GST Refund Process – An Overview

The Goods and Services Tax (GST) refund process plays a vital role in ensuring that businesses are not burdened with excess taxes paid and working capital blockages. Refunds are allowed under specific circumstances as prescribed in the CGST Act, 2017, and the rules framed thereunder.

 

✅ Circumstances for GST Refund

A registered person may claim a refund in the following cases:

1. Excess balance in Electronic Cash Ledger.
2. Export of goods or services (with or without payment of IGST).
3. Supplies made to SEZ units or developers (with or without payment of IGST).
4. Refund on account of inverted duty structure (higher input tax than output tax).
5. Refund of excess tax paid due to mistake.
6. Refund arising on account of finalisation of provisional assessment.
7. Refund for deemed exports.

 

📌 Steps in the Refund Application Process

1. Application Form – Refund application must be filed online in FORM GST RFD-01 on the GST portal within 2 years from the relevant date.
2. Acknowledgement – After submission, the applicant receives an ARN (Acknowledgement Reference Number) for tracking the refund claim.
3. Scrutiny by Proper Officer –
• If application is complete → Acknowledgement in FORM GST RFD-02 within 15 days.
• If deficiencies found → Deficiency Memo in FORM GST RFD-03 is issued.
4. Provisional Refund (Exports/SEZ cases) –
• 90% of the refund may be granted provisionally within 7 days of acknowledgment, through FORM GST RFD-04.
• Payment order issued in FORM GST RFD-05.
5. Final Order – After due verification, the officer issues:
• Sanction Order (FORM GST RFD-06) for approved refunds, OR
• Rejection Order (FORM GST RFD-07/08) if refund is inadmissible.
6. Payment of Refund – Refund is credited electronically to the applicant’s bank account.

 

📊 Relevant Timelines

• Refund application: within 2 years from relevant date.
• Provisional refund: 7 days.
• Final sanction: within 60 days from date of receipt of complete application.

 

🚨 Cases Where Refund is Withheld

Refund may be withheld if:

• The applicant has defaulted in tax dues.
• The refund is under investigation for fraud, misstatement, or suppression of facts.

 

📌 Importance of Refund Mechanism

• Ensures liquidity for taxpayers.
• Prevents cascading effect of taxes.
• Promotes exports and competitiveness.
• Aligns with the principle of ease of doing business.