GST Refund Claims, Scrutiny & Appeal

GST REFUND — STATUTORY FRAMEWORK

1. SECTION 54 CGST ACT, 2017 — REFUND OF TAX

Section 54(1) provides that any person claiming a refund of tax or interest paid or the amount paid by mistake may make an application before the expiry of two years from the relevant date. The relevant date varies by refund category:

• For export of goods: date of departure of the ship or aircraft in case of goods exported by sea or air; date of issue of Bill of Lading / Airway Bill in other cases


• For export of services: date of receipt of payment in convertible foreign exchange; or date of invoice (if advance received before supply)


• For inverted duty structure: end of the financial year in which the claim for refund arises


• For tax paid mistakenly: date of payment of tax

Section 54(3) specifically allows refund of unutilised ITC at the end of any tax period where the credit accumulation is on account of: (a) zero-rated supplies (exports); or (b) an inverted rate structure — inputs are taxed at a higher rate than the output supply.

2. RULE 89 CGST RULES, 2017 — REFUND APPLICATION AND DOCUMENTS

Application for refund is filed in FORM RFD-01 electronically on the GST portal. Supporting documents include: FORM GSTR-2A / GSTR-2B (ITC details), export invoices, shipping bills / bills of export, BRC/FIRC (Bank Realisation Certificate / Foreign Inward Remittance Certificate for service exports), and a statement of invoices in the applicable annexures.

Rule 89(5) — Net ITC formula for inverted duty refund: Maximum Refund = (Turnover of inverted rated supply of goods and services × Net ITC ÷ Adjusted Total Turnover) − Tax payable on such inverted rated supply. The formula caps the refund to prevent excess grant.

3. FORM RFD-03 — DEFICIENCY MEMO

If the refund application is found deficient (incomplete documents, incorrect computation, or ineligible category), the proper officer issues FORM RFD-03 (deficiency memo) under Rule 90(3) within 15 days of filing. The applicant must re-file FORM RFD-01 after addressing the deficiency. The 60-day processing clock stops on issuance of RFD-03 and restarts on re-filing.

4. PROVISIONAL REFUND — FORM RFD-06

Under Section 54(6), the proper officer may grant a provisional refund of 90% of the claimed amount within 7 days of the date of acknowledgement where the applicant is an exporter with a satisfactory track record and the refund claim is in respect of zero-rated supplies. The provisional sanction order is in FORM RFD-06.

5. SECTION 56 — INTEREST ON DELAYED REFUND

Under Section 56 of the CGST Act, if the refund is not sanctioned within 60 days of receipt of the refund application, the Government is liable to pay interest at 6% per annum on the refund amount from the date immediately after the expiry of 60 days until the date of refund (CBIC Circular 173/5/2022-GST dated 06.07.2022 clarified the interest computation methodology).

6. SECTION 107 — APPEAL AGAINST REFUND REJECTION

Where a refund is wholly or partially rejected through FORM RFD-07, the applicant may appeal to the Appellate Authority under Section 107 of the CGST Act within 3 months from the date of communication of the rejection order. Pre-deposit of 10% of the disputed tax amount is required under Section 107(6).

GST refund claims under Section 54 of the CGST Act, 2017 cover: (a) refund of IGST paid on export of goods or services (zero-rated supplies); (b) refund of unutilised ITC accumulated due to an inverted tax structure (input tax rate exceeds output tax rate) under Rule 89(5); (c) refund of tax paid by mistake or excess; and (d) other categories notified by the Government. We prepare FORM RFD-01 with the required documentary evidence, respond to deficiency memos in FORM RFD-03, track provisional refund orders (FORM RFD-06), and appeal against full or partial rejection orders (FORM RFD-07) before the Appellate Authority under Section 107. Interest at 6% per annum is payable by the Government under Section 56 for delayed refunds beyond 60 days.