REFUND

Relevant date for claiming refund [Explanation 2 to section 54]

Cases Relevant Date

In case of services exported out of India where a refund of tax Date of receipt of payment in convertible foreign exchange
paid is available in respect of services themselves or, as the or in Indian rupees wherever permitted by the Reverse
case may be, the inputs or input services used in such Bank of India [Note 1]
services, and the supply of services had been completed prior
to the receipt of such payment

In case of refund of unutilised ITC on account of inverted Due date for furnishing of return under section 39 for the
duty structure period in which such claim for refund arises [Note 2]
Note 1:- This amendment has been made in view of amendment carried out in section 2(6) (i.e. export of service ) of IGST Act,
allowing realisation of export proceeds in INR, wherever allowed by RBI.
Note 2:- This amendment has been made to correct an inherent contradiction of the relevant date in case of refund of
unutilized ITC under section 54(3) since as per Explanation (2)(e) to section 54, the relevant date means the end of the
financial year in which such claim for refund arises while section 54(3) states that a registered person may claim refund of any
unutilized ITC at the end of any tax period.

Principle of unjust enrichment to apply in case of refund claim arising out of supplies of
goods/services made to SEZ developer/unit [Section 54 of CGST Act]
Q. Specify the cases where Doctrine of unjust enrichment is not applicable OR
Cases where refund is directly payable to applicant OR
Amount not transferable to consumer welfare fund.
Ans :
Cases where refundable amount shall be paid to the applicant:
Section 54(8) stipulates that the refundable amount shall, instead of being credited to the Consumer Welfare Fund, be
Amended by CGST
paid to the applicant, if such amount is relatable to — Amendment Act, 2018

(a) Tax on Exports : refund of tax paid on zero rated supplies Exports of goods or services or both or on inputs or input
services used in making such zero-rated supplies.
(b) Excess ITC of zero rated supply or inverted structure : refund of unutilised ITC in case of zero rated supplies
made without payment of tax or on account of inverted duty structure;
(c) Refund of Tax on issue of refund voucher : 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) Payment of Tax under wrong head : refund of tax in pursuance of section 77, i.e. tax paid tax on a transaction
treated to be an intra-State supply, but which is subsequently held to be an inter-State supply or vice-versa.;
(e) Refund if burden is not shifted : 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) Notified cases of Government : the tax or interest borne by such other class of applicants as the Government may,
on the recommendations of the Council, by notification, specify.

Prior Amendment:- Section 54(8) of the CGST Act provides a list of situations where the principle of unjust enrichment
does not apply for the purposes of payment of refund; in other words, refund amount, instead of being credited to the
Consumer Welfare Fund, shall be paid to the applicant.
One such situation was zero-rated supplies of goods or services. Zero-rated supply under section 16(1) of the IGST Act
means physical exports of goods or services or supplies made to an SEZ unit/SEZ developer. Earlier, principle of unjust

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 enrichment did not apply in such cases.
Amendment: Refund of tax paid on only export of goods or services or both or on inputs or input services used in making
such exports shall be paid to the applicant, instead of being credited to the Consumer Welfare Fund.
Section 54(8)(a) has been amended to provide that the principle of unjust enrichment will now apply in case of refund claim
arising out of supplies of goods or services made to SEZ developer/unit.

Rule 89 (4A) - Deemed Export

In the case of supplies received on which the supplier has availed the benefit of deemed exports under
notification No. 48/2017 Central Tax.
Refund of input tax credit, availed in respect of other inputs or input services used in making
zero-rated supply of goods or services or both, shall be granted.

Notification No. 48/ 2017 Following supply are notified as a deemed export

(a) Supply of goods by a registered person against Advance Authorisation

Proviso “Provided that goods so supplied, when exports have already been made after availing input tax credit on inputs used in
manufacture of such exports,
shall be used in manufacture and supply of taxable goods (other than nil rated or fully exempted goods)
and a certificate to this effect from a chartered accountant is submitted to the jurisdictional commissioner of GST or any other
officer authorised by him within 6 months of such supply;
Provided further that no such certificate shall be required if input tax credit has not been availed on inputs used in
manufacture of export goods Newly Inserted by N/N
01/2019 dt 15/01/2019

(b) Supply of capital goods by a registered person against Export Promotion Capital Goods
Authorisation
(c) Supply of goods by a registered person to Export Oriented Unit
(d) Supply of gold by a bank or Public Sector Undertaking specified in the notification No.50/
2017- Customs, dated the 30th June, 2017 (as amended) against Advance Authorisation.

Rule 89 (5) -Refund of ITC in case of inverted duty structure

Rule 89(5) of CGST Rules has been amended to include the definition of relevant period as follows:
Relevant period:- means the period for which the claim has been filed.

Rule 91 :- Provision related to grant of provisional refund

.Ü The proper officer, after scrutiny of the claim and the evidence submitted in support thereof and
on being prima facie satisfied that the amount claimed as refund is due to the applicant in
accordance with the provisions of section 54(6), shall make an order in prescribed form, sanctioning
the amount of refund due to the said applicant on a provisional basis within a period not exceeding 7
days from the date of the acknowledgement.
Newly InsertedProvided that the order issue in FORM GST RFD - 04 shall not be required to be
revalidated by the proper officer.(N/N 3/2019-CT Dated 29/01/2019)
Ü The proper officer shall issue a payment advice for the amount sanctioned and the same shall be
electronically credited to any of the bank accounts of the applicant mentioned in his registration
particulars and as specified in the application for refund.
Newly Inserted Provided that the payment advice in FORM GST RFD-05 shall be required to be
revalidated where the refund has not been disbursed within the same financial year in which the
said payment advice was issued (N/N 3/2019-CT Dated 29/01/2019)

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 Rule 89 (2) : Document required for filing refund claim
Declaration to the effect that tax has not been collected from SEZ unit/ developer is required
for claiming refund
Prior Amendment :- Earlier clause (f) of the said sub-rule required a declaration to the effect that the
SEZ unit/SEZ developer has not availed ITC of the tax paid by the supplier of goods or services or both,
in a case where the refund is on account of supply of goods or services made to a SEZ unit/SEZ
developer.
Amendment :- Consequently, with effect from 01.02.2019, clause (f) has been substituted with a new
clause providing that a declaration to the effect that tax has not been collected from SEZ unit/SEZ
developer, is required as a documentary evidence, in case where the refund is on account of supply of
goods or services or both made to SEZ unit/SEZ developer.
Impact:- With effect from 01.02.2019, the principle of unjust enrichment applies in case of refund claim
arising out of supplies of goods or services made to SEZ developer/unit.

f. supply of goods or services made to a SEZ “a declaration to the effect that tax has not
unit or a SEZ developer. been collected from the SEZ unit or the SEZ
developer” Amended by N/N
03/2019-CTdt 29/01/19

Rule 92 :- Provision relating to order sanctioning refund

Q. Explain the order of refund [Section 54(5),(7) read with rule 92]?
Ans.:
Ü Section 54(5) stipulates that 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 in FORM
RFD-06 accordingly and the amount so determined shall be credited to the Consumer
Welfare Fund
Ü Refund order shall be issued by the proper officer within 60 days from the date of receipt of
application complete in all respects [Section 54(7)].
The time limit of 60 days shall be counted from the date of filing claim for refund as mentioned in the
acknowledgment received for refund claim.
Where the proper officer is he shall make an
satisfied that the amount Ü order in Form GST RFD-06 and
refundable is payable to the Ü issue a payment advice for the amount of refund and
applicant under section 54(8) Ü the same shall be electronically credited to any of the bank
accounts of the applicant mentioned in his registration
particulars and as specified in the application for refund
[Rule 92(4)].
Provided that the order issued in FORM GST
Newly Inserted RFD-06 shall not be required to be revalidated by the
proper officer (N/N 3/2019-CT dt 29/01/2019)
However, the payment advice shall be
required to be revalidated where the refund has not been
disbursed within the same financial year in which the said
payment advice was issued.(N/N 3/2019-CT dt 29/01/2019)

W h e r e t h e p r o p e r o ffi c e r i s he shall make an order in Form GST RFD-06 and issue an

s a t i s fi e d t h a t t h e a m o u n t advice for the amount of refund to be credited to the
refundable is not payable to the Consumer Welfare Fund [Rule 92(5)]
applicant under section 54(8)

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 Rule 96:- Filing of departure manifest shall be deemed to be the application filed for refund of
tax paid on export of goods. [Notification No. 74/2018 CT dated 31.12.2018]
Prior Amendment:- Earlier, rule 96 provided that the shipping bill filed by an exporter of goods shall
be deemed to be an application for refund of integrated tax paid on the goods exported out of India
and such application shall be deemed to have been filed only when: —
(a) the person in charge of the conveyance carrying the export goods duly files an export manifest
or an export report covering the number and the date of shipping bills or bills of export; and
(b) the applicant has furnished a valid return in Form GSTR-3/Form GSTR-3B, as the case may
be;
Amendment:- Provided that the person in charge of the conveyance carrying export of goods files a
departure manifest then also the application for refund of IGST paid on export of goods shall be
deemed to have been filed.
Impact:- In other words, filing of export manifest or an export report, apart from filing of shipping bill
and GSTR-3B is a mandatory requirement for processing refund claim.

Rule 96A:- Export of goods or service under bond or LUT

Q.Explain the Provision of export of goods or services under bond or Letter of Undertaking
(LUT) [Rule 96A]?
Ans.:
Ü Any registered person availing the option to supply goods/services for export without payment of
IGST shall furnish, prior to export, a bond/LUT in prescribed form to the jurisdictional
Commissioner, binding himself to pay the tax due along with the interest specified under section
50(1) [@ 18% p.a.] within a period of:
(a) if the goods are not exported out 15 days after the expiry of 3 months or such further
of India period as may be allowed by the commissioner
from the date of issue of the invoice for export
(b) if the payment of such services is 15 days after the expiry of one year, or such
not received by the exporter in further period as may be allowed by the
convertible foreign exchange or Commissioner, from the date of issue of the
in Indian rupees, wherever invoice for export
permitted by the RBI Amended by 3/2019-CT
dt 29/01/2019

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 i) Calculation of refund amount for claims of refund of accumulated Input Tax Credit (ITC) on
account of inverted duty structure. (Circular no 79/53/2018 dt 31/12/2018)

Issue - Representations have been received stating that while processing the refund of unutilized ITC
on account of inverted tax structure,
the departmental officers are denying the refund of ITC of GST paid on those inputs which are
procured at equal or lower rate of GST than the rate of GST on outward supply, by not including the
amount of such ITC while calculating the maximum refund amount as specified in rule 89(5) of the
CGST Rules.

Clarification - Refund of unutilized ITC in case of inverted tax structure, as provided in section 54(3)
of the CGST Act, is available where ITC remains unutilized even after setting off of available ITC for
the payment of output tax liability.
Where there are multiple inputs attracting different rates of tax, in the formula provided in rule 89(5) of
the CGST Rules, the term 'Net ITC' covers the ITC availed on all inputs in the relevant period,
irrespective of their rate of tax.
The calculation of refund of accumulated ITC on account of inverted tax structure, in
cases where several inputs are used in supplying the final product/output, can be clearly understood
with help of the following example:
ple
A manufacturing process involves the use of an input A (attracting 5% GST) and input B
am
Ex (attracting 18 %GST) to manufacture output Y (attracting 12 % GST). Assume that the
claimant supplies the output Y having value of ` 3,000/- during the relevant period for which the
refund is being claimed. Since the claimant has no other outward supplies, his adjusted total
turnover will also be ` 3,000/-. Value of input A is ` 500 & Input B is ` 2000 which has been
purchased for relevant period for manufacture of 'Y'. Compute the value of maximum refund
Answer:-
i. Turnover of Inverted rate supply - ` 3000
ii. ITC on value of input A – ` 25 (500* 5%)
iii. ITC on value of Input B – ` 360 (2000 * 18%)
iv. Output Tax payable on Y - ` 360 (3000 * 12%)
v. Net ITC – ` 385
Maximum Refund Amount = {(Turnover of inverted rated supply of goods and services) x Net
ITC ÷ Adjusted Total Turnover} - tax payable on such inverted rated supply of goods and services.
= 3000/3000 * 385 – 360
= ` 25/-

Note – As the manufacturer is involved only in supply of inverted rated goods , therefore the total
turnover during the relevant period will be of ` 3000 only.

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 ii. Refund of accumulated ITC of input services and capital goods arising on
account of inverted duty structure –
Issue – As stated in sec 54(3) of the CGST act that refund of any unutilized ITC may be claimed 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),
does this include credit on capital goods & input services also & this matter has been
clarified.

Legal Provision- As per sec 2(59) of CGST act , defines inputs as any goods other than capital goods
used or intended to be used by a supplier in the course or furtherance of business.
As per N/N 26/2018 – CT dt 13/06/2018, it was stated that the term Net ITC, as used in the formula for
calculating the maximum refund amount under rule 89(5) of the CGST Rules,
shall mean input tax credit availed on inputs during the relevant period other than the
input tax credit availed for which refund is claimed under sub-rules (4A) or (4B) or both.

Clarification –As per the above stated provisions, it is clear that the intent of the law is not to allow
refund of tax paid on input services or capital goods as part of refund of unutilized input tax credit.
Also as per the rules, it is clarified that both the law and the related rules clearly prevent
the refund of tax paid on input services and capital goods as part of refund of input tax credit
accumulated on account of inverted duty structure.

Misinterpretation of the meaning of the term “inputs”: (Circular no 79/53/2018 dt

31/12/2018)

Issue - It has been represented that on certain occasions, departmental officers do not consider ITC
on stores and spares, packing materials, materials purchased for machinery repairs, printing and
stationery items, as part of Net ITC on the grounds that these are not directly consumed in the
manufacturing process and therefore, do not qualify as input.
There are also instances where stores and spares charged to revenue are considered as capital
goods and therefore the ITC availed on them is not included in Net ITC, even though the value of
these goods has not been capitalized in his books of account by the claimant.

Clarification - The GST paid on inward supplies of stores and spares, packing materials etc. shall be
available as ITC as long as these inputs are used for the purpose of the business and/or for effecting
taxable supplies, including zero-rated supplies,
and the ITC for such inputs is not restricted under section 17(5) of the CGST Act and
there is no specific restriction on the availment of such ITC anywhere else in the GST Act.
Further, capital goods have been clearly defined in section 2(19) of the CGST Act
as goods whose value has been capitalized in the books of account and which are used or intended
to be used in the course or furtherance of business. Stores and spares, the expenditure on which has
been charged as a revenue expense in the books of account, cannot be held to be capital goods.

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