GST Basics #20: Section 54 — Getting Your Money Back

GST Basics #20 walks through Section 54 of the CGST Act: when a refund arises, the two situations in which accumulated input tax credit is refundable, Form GST RFD-01 and the two-year limit, the forms and timelines, and the unjust enrichment test.

A refund under GST is simply the government giving back money that should never have stayed with it. Section 54 of the CGST Act is the provision that governs it, and CBIC's own explainer on the subject is at https://gstcouncil.gov.in/sites/default/files/e-version-gst-flyers/refund-in-gst.pdf

Refunds arise in more situations than most people expect. Exports of goods or services, supplies to a unit in a special economic zone, deemed exports, tax paid by mistake or in excess, money left sitting in your electronic cash ledger after the tax is paid, a pre-deposit returned after you win an appeal, tax paid under the wrong head, and credit that has piled up because the tax on what you buy is higher than the tax on what you sell.

That last one matters. Unutilised input tax credit is refundable in only two situations: exports and other zero-rated supplies, and an inverted duty structure. In every other case, accumulated credit stays in the ledger and waits for a liability to set off against, as instalment #18 explained.

An exporter has a choice. Either export under a bond or letter of undertaking without paying tax and claim back the credit, or pay integrated tax on the export and claim that tax back.

The mechanics are the same across categories. You apply in Form GST RFD-01 on the portal, and the time limit is two years from the relevant date. The officer acknowledges the claim in RFD-02 within fifteen days, or points out what is missing in RFD-03, which sends you back to the start. A sanction order in RFD-06 should follow within sixty days. If the department proposes to reject the claim it must say so in RFD-08 and hear your reply in RFD-09. For zero-rated supplies, ninety per cent of the claim is released provisionally within seven days of acknowledgement, so exporters are not left waiting for their working capital.

If the sixty days pass, CBIC's flyer puts the interest payable at six per cent, rising to nine per cent where the refund follows an order of an appellate authority or a court.

One condition catches people out. Most refund claims must clear the test of unjust enrichment: you cannot get back a tax whose burden you have already passed on to your customer. Below a threshold of two lakh rupees your own declaration is enough; above it, a chartered accountant's or cost accountant's certificate is required. Refunds of accumulated credit and of export-related tax are outside this test.

The portal's own guide to filing is at https://tutorial.gst.gov.in/userguide/refund/Application_for_Refund.htm and it carries a practical warning: you cannot claim a refund for a period whose GSTR-3B is not yet filed. Returns first, as always, then refunds. Cross-refer instalments #11 and #12 on which credit is available in the first place, and #17 on the returns that support the claim.

Topics:GST refundsSection 54RFD-01inverted duty structurezero rated suppliesexport refundprovisional refundunjust enrichmentGST basicsinput tax creditChennaiTamil Nadu

Back to all GST updates