GST Refund: Rules, Provisions & Claim Process

Goods and Service Tax (GST) is an indirect tax which is applicable on the supply of goods and services. The tax was introduced as a replacement of all other forms of indirect tax like sales tax, VAT, etc. Today, only GST is charged on goods and services which made the indirect tax regime uniform.

All businesses and individuals who supply goods and services are liable to pay GST to the Government. However, in certain instances, businesses and individuals might be eligible for a GST refund. A GST refund is the refund of excess GST paid by a business or an individual. If the GST paid is more than the actual GST liability, a GST refund would become applicable.

Scenarios when GST refund is applicable

Under Section 54 of the GST law, the term ‘refund’ in the context of GST would include the following instances –

  • Refund of output tax which has been paid on zero-rated supply of goods and/or services
  • Refund of input tax on inputs or on input services which have been used to make zero-rated supplies
  • Refund of tax levied on goods which are categorised as deemed exports
  • Refund of the unutilized input tax credit as specified under Section 54(3) of the GST Act due to an inverted duty structure.

Besides these types of refunds which have been specified under Section 54 of the GST Act, there can also be other types of refunds like the following –

  • Refund of tax on export of goods and services
  • Excess payment of GST due to an error or inadvertence
  • Refund on finalization of provisional assessment
  • Refund of the tax paid by bodies of the United Nations, para-military forces, army canteens, etc.
  • Refund of tax on pre-deposit if there is an appeal
  • Refund for the additional balance in the Electronic Cash Register
  • Refund of tax levied on supplies made to SEZs
  • Other miscellaneous refunds

When to claim GST refunds?

Now you know the instances when you can claim a GST refund but do you know when should the refund be claimed?

The application for claiming a GST refund should be made within 2 years of the relevant date. The concept of ‘relevant date’ differs across the different instances of GST refunds. Here are the relevant dates for common instances of GST refunds –

Instance of GST refund Relevant date
Refunds when goods are exported by air or sea The date on which the aircraft or the ship carrying the goods leaves India
Refunds when goods are exported by land The date on which the goods pass the frontier
Refunds when goods are exported by post The date when the goods are dispatched by the concerned post office
Refunds when goods are considered to be deemed exports The date on which the return on such goods is filed
Refunds when services have been exported and when the supply of services has been completed before receiving the payment The date on which the payment for the services is received 
Refunds when services have been exported and the payment for such services has been received before the invoice has been issued The date when the invoice is issued 
Refund of tax due to decree, judgement, direction or order of the Appellate Authority, Appellate Tribunal or any other court The date when the decree, judgement, direction or order is communicated
Refund for the unutilized part of the Input Tax Credit The last date of the financial year in which the claim for refund is made
Refund when GST is paid provisionally under the rules of the GST Act The date when the tax is adjusted after the final assessment is done

Who can claim a GST Refund?

GST refund would be payable to an applicant only when the amount is relevant to the following –

  • The amount is the refund of tax and interest thereon or any other amount which is paid by the applicant. Moreover, refund would be payable when the individual has not passed on the tax and interest thereon or any other amount to any other individual
  • The amount is the tax or interest borne by specific individuals whose name has been notified by the State Government or the Central Government based on the recommendations made by the GST Council.

When is the refund paid by the Government?

After the application for GST refund is submitted by the applicant, the refund is usually paid within period of 60 days. If, however, the refund has not been paid within 60 days, an interest would have to be paid on the delayed refund. Such interest would be calculated on a rate specified by the Central or the State Government based on the recommendation of the GST Council. The period over which interest would be calculated would be from the expiry of the refund due date till the date that the refund is paid. For example, if a GST refund was filed on 1st July, 2019, the refund should be paid by the Government by 1st September, 2019. However, if there is a delay and the refund is paid by 1st December, 2019, interest would be charged for the three months over which the refund was delayed.

Things to remember

Here are some important aspects of GST refund which you should know about –

  • If the amount of GST refund is up to INR 1000, no refund would be paid
  • If an order which results in a GST refund is under appeal or further proceedings and such appeal and proceedings is pending, the refund can be withheld. Withholding is usually done when the Commissioner or Board feels that the refund would have a negative impact on the revenue of the assessee. The assessee would then be informed of the withholding of the refund and the refund would be paid after the proceedings or appeal is done. If the result of the proceedings or the appeal is in favour of the assessee, an interest would also be payable on the withheld refund.
  • The assessee should submit documentary proof of the fact that the tax, interest or any other amount paid was not transferred by him to any other individual. However, if the refund amount is below INR 5 lakhs, no documentary proof would be required. In that case, a self-declaration by the asseessee would be enough which would state that the tax, amount or interest has not been passed on to another individual.
  • In case of refund on the GST paid on export of goods or services, provisional refund of 90% would only be paid. The remainder would be paid after verification of the documents of the assessee.

So, understand the instances when GST refund becomes applicable and the rules for claiming the refund so that you can get refund of the extra tax that you might have paid.

Frequently Asked Questions

Q- How to file for a GST refund?

If you are eligible for a GST refund, you can file for the refund using GST Refund Form RFD-01. The form should be prepared by a Chartered Accountant. You can then submit the form within the relevant date and claim your refund.

Q- What if the GST refund is not filed within the relevant date?

If you fail to file for your GST refund within the mentioned relevant dates, you would not be able to get the refund for the extra tax paid. Your input tax credits can also be blocked in future.

Q- What happens when the GST Form RFD-01 has some errors?

In case of discrepancies in RFD-01, a new form called Form RFD -03 is generated and sent to the assessee to rectify the mistakes in his GST refund application.

CA Abhishek Soni
CA Abhishek Soni

Abhishek Soni is a Chartered Accountant by profession & entrepreneur by passion. He is the co-founder & CEO of Tax2win is amongst the top 25 emerging startups of Asia and authorized ERI by the Income Tax Department. In the past, he worked in EY and comes with wide industry experience from telecom, retail to manufacturing to entertainment where he has handled various national and international assignments.