GST Refunds

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1.           Application for refund

Any person claiming refund of any tax and interest, if any, paid on such tax may make an application before the expiry of 2 years from the relevant date. A taxable person may claim refund of any unutilized input tax credit of tax paid on exports or in cases where the credit has accumulated on account of rate of tax on inputs being higher than the rate of tax on outputs.


2.         Interest on delayed refund

Any tax refundable to any applicant, which is not refunded within 3 months from the date of receipt of application, interest at specified rate shall be payable in respect of such refund from the date immediately after the expiry of the due date for sanction of refund till the date of refund of such tax.


3.         Refund Process in case of Export of Goods

The IEC details of taxpayer will be captured at the time of issuance of GSTIN and the same can be verified online with DGFT for verifying the correctness of the exporter’s particulars. The refund of ITC/rebate of GST paid on exported goods may be granted on submission of application to this effect by the taxpayer. It is recommended that linkage between ICEGATE of Customs administration and the proposed GSTN of GST administration may be established so that online verification of the exports can be carried out. In any case such linkage has to be established to verify IGST paid at the time of import of goods/services.


4.            Various forms under the regime

4.1 Refund Claim Form under ------ Goods & Services Tax Act, ----- (To be used by Tax Payers only)

4.2 Refund order under ----- Goods & Services Tax Act, ----

4.3 Reduction / Adjustment Summary

4.4 Refund Claim Form under ---- Goods & Services Tax Act, ----- (To be used only by Embassies, International and Public Organisations and their Officials)


5.            Situations where refund would arise

5.1 Excess payment of tax due to mistake or inadvertence.

5.2 Export (including deemed export) of goods / services under claim of rebate or Refund of accumulated input credit of duty / tax when goods / services are exported.

5.3 Finalization of provisional assessment.

5.4 Refund of Pre – deposit for filing appeal including refund arising in pursuance of an appellate authority’s order (when the appeal is decided in favour of the appellant).

5.5 Payment of duty / tax during investigation but no/ less liability arises at the time of finalization of investigation / adjudication.

5.6 Refund of tax payment on purchases made by Embassies or UN bodies.

5.7 Credit accumulation due to output being tax exempt or nil-rated.

5.8 Credit accumulation due to inverted duty structure i.e. due to tax rate differential between output and inputs.

5.9 Year-end or volume based incentives provided by the supplier through credit notes.

5.10 Tax Refund for International Tourists


6.            Supporting documents required

6.1 Copy of return evidencing payment of duty.

6.2 Copy of invoices (in original) (for the purpose of evidencing the supply of goods and the fact that duty is not reflected in the same). The applicant for refund in such cases would submit the copies of the invoices or a statement containing details of quantity along with the refund application.

6.3 Documents evidencing that the tax burden has not been passed on to the buyer

Since GST is an Indirect tax, there will be a rebuttable presumption that the tax has been passed on to the ultimate consumer. A Chartered Accountant’s Certificate certifying the fact of non-passing of the GST burden by the taxpayer, being claimed as refund should be called for.

6.4 Any other document as prescribed by the refund sanctioning authority.


7.            Processing of refund

7.1 Applicant may be given the option of filing refund application either through the GSTN portal or through the respective State / Central Tax portal. Filing through GSTN portal may be beneficial for those applicants whose refund relates to CGST / IGST as well as SGST or the refund arises in different State Tax jurisdictions. Instead of filing applications with different tax authorities, the same may be filed with the GSTN portal which will forward it to the respective tax authority.

7.2 On filing of the electronic application, a receipt/ acknowledgement number may be generated and communicated to the applicant via SMS and email for future reference. A provision may be made to display the application for refund in dealer's online dashboard when he logs into the system.

7.3 The “carry forward input tax credit” in the return and the cash ledger should get reduced automatically, if the application is filed at GSTN portal itself. In case the application is filed at the tax department portal, suitable integration of that portal with GSTN portal should be established to reduce/block the amount before taking up the refund processing.

7.4 It should be clearly mentioned / highlighted that generation of this number does not in any way affirm the legality, correctness or completeness of the refund application.

8.            Verification and control

8.1 Every refund that is sanctioned would need to go through a process of review by higher authorities in order to ensure the correctness of the decision of refund sanctioning authority. So once the refund is sanctioned, the same shall be transferred through the IT system to the menu of the higher authority along with the documents on the basis of which decision was taken by the refund sanctioning authority. Any documents that were sought besides those in the application should also be forwarded manually to the higher authority for taking a decision about review of the order.

8.2 It is recommended that looking at the higher level of compliance and self regulating mechanism in the form of system based ITC verification, uploading of sales and purchase invoices, reconciliation, compliance rating etc. post audit of refund application can be dispensed with if so decided by the respective Tax Jurisdiction for refunds up to Rs. 1 lakh for normal taxpayers and for refund up to Rs. 2 lakhs for certain prescribed categories of applicants (like public sector undertakings, applicants having the AEO Status, etc.).

8.3 Besides this, for refund amounts exceeding a pre-determined amount a provision for pre-audit of refund application before the sanction of the refund may be provided for. Keeping in view the points mentioned above regarding increased compliance, self-regulation and system based verification, etc., it is recommended that the monetary limit for pre- audit of the refunds sanctioned may be kept at Rs. 1 crore or as may be decided by the respective Tax Jurisdiction. The procedure for pre- audit will be same as that for the post audit except that the application will have to move to and fro between the refund sanctioning authority and the audit authority before grant of refund. The GST Law may provide that the process of audit should be time bound with clearly defined timeline so that quality of audit does not suffer from insufficiency of time.


Category: articles
Source/Author: RAJAT MOHAN

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