REFUNDS

Objective of the Session

• Brief discussion on Sec. 54 of CGST & Sec.16 of IGST
• Not covering Procedures
• Different issues that might arise
• Recent Circulars on refund

If time permits

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 What is Refund ? - Explanation 1 to Sec.54
• Meaning of refund not explained in Section;
• It should be understood in general;
• Explanation specifically adds -
– Refund of tax paid on zero-rated supplies of goods/services/both;
– Refund of tax paid on inputs or input services used in making such
zero-rated supplies; (not covered anywhere in refunds)
– Refund of tax on the supply of goods regarded as deemed exports;
– Refund of unutilised ITC as provided in S.54(3).

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 S.54(1)- Process of refund claim
• Any person;
• Claiming refund of
– any tax and interest on such tax or
– any other amount
• Paid by him,
• may make an application for refund
• in such form and manner as may be prescribed
• Within two years
• from the relevant date
• In case of refund of balance in ECL by R.P. as permitted u/s 49(6) is
entitled to claim refund in the returns furnished u/s 39;
 S.54(1)- Process of refund claim
• Issues
– Provision does not give situations of refund;
• Any amount which is not payable but paid is eligible for refund.
– Whether refund can be claimed by recipient who has paid excess
tax?
• Yes.
– Can refund be claimed only of interest?
• Any other amount can cover interest alone
– Whether time limit applies for refund of ECL balance?
• No.
 Explanation 2 to Sec. 54- Relevant Date
• In case of goods export – (IGST paid or tax on inputs & services used), —
– Exported by sea or air - date on which the ship or the aircraft leaves India;
– Exported by land - date on which goods pass the frontier;
– Exported by post - date of despatch of goods by the Post Office
concerned;
• In case of deemed export supplies – date of filing return relating to such
deemed exports;
• In case of services export - (IGST paid or tax on inputs & services used) —
– Services completed prior to the receipt of payment – date of Receipt of in
CFE or INR if permitted; or
– Payment received in advance before issues of invoice – date of Issue of
invoice; (if payment after service but before invoice)
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 Explanation 2 to Sec. 54- Relevant Date
• In case of tax becomes refundable consequent to – (what about other
payments)
– judgment, decree, order or direction
– of the Appellate Authority, Appellate Tribunal or any court, (adjudicating
authority missing)
date of communication of such judgment, decree, order or direction;
• In case of inverted duty, unutilised ITC- Due date of return u/s w.r.t. period
for which refund arises; (what about exports/zero rated accumulated ITC)
• In case of provisional assessment - date of adjustment of tax after final
assessment;
• In case of refund claimed by a person, other than the supplier - date of
receipt of goods/services/both;
• In any other case - the date of payment of tax. (what about other payments)
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 S.54(2)- Refund to specified persons
• Refund of tax paid by the following agencies/persons on inward supplies
are entitled for refund -
– Notified specialised agency of UNO;
– Any notified Multilateral Financial Institution and Organisation;
– Consulate or Embassy of foreign countries;
– Any other person or class of persons, notified u/s 55,
• may make an application for 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.
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 S.54(3) – Unutilised ITC refund
• A registered person
• may claim refund of any unutilised ITC at the end of any tax period (period of
accumulation is not mentioned) :
• Refund of unutilised ITC is allowed only in following cases —
– zero rated supplies made without payment of tax;
– Inverted tax structure – Inputs rate higher than output supplies rate (N.A. for
nil rate/fully exempted),
• For notified supplies inverted tax refund is not permissible;
• No refund of unutilised ITC in cases of –
– Goods exported are subjected to export duty -;
– Avails drawback of Central taxes;
– Claims refund of IGST on goods exported;
• The amount sanctioned can be appropriated as per S.54(10)

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 S.54(4) - Documents
• The refund application should be accompanied by —
– Prescribed documentary evidence to establish entitlement of refund to
the applicant;
– Documentary or other evidence (including documents u/s 33) to establish
that refund of tax/interest/other amount claimed was paid by him and
incidence of such tax/interest is not passed on to any other person :
• In case refund claim is less than two lakh rupees, mere declaration
that incidence is not passed on instead of documents to establish
the said fact.

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 S.54(5), (7),(8A)- Sanction of Refund
• If the proper officer (AC/DC) is satisfied as to eligibility of refund
(partly or wholly), shall pass order to credit the amount to
consumer welfare fund;
• Proper officer is required to pass order within sixty days from the
date of receipt of application complete in all respects.
• The Government may disburse in prescribed manner, the refund of
other part of the tax i.e. State tax/Central tax as the case may be.
• Instead of crediting to consumer welfare fund, the amount shall be
refunded to applicant in case listed in S.54(8)
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 S.54(8) – Exception to C.W.F.
• Amount shall be refunded to applicant instead of C.W.F. if refund is relatable
to —
– IGST paid on exports;
– ITC on inputs or input services used in making exports;
– Refund of unutilised ITC;
– Refund of tax paid on advance for supply which is not provided wholly/partially- no
invoice is issued or refund voucher is issued;
– Refund of tax in pursuance of section 77 of CGST/19 of IGST;
– Tax/interest/other amount paid by the applicant and has not passed on the incidence
to any other person;
– Other notified class of applicants who has borne the Tax or interest

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 S.54(6)- Provisional sanction of refund
• In case of zero-rated supply refund by R.P.;
• P.O. is empowered to sanction 90% of claim excluding ITC
provisionally accepted;
• Subject to prescribed conditions, limitation and safeguards
• This sanction is notwithstanding S.54(5)
• Thereafter the P.O. shall make an order under sub-section (5)
for final settlement of the refund claim after due verification of
documents furnished by the applicant.
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 S.54(9)
• Irrespective of
– any judgment, decree, order or direction
– of the Appellate Tribunal or any court or
– any other provisions of this Act or the rules made thereunder or in
any other law for the time being in force,
• All refunds can be made only in terms of provisions of S.54(8) –
passing unjust enrichment test.

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 S.54(10)- Withholding/recovery/adjustment
• Applies only for refund of accumulated ITC to R.P.;
• If R.P.
– Has defaulted in filing any return or
– is required to pay any tax, interest or penalty, which is not stayed by
Court/Tribunal/Appellate Authority within last date for filing appeal,
• P.O. is entitled to—
– withhold payment of refund – till return is filed or taxes/interest/penalty is paid;
– deduct from refund - any tax/interest/penalty/fee/any other amount the taxable
person is liable to pay but remained unpaid under GST or under existing law.

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 S.54(11) & (12)
• In case of refund consequent to order, which is appealed or subjected to
further proceedings;
• Where any other proceedings under this Act is pending;
• The Commissioner is of the opinion that grant of such refund is likely to
adversely affect the revenue in appeal/proceedings;
• Due to malfeasance or fraud committed;
• He may, withhold the refund till the time he may determine;
• Opportunity of hearing to be given to taxable person;
• Subsequently taxable person becomes entitled for refund, refund should be
sanctioned alongwith interest at notified rate.
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 S.54(13)
• In case of casual taxable person or a non-resident taxable
• The amount of advance tax deposited u/s 27(2) at the time of
seeking registration
• shall be refunded only after all the returns u/w 39 are filed
• For the entire period for which the certificate of registration
granted to him had remained in force.
• This is irrespective of other provisions as to refund.

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 S.54(14)
• Refund will be ordered only if the amount is equal to or more
than Rs. 1000/-

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