Changes in rules of refund under GST as per Central Board of Indirect Taxes and Custom

The concept of refund under GST relates to any amount returned by the government that was paid by the registered taxpayer either in excess or. was not liable to be taxed. GST follows doctrine of unjust enrichment in case of refund of GST. Doctrine of unjust enrichment means no person can be unjustly enriched at the expense of another person. Therefore, if any refund becomes due to the supplier/ importer, then since supplier/ importer has recovered the tax/ duty from the consumers, thus to be fair refund should be made to consumers.

Central Board of Indirect Taxes & Custom with notification No. 15 /2021 dated 18th May 2021 has notified changes in GST refund policy and revocation of cancellation of registration rules. Experts feel that these changes will give some relief to GST assesses. Based on the notification, now refund application can be withdrawn at any time prior to issuance of refund provisional/ final/ payment/ withhold/ rejection order. Some changes have been made in the procedure of withheld refund. The withheld refund can be released after the satisfaction of the proper officer or Commissioner.

What are the various changes notified by the CBIC?

Below are the rules which have been changed by the CBIC through notification No. 15 /2021 dated 18^th May 2021 the changes has been highlighted (bold letters) in the respective rule:

1) Rule 23 (1) – Revocation of cancellation of registration

As per Rule 23 sub rule (1) A registered person, whose registration is cancelled by the proper officer on his own motion, may submit an application for revocation of cancellation of registration, in FORM GST REG-21, to such proper officer, within a period of thirty days from the date of the service of the order of cancellation of registration or within such time period as extended by the Additional Commissioner or the Joint Commissioner or the Commissioner, as the case may be, in exercise of the powers provided under the proviso to sub-section (1) of section 30, at the common portal, either directly or through a Facilitation Centre notified by the Commissioner.

2) Rule 90- Acknowledgement for Refund Application

(1) Where the application relates to a claim for refund from the electronic cash ledger, an acknowledgement in FORM GST RFD-02 shall be made available to the applicant through the common portal electronically, clearly indicating the date of filing of the claim for refund and the time period specified in sub-section (7) of section 54 shall be counted from such date of filing.

(2) The application for refund, other than claim for refund from electronic cash ledger, shall be forwarded to the proper officer who shall, within a period of fifteen days of filing of the said application, scrutinize the application for its completeness and where the application is found to be complete in terms of sub-rule (2), (3) and (4) of rule 89, an acknowledgement in FORM GST RFD-02 shall be made available to the applicant through the common portal electronically, clearly indicating the date of filing of the claim for refund and the time period specified in sub-section (7) of section 54 shall be counted from such date of filing.

(3) Where any deficiencies are noticed, the proper officer shall communicate the deficiencies to the applicant in FORM GST RFD-03 through the common portal electronically, requiring him to file a fresh refund application after rectification of such deficiencies. “Provided that the time period, from the date of filing of the refund claim in FORM GST RFD-01 till the date of communication of the deficiencies in FORM GST RFD-03 by the proper officer, shall be excluded from the period of two years as specified under sub-section (1) of Section 54, in respect of any such fresh refund claim filed by the applicant after rectification of the deficiencies.”;

(4) Where deficiencies have been communicated in FORM GST RFD-03 under the State Goods and Service Tax Rules, 2017, the same shall also deemed to have been communicated under this rule along with the deficiencies communicated under sub-rule (3).

(5) The applicant may, at any time before issuance of provisional refund sanction order in FORM GST RFD-04 or final refund sanction order in FORM GST RFD-06 or payment order in FORM GST RFD-05 or refund withhold order in FORM GST RFD-07 or notice in FORM GST RFD-08, in respect of any refund application filed in FORM GST RFD-01, withdraw the said application for refund by filing an application in FORM GST RFD-01W.

(6) On submission of application for withdrawal of refund in FORM GST RFD-01W, any amount debited by the applicant from electronic credit ledger or electronic cash ledger, as the case may be, while filing application for refund in FORM GST RFD-01, shall be credited back to the ledger from which such debit was made.

3) Rule 92: Order sanctioning refund

(1) Where, upon examination of the application, the proper officer is satisfied that a refund under sub-section (5) of section 54 is due and payable to the applicant, he shall make an order in FORM GST RFD-06 sanctioning the amount of refund to which the applicant is entitled, mentioning therein the amount, if any, refunded to him on a provisional basis under sub-section (6) of section 54, amount adjusted against any outstanding demand under the Act or under any existing law and the balance amount refundable:

Provided that in cases where the amount of refund is completely adjusted against any outstanding demand under the Act or under any existing law, an order giving details of the adjustment shall be issued in Part A of FORM GST RFD-07. As per the latest amendment sub rule (1) has been omitted from Rule 92

“(1A) Where, upon examination of the application of refund of any amount paid as tax other than the refund of tax paid on zero-rated supplies or deemed export, the proper officer is satisfied that a refund under sub-section (5) of section 54 of the Act is due and payable to the applicant, he shall make an order in FORM RFD-06 sanctioning the amount of refund to be paid, in cash, proportionate to the amount debited in cash against the total amount paid for discharging tax liability for the relevant period, mentioning therein the amount adjusted against any outstanding demand under the Act or under any existing law and the balance amount refundable and for the remaining amount which has been debited from the electronic credit ledger for making payment of such tax, the proper officer shall issue FORM GST PMT-03 re-crediting the said amount as Input Tax Credit in electronic credit ledger.”;

(2) Where the proper officer or the Commissioner is of the opinion that the amount of refund is liable to be withheld under the provisions of sub-section (10) or, as the case may be, sub-section (11) of section 54, he shall pass an order in Part A of FORM GST RFD-07 informing him the reasons for withholding of such refund. Provided that where the proper officer or the Commissioner is satisfied that the refund is no longer liable to be withheld, he may pass an order for release of withheld refund in Part B of FORM GST RFD- 07.

4) Rule 96: Refund of Integrated Tax paid on Goods or Services Exported out of India

(1) 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 a departure manifest or 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 or FORM GSTR-3B, as the case may be;

(2) The details of the relevant export invoices in respect of export of goods contained in FORM GSTR-1 shall be transmitted electronically by the common portal to the system designated by the Customs and the said system shall electronically transmit to the common portal, a confirmation that the goods covered by the said invoices have been exported out of India.

Provided that where the date for furnishing the details of outward supplies in FORM GSTR-1 for a tax period has been extended in exercise of the powers conferred under section 37 of the Act, the supplier shall furnish the information relating to exports as specified in Table 6A of FORM GSTR-1 after the return in FORM GSTR-3B has been furnished and the same shall be transmitted electronically by the common portal to the system designated by the Customs:

Provided further that the information in Table 6A furnished under the first proviso shall be auto-drafted in FORM GSTR-1 for the said tax period.

(3) Upon the receipt of the information regarding the furnishing of a valid return in FORM GSTR-3 or FORM GSTR-3B, as the case may be from the common portal, the system designated by the Customs or the proper officer of Customs, as the case may be, shall process the claim of refund in respect of export of goods and an amount equal to the integrated tax paid in respect of each shipping bill or bill of export shall be electronically credited to the bank account of the applicant mentioned in his registration particulars and as intimated to the Customs authorities.

(4) The claim for refund shall be withheld where,-

(a) a request has been received from the jurisdictional Commissioner of central tax, State tax or Union territory tax to withhold the payment of refund due to the person claiming refund in accordance with the provisions of sub-section (10) or sub-section (11) of section 54; or

(b) the proper officer of Customs determines that the goods were exported in violation of the provisions of the Customs Act, 1962.

(5) Where refund is withheld in accordance with the provisions of clause (a) of sub-rule (4), the proper officer of integrated tax at the Customs station shall intimate the applicant and the jurisdictional Commissioner of central tax, State tax or Union territory tax, as the case may be, and a copy of such intimation shall be transmitted to the common portal.

(6) Upon transmission of the intimation under sub-rule (5), the proper officer of central tax or State tax or Union territory tax, as the case may be, shall pass an order in Part A of FORM GST RFD-07.

(7) Where the applicant becomes entitled to refund of the amount withheld under clause (a) of sub-rule (4), the concerned jurisdictional officer of central tax, State tax or Union territory tax, as the case may be, shall proceed to refund the amount by passing an order in FORM GST RFD-06.

(8) The Central Government may pay refund of the integrated tax to the Government of Bhutan on the exports to Bhutan for such class of goods as may be notified in this behalf and where such refund is paid to the Government of Bhutan, the exporter shall not be paid any refund of the integrated tax.

(9) The application for refund of integrated tax paid on the services exported out of India shall be filed in FORM GST RFD-01 and shall be dealt with in accordance with the provisions of rule 89.

(10) The persons claiming refund of integrated tax paid on exports of goods or services should not have-

(a) received supplies on which the benefit of the Government of India, Ministry of Finance notification No. 48/2017-Central Tax, dated the 18th October, 2017, published in the Gazette of India, Extraordinary, Part II, Section 3, Sub-section (i), vide number G.S.R 1305 (E), dated the 18th October, 2017 except so far it relates to receipt of capital goods by such person against Export Promotion Capital Goods Scheme or notification No. 40/2017-Central Tax (Rate), dated the 23rd October, 2017, published in the Gazette of India, Extraordinary, Part II, Section 3, Sub-section (i), vide number G.S.R 1320 (E), dated the 23rd October, 2017 or notification No. 41/2017-Integrated Tax (Rate), dated the 23rd October, 2017, published in the Gazette of India, Extraordinary, Part II, Section 3, Sub-section (i), vide number G.S.R 1321 (E), dated the 23rd October, 2017 has been availed; or

(b) availed the benefit under notification No. 78/2017-Customs, dated the 13th October, 2017, published in the Gazette of India, Extraordinary, Part II, Section 3, Sub-section (i), vide number G.S.R 1272(E), dated the 13th October, 2017 or notification No. 79/2017-Customs, dated the 13th October, 2017, published in the Gazette of India, Extraordinary, Part II, Section 3, Sub-section (i), vide number G.S.R 1299 (E), dated the 13th October, 2017 except so far it relates to receipt of capital goods by such person against Export Promotion Capital Goods Scheme.

Explanation.- For the purpose of this sub-rule, the benefit of the notifications mentioned therein shall not be considered to have been availed only where the registered person has paid Integrated Goods and Services Tax and Compensation Cess on inputs and has availed exemption of only Basic Customs Duty (BCD) under the said notifications.

5) CGST Rule 138E: Restriction on furnishing of information in PART A of FORM GST EWB 01

Notwithstanding anything contained in sub-rule (1) of rule 138, no person (including a consignor, consignee, transporter, an e-commerce operator or a courier agency) shall be allowed to furnish the information in PART A of FORM GST EWB 01 in respect of any outward movement of goods of a registered person, who,—

(a) being a person paying tax under section 10, or availing the benefit of notification of the Government of India, Ministry of Finance, Department of Revenue No. 02/2019– Central Tax (Rate), dated the 7th March, 2019, published in the Gazette of India, Extraordinary, Part II, Section 3, Sub-section (i) vide number G.S.R. 189, dated the 7th March, 2019, has not furnished the statement in FORM GST CMP-08 for two consecutive quarters; or

(b) being a person other than a person specified in clause (a), has not furnished the returns for a consecutive period of two months:

Provided that the Commissioner may, on receipt of an application from a registered person in FORM GST EWB-05, on sufficient cause being shown and for reasons to be recorded in writing, by order, in FORM GST EWB-06, allow furnishing of the said information in PART A of FORM GST EWB 01, subject to such conditions and restrictions as may be specified by him:

Provided further that no order rejecting the request of such person to furnish the information in PART A of FORM GST EWB 01 under the first proviso shall be passed without affording the said person a reasonable opportunity of being heard:

Provided also that the permission granted or rejected by the Commissioner of State tax or Commissioner of Union territory tax shall be deemed to be granted or, as the case may be, rejected by the Commissioner.

Explanation:– For the purposes of this rule, the expression “Commissioner” shall mean the jurisdictional Commissioner in respect of the persons specified in clauses (a) and (b).

(c) being a person other than a person specified in clause (a), has not furnished the statement of outward supplies for any two months or quarters, as the case may be.

What is the time limit for clamming refund under GST?

As per section 54, time limit for filing refund claim Any person claiming the refund of the GST tax, or the interest paid should make an application within a period of two years from the relevant date using the Form GST RFD-01 electronically. A person may claim the balance available in the electronic cash ledger by filing the return as per the dates mentioned under GST.

Relevant date in case of refund are as follows:

Sr no	Case	Relevant Date
1	Goods exported out of India where a refund of tax paid is available in respect of goods themselves or, as the case may be the inputs or input services used in such goods – If the goods are exported by sea or air If the goods are exported by landIf the goods are exported by post	The date on which the ship or the aircraft in which such goods are loaded, leaves India; or the date on which such goods pass the frontier; or the date of dispatch of goods by the post office concerned to a place outside India;
2	Supply of goods regarded as deemed exports where a refund of tax paid is available in respect of the goods	The date on which the return relating to such deemed exports is furnished
3	Services exported out of India where a refund of tax paid is available in respect of services themselves or, as the case may be, the input or input services used in such services and the supply of services had been completed prior to the receipt of such payment. Payment for the services had been received in advance prior to the date of issue of the invoice	The date of receipt of payment in convertible foreign exchange or in Indian rupees wherever permitted by the RBI the date of issue of invoice
4	Where the tax becomes refundable as a consequence of judgement, decree, order or direction of the appellate authority, appellate tribunal or any court	The date of communication of such judgement, decree, order or direction;
5	Refund of unutilized input tax credit under clause (ii) of the first proviso to section 54(3) i.e. on account of inverted duty structure	The due date for furnishing of return under section 39 for the period in which such claim for refund arises
6	Where tax is paid provisionally under this act or the rules made thereafter	The date of adjustment of tax after the final assessment thereof;
7	A person, other than the supplier	The date of receipt of goods or services or both by such person; and
8	Other cases	The date of payment of tax

Who and in what situation taxpayers can claim for refund?

Refund includes the following:

Refund of tax paid on zero rated supplies of goods or services or both or on inputs or input services used in making such zero-rated supplies, or
Refund of tax on the supply of goods regarded as deemed exports, or
Refund of unutilized input tax credit in respect of inverted rate of goods as per section 54(3).
Refund of taxes on purchase made by UN or embassies etc
Refund arising on account of judgment, decree, order or direction of the Appellate Authority, Appellate Tribunal or any court
Finalisation of provisional assessment
Refund of pre-deposit
Excess payment due to mistake
Refunds to International tourists of GST paid on goods in India and carried abroad at the time of their departure from India
Refund on account of issuance of refund vouchers for taxes paid on advances against which goods or services have not been supplied.

What are the circumstances under which the refund is granted to taxpayer?

As per section 54(8) the principle of unjust enrichment is applicable in all cases of refund except in the following cases where the refundable amount shall, instead of being credited to the fund, be paid to the applicant, if such amount is relatable to –

Refund of tax paid on export of goods or services or both or on inputs or input services used in making such exports
Refund of unutilized ITC in case of zero-rated supplies or accumulated ITC on account of inverted duty structure
Refund of tax paid on a supply which is not provided, either wholly or partially, and for which involve has not been issued, or where a refund voucher has been issued;
The tax and interest, if any, or any other amount paid by the applicant, if he has not passed on the incidence of such tax and interest to any other person; or
The tax or interest borne by such other class of applicants as the government may, on the recommendations of the council, by notifications, specify

What is the documentary evidence required in case of refund of GST?

The application of refund shall accompany along with the following documentary evidence which establish that a refund is due to the taxpayer or applicant:

The reference number of the order and a copy of the order passed by the proper officer or an appellate authority or appellate tribunal or court resulting in such refund or the reference number of the payment of the amount to be deposited at the rime of filing of appeal before appellate authority or appellate tribunal.
Where the refund is on account of export of goods then a statement containing the number and date of shipping bills of export and the number and the date of the relevant export invoices.
Where the refund is on account of the export of services, then a statement containing the number and the relevant Bank realization certificates or foreign realization certificates or foreign inward remittance certificates, as the case may be.
Where supply of goods made to SEZ unit or a SEZ developer then a statement containing the number and date of invoices as provided in rule 46 along with the evidence regarding goods admitted in full for authorized operations as endorsed by the specified officer of SEZ.
Where the refund is on account of supply of services made to a SEZ unit or SEZ developer then a statement containing the number and date of invoices, the evidence regarding the endorsement by specified officers of SEZ and the details of payment , along with the proof thereof, made by the recipient to the supplier for authorized operations defined under the SEZ act, 2005.
In case, where the refund is on account of supply of goods or services or both made to a SEZ unit or a SEZ developer then a declaration to the effect that tax has not been collected from the SEX unit or the SEX developer.
Where the refund is on account of deemed exports than a statement containing the number and date of invoices along with such other evidence as may be notified in this behalf, till date the following have been notified:
- Undertaking by the recipient of demand export supplies that no ITC on such supplies has been availed by him.
- Undertaking by the recipient of demand export supplies that he shall not claim the refund in respect of such supplies and the supplier may claim the refund.
- Acknowledgment by the jurisdictional tax officer of the advance authorization holder or export promotion capital goods authorization holder, as the case may be, that the said deemed export supplies have been received by the said advance authorization holder or export promotion capital goods authorization holder or a copy of the tax invoice under which such supplies have been made by the supplier, duly signed by the recipient EOU that the said deemed export supplies have been received by it.
Where the claim pertains to refund of any unutilized input tax credit under section 54(3) i.e. credit in case of inverted duty structure.
Where the refund arises on account of the finalization of provisional assessment than the reference number of the final assessment order and copy of the said order.
A statement showing the details of transactions considered as intra state supply but which is subsequently held to be inter-state supply.
A statement showing the details of the amount of claim on account of excess payment of tax;
Where the claim of refund does not exceed Rs. 2,00,000 then a declaration to the incidence of tax interest or any other amount claimed as refund has not been passed on to any other person.