CGST §54 — Refund of tax (zero-rated, inverted duty, excess balance)

Refund application in FORM RFD-01 within 2 YEARS from relevant date. Common refund categories: (a) zero-rated supplies (exports + SEZ) — refund of unutilised ITC OR IGST paid; (b) INVERTED DUTY STRUCTURE — output tax rate less than input rate; (c) excess balance in cash ledger; (d) deemed exports. 90% provisional refund within 7 days for zero-rated exporters per Rule 91.

Key points

• §54(1) allows any person to claim refund of tax and interest, if any, paid on such tax, or any other amount paid by him, by filing FORM GST RFD-01 electronically WITHIN TWO YEARS from the RELEVANT DATE (defined in Explanation 2 — for exports the relevant date is the date of export;
• for excess payment, the date of payment).
• §54(3) authorises refund of UNUTILISED INPUT TAX CREDIT in TWO scenarios ONLY: (a) ZERO-RATED SUPPLIES made WITHOUT payment of tax under bond / LUT — exporters and SEZ suppliers;
• (b) where credit has accumulated on account of INVERTED DUTY STRUCTURE i.e. rate of tax on INPUTS is HIGHER than the rate on OUTPUT SUPPLIES — EXCEPT nil-rated / fully exempt outputs and unless Government notifies the goods / services to which this benefit shall NOT apply (Notification 5/2017-CT(R) blocks textiles, railway parts etc historically).
• §54(6) — PROVISIONAL REFUND of NINETY PER CENT of the refund claim shall be granted within 7 DAYS to a registered person making a zero-rated supply, subject to conditions in Rule 91 (no offences in past 5 years, no proceedings pending).
• Final order on full refund must be passed within SIXTY DAYS of receipt of complete application per §54(7);
• interest @ 6% under §56 if delayed.
• Rule 89 prescribes formula for refund amount: for zero-rated supply WITHOUT tax — Net ITC × (Turnover of zero-rated supply / Adjusted Total Turnover);
• for inverted duty — Net ITC × (Turnover of inverted-rated supply / Adjusted Total Turnover) − tax payable on such inverted-rated supply.
• UNJUST ENRICHMENT bar (§54(8)) applies to most refund categories — applicant must prove the tax burden was NOT passed on to recipient — exceptions: zero-rated supplies, refund of payment by specified UN agencies / embassies, refund up to ₹2 lakh in excess balance.

Reference: §54 CGST Act 2017 read with Rules 89, 91, 93 + §56