-section (3) provides that a registered person may claim refund of any unutilised input tax credit at the end of any tax period. But 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. (inverted duty structure)

Refund of unutilised input tax credit is not be allowed in cases where the goods exported out of India are subjected to export duty. Refund is also not 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.

Application for refund:

Documents evidencing refund required:

A registered person has to file an application along with documents:

(a) evidencing the refund is due to him

(b) such documentary or other evidence (including the documents referred to in section 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.

Documents evidencing refund not required:

If the amount claimed as refund is less than two lakh rupees, it is not be necessary for the applicant to furnish any documentary and other evidences. 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.

Order of refund:

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 Consumer Welfare Fund.

The proper officer shall issue a refund order within sixty days from the date of receipt of application complete in all respects.

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, the proper officer may refund on a provisional basis, ninety per cent. of the total amount so claimed, excluding the amount of input tax credit provisionally accepted, in such manner and subject to such conditions, limitations and safeguards as may be prescribed and thereafter make an order for final settlement of the refund claim after due verification of documents furnished by the applicant.

Refund paid to the applicant instead of crediting it to Consumer Welfare Fund:

In the following cases the refundable tax will be paid to the applicant, instead of being credited to the Consumer Welfare Fund;

(a) refund of tax paid on export of goods or services or both or on inputs or input services used in making such exports;

(b) refund of unutilised input tax credit under sub-section (3). (The said sub-section is given above);

 (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 of section 77. Sub-section 77 states that refund shall be paid in such case where tax is paid under wrong head e.g. IGST paid in CGST head and likwise.;

(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.

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).

Refund will be bold:

In case of defaulted in compliance by the applicant.

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.

“specified date” shall mean the last date for filing an appeal under this Act.

In case the refund if made be affecting the revenue.

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.

Eligibility for interest in case of delay in receiving refund.

Where a refund is withheld as discussed above, the applicant shall 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 the applicant becomes entitled to refund.

Refund to casual taxable person or a non-resident taxable person:

The amount of advance tax deposited by a casual taxable person or a non-resident taxable person 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 under section 39.

No refund:

No refund shall be paid to an applicant, if the amount of refund is less than one thousand rupees.

Section 54 to 58 of CGST Act, 2017  & Rule 89 to 97A of CGST Rules, 2017 contains the provision  for the refund.