The balance in your credit ledger is not money the government is holding for you, and the gap between that balance and what actually comes back catches almost everybody. Start with the sentence people stop reading too early. Section 54(3) of the Central Goods and Services Tax Act, 2017 opens by letting a registered person claim refund of unutilised input tax credit — and then its first proviso confines that to two cases only: zero rated supplies made without payment of tax, and credit accumulated because the rate on inputs is higher than the rate on output supplies. Credit that piled up for any other reason has no refund route at all. Then the amount is not the balance either. For an inverted duty claim the figure comes out of the formula in rule 89(5), and Net ITC counts credit on goods only. Credit on freight, job work, rent, commission and professional fees never enters the numerator. The Supreme Court upheld that exclusion in 2021 and declined to disturb it because a formula throws up anomalies. And since 1 October 2025 the early money is decided by a machine. Rule 91(2) was amended with effect from that date so that the ninety per cent provisional refund turns on identification and evaluation of risk by the system. Score low risk and ninety per cent is sanctioned. Score anything else and nothing is paid provisionally — no order, no notice, nothing to answer and nothing to appeal. Inverted duty claims were brought inside that ninety per cent for the first time, expressly as an interim measure pending amendment of the Finance Act. So the question on day one is not how large the ledger balance is. It is: which of the two gates did this credit come through, and how much of the two year window is left on the oldest period in it?
What is on this page
Under the goods and services tax, a refund returns money that reached the government and, on the law as it stands, had no business remaining there. That is a narrower idea than it sounds. It does not mean every rupee of tax you have paid and not recovered. It does not mean the balance sitting in your credit ledger. It means a specific amount, arising from a specific cause the statute recognises, claimed within a specific window, computed in a specific way.
Section 54 of the Central Goods and Services Tax Act, 2017 is the provision that does this work, and almost every argument about refunds is really an argument about one of its sub-sections. The structure is worth holding in mind before any of the detail: sub-section (1) opens the door and sets the clock, sub-section (3) decides whether accumulated credit can come back at all, sub-sections (5) to (8) decide who the money goes to, and sub-sections (10) to (12) decide when it can be held back.
Everything on this page hangs off that spine. Where a figure or a form is involved, the Rules supply it, and where a date is involved, the Explanation to section 54 supplies it. The Act itself is surprisingly short about refunds; the complication lives one level down.
In practice, the refund enquiries that reach us fall into four groups, and the first job is always to work out which one is in front of us, because everything downstream differs.
Exports and zero rated supplies. Goods or services supplied out of India, or to a special economic zone, either without payment of tax under a bond or letter of undertaking with a claim for the accumulated credit, or with payment of integrated tax and a claim for that tax back.
Inverted duty structure. Credit accumulating because the rate on what you buy is higher than the rate on what you sell. The domestic manufacturer problem.
Excess balance in the electronic cash ledger. Money actually deposited and never used. The simplest of the four, and the only one that is close to automatic.
Tax paid under the wrong head. Integrated tax paid where central and state tax were due, or the reverse. Dealt with by section 77 of the Central Act and section 19 of the Integrated Act.
There are others, including deemed exports and refunds arising from an order or judgment, but those four cover most of what walks in. The distinction matters because the relevant date, the evidence required and the computation are all different, and because a claim lodged under the wrong head collects a deficiency memo rather than a cheque.
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Section 54(1) permits any person claiming refund of tax and interest, if any, paid on such tax or any other amount paid by him, to make an application before the expiry of two years from the relevant date. That is the outer limit and it is not elastic. There is no general power in the section to condone a delay in filing a refund claim the way there is for an appeal.
Two years sounds generous and it is, until you notice what it is measured from. The clock does not run from when you realised you had a claim, or from when your accountant finished the reconciliation, or from when the money became inconvenient to be without. It runs from the relevant date, and the relevant date is defined by clause rather than by principle.
The practical consequence shows up most sharply on accumulated credit. A balance that has built over three financial years is not one claim with one deadline. It is a series of period-wise claims, each with its own relevant date, and the earliest of them expires first while you are still gathering documents for the latest.
There is no condonation of delay for a refund claim. Unlike an appeal, section 54 carries no general power to admit a late application. Two years from the relevant date is the end of it.
The Explanation to section 54 defines the relevant date, and it does so case by case rather than by a single rule. This is the provision people skip, and it is the provision that most often decides whether a claim survives.
It matters for three reasons at once. It fixes the start of the two year window, so it decides whether you are in time. It identifies which event has to be evidenced, so it decides what documents the application needs. And where a claim spans several periods it forces the claim to be broken up, because each period carries its own date rather than inheriting the latest one.
Reading it properly takes about ten minutes and is the highest-value ten minutes in the whole exercise. We do it before anything else, and we do it in writing, so that the date is a recorded position rather than an assumption nobody has tested. Where a client has already filed and been met with a memo, this is usually where the problem started.
Take goods going out of India. If they leave by sea or by air, the relevant date is the date the ship or the aircraft in which they are loaded leaves India. By land, it is the date the goods pass the frontier. By post, it is the date of despatch from the post office concerned. Three different dates for the same consignment depending only on how it travelled.
Services exported are measured differently again. Where the supply was completed before payment came in, the relevant date is the date of receipt of payment in convertible foreign exchange, or in Indian rupees where the Reserve Bank permits it. Where payment was received in advance of the invoice, it is the date of the invoice. Supplies to a special economic zone developer or unit take the due date for furnishing the return under section 39.
Deemed exports take the date the return relating to them is furnished. Accumulated credit under the inverted duty route takes the due date for furnishing the return for the period concerned. Tax paid provisionally takes the date of adjustment after final assessment. A refund arising from a judgment, decree, order or direction takes the date that order is communicated. Where the claimant is someone other than the supplier, it is the date of receipt of the goods or services. And in any other case, the date of payment of tax.
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People use the word ledger for two quite different accounts and then wonder why the advice does not fit. The electronic cash ledger holds money you deposited. The electronic credit ledger holds input tax credit you availed. They behave differently for refunds and conflating them causes a lot of wasted effort.
A balance in the cash ledger is your own money that was deposited and never used against a liability. Section 54(1) deals with it separately: a registered person claiming refund of any balance in the electronic cash ledger under section 49(6) may claim it in the return furnished under section 39. There is no entitlement question to argue, no formula, and no real dispute about whether it should come back. It is the one refund that behaves the way a layperson expects a refund to behave.
A balance in the credit ledger is nothing like that. It is an entitlement to set off against future output tax, not a deposit. Whether any part of it is refundable at all is the question the rest of this page is about, and for most businesses most of the time the answer is no.
It is worth saying plainly, because the way refunds are experienced tends to teach the opposite lesson. A refund that is due is due. It is not a favour, it is not discretionary at the point of entitlement, and the officer processing it is applying a statutory test rather than deciding whether to be helpful.
Where discretion genuinely exists, the statute says so and bounds it. Section 54(6) uses may in relation to the provisional refund. Section 54(10) and section 54(11) confer powers to withhold, each on stated grounds and, in the case of section 54(11), only after a hearing. Section 56 makes interest payable as of right once the sixty days pass. Outside those places, the question is whether the conditions are met, not whether the claim deserves sympathy.
That matters for how an application is written. A refund claim is not a request. It is a demonstration that each statutory condition is satisfied, set out so that an officer can verify each one without having to ask. Applications written in the register of a request tend to read as though the writer was not sure of the entitlement, and that is not a good first impression for a file to make.
Write the application as a demonstration, not a request. Every statutory condition should be visible and verifiable on the face of it, in the order the section puts them.
Section 54(14) provides that no refund under sub-section (5) or sub-section (6) is paid where the amount is less than one thousand rupees. It is a small threshold and it rarely bites on its own.
It bites when claims get split. A business filing month by month on thin margins can produce several individual applications that each fall under a thousand rupees, and each of those is simply not paid. Aggregated across a quarter the same amount would have been payable. The threshold is applied to the refund, not to the business, so how the claim is divided up changes whether the money arrives.
This is one of the small reasons to think about the period of a claim before filing rather than defaulting to the tax period. The others are larger, and they run the other way: a longer period is more work to reconcile, and a period that reaches too far back runs into the relevant date problem. There is no general answer, only a calculation to do on the specific numbers.
Before any computation, four things get read and four questions get answered in writing. The reading is the returns for the periods in question, the electronic credit and cash ledgers, the purchase and sales registers behind the returns, and whatever correspondence already exists with the department on this claim.
The questions are these. Which refund head does this fall under, and is there more than one running at once? What is the relevant date for each period, and how much of the window is left on the earliest of them? Is the entitlement itself clean, or is there a question underneath about whether the credit should have been availed in the first place? And has anything already been filed on this claim, because a prior application and a prior memo change the whole sequence.
That last one catches more files than it should. Clients frequently arrive having filed once through somebody else, with no clear record of what happened to it. The credit debited at filing may or may not have been restored. Until that is established, nothing else can sensibly be done, and establishing it is quick.
If somebody has filed for you before, say so at the outset. It is not a mark against the file. It changes the first step from computing a claim to establishing the status of an existing one, and those are different pieces of work.
No other mistaken belief in this area costs claimants as much, and what it costs them is usually measured in months. Input tax credit that has accumulated in the ledger is not money the government is holding on your behalf. It is an entitlement to reduce future output tax. The default position is that it stays there until it is used.
Section 54(3) opens by permitting a registered person to claim refund of any unutilised input tax credit at the end of any tax period, and if the sentence stopped there the popular understanding would be right. It does not stop there. The first proviso immediately confines the permission to two cases, and anything outside those two cases has no refund route at all under this provision.
So the question is never how much credit has accumulated. The question is why it accumulated. A balance that built up because trading was slow, or because a large capital purchase was made, or because output was seasonal, is not refundable however large it is and however long it sits. A balance of the same size that built up for one of the two permitted reasons is.
Before you spend anything on a refund, answer one question. Why did this credit accumulate? If the answer is not zero rated supplies or a rate differential, there is no claim, however large the balance.
The first proviso to section 54(3) allows refund of unutilised credit in two cases and no others. The first is zero rated supplies made without payment of tax. The second is where credit has accumulated on account of the rate of tax on inputs being higher than the rate of tax on output supplies, other than nil rated or fully exempt supplies, except supplies of goods or services notified by the Government on the recommendations of the Council.
Read that second limb slowly, because it contains three restrictions stacked together. The accumulation must be on account of the rate differential, which is a causation requirement rather than a description of the balance. Supplies that are nil rated or fully exempt are taken out, so an exempt output does not generate an inverted structure claim even though it certainly generates accumulated credit. And the Government retains power to notify particular goods or services out of the entitlement altogether.
Most claims that fail at the entitlement stage fail on the first of those three. The balance exists, but the reason it exists is not the rate differential, and once the reconciliation separates out the causes the refundable part turns out to be smaller than the ledger suggested.
Three restrictions stacked in the second limb. The accumulation must be on account of the rate differential, which is causation and not description. Nil rated and fully exempt output supplies are taken out. And the Government may notify particular goods or services out of the entitlement altogether.
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An exporter has a choice of two routes, and which one is taken determines which refund follows. Supplying without payment of tax, under a bond or a letter of undertaking, leaves the credit on the inputs unused, and that unused credit is what gets claimed. Supplying on payment of integrated tax means the tax itself is what gets claimed back.
The first route is the one that falls under section 54(3)(i). It is the common choice for businesses whose output is largely or wholly exported, because paying tax only to reclaim it ties up working capital for no purpose. Setting up the letter of undertaking is a separate piece of work from the refund itself, and clients who have not done it often discover the point only when the first claim is being prepared.
The second route is different in character: the claim is for tax paid rather than for credit accumulated, and it has historically carried its own restrictions. One of the largest of those, rule 96(10), is now gone, and that is dealt with further down this page.
Neither route is better in the abstract. The choice turns on how much of your output is exported, how much credit you can realistically absorb domestically, and how much working capital you can afford to have sitting with the department.
The inverted duty structure is easier to see with numbers than with words. A unit buys yarn and chemicals taxed at eighteen per cent and sells finished garments taxed at five per cent. Every month, the credit generated on purchases exceeds the output tax available to absorb it. The gap does not close in a good month, because a good month means more purchases as well as more sales. It compounds.
That is structurally different from ordinary accumulation. A business with matching rates that has a slow quarter accumulates credit and then works it off when trade recovers. A business with inverted rates never works it off, because the arithmetic that creates the accumulation is the same arithmetic that is supposed to consume it. Left alone, the credit becomes a permanent interest-free loan to the government.
Section 54(3)(ii) exists to deal with exactly that. What it does not do is return the whole accumulation, and the distance between what the business has accumulated and what the section will return is the subject of the next group of sections on this page. That distance is where most of the disappointment in this area comes from.
An inverted structure does not correct itself in a good month. More sales means more purchases, so the gap that creates the accumulation is the same gap that is supposed to consume it. That is why the statute treats it as structural.
The closing words of the first proviso reserve a power: except supplies of goods or services as may be notified by the Government on the recommendations of the Council. That power has been used, and the effect is absolute rather than partial. Where a supply is notified, there is no inverted duty refund on it at all, however clearly the rate differential exists.
Construction services and certain textile categories have featured in notifications of this kind at different times, and the list has been amended more than once. Because it is a notification rather than a statutory list, it is exactly the sort of thing that changes without changing the Act, and a reader working from a textbook or an older article can be badly misled.
We check the current notified position against the specific supply before a claim is built, and we say so in writing. This page deliberately does not print the list, because a list of notified supplies printed on a page in one year and read in another is worse than no list at all.
Do not take a notified-supplies list from any secondary source, including this one. The entitlement can be removed entirely by notification, and the only safe position is the notification as it stands on the date the claim is filed.
The second proviso to section 54(3) shuts the door in two further situations. No refund of unutilised input tax credit is allowed where the supplier of goods or services avails of drawback in respect of central tax, and none is allowed where the supplier claims refund of the integrated tax paid on such supplies.
The logic is straightforward enough: the statute is not willing to let the same economic burden be relieved twice through two different mechanisms. The difficulty in practice is that the two decisions are often taken by different people in the same business at different times, and nobody connects them. The customs side claims drawback because that is what the customs side does; the tax side prepares a credit refund because that is what the tax side does.
It is therefore one of the first things we ask about, and one of the things clients most often have to go and find out. If drawback of central tax has been availed on the same supplies, the credit refund is not available, and discovering that after filing rather than before is an avoidable waste of everybody time.
Ask the customs side before you file. Drawback of central tax availed anywhere on the same supplies closes the credit refund, and the two decisions are usually taken by different people who never compare notes.
Section 54(3) carried a third proviso, and it was omitted by section 128 of the Finance (No. 2) Act, 2024, with effect from a date to be notified. That form of words is worth pausing on, because it describes a state of affairs that catches readers out repeatedly.
An amendment enacted with effect from a date to be notified is law on the statute book and not yet in force. Until the notification issues, the position continues as before. A reader looking at a current commercial copy of the Act will see the provision shown as omitted, with a footnote, and may reasonably conclude that it has gone. Whether it has gone depends entirely on whether the appointed day has been notified.
This is a general hazard with tax amendments rather than a quirk of this one, and it is why dates matter more in this area than in most. The same Finance (No. 2) Act, 2024 inserted section 54(15), and that one did take effect, which makes the contrast within a single amending Act a useful thing to have noticed.
Section 54(15), inserted by section 128 of the Finance (No. 2) Act, 2024, provides that no refund of unutilised input tax credit on account of zero rated supply of goods, or of integrated tax paid on zero rated supply of goods, shall be allowed where such zero rated supply of goods is subjected to export duty.
It is a short provision with a hard edge. It does not scale the refund down, apportion it or defer it. Where the goods exported attract export duty, both of the export refund routes close. The exporter who went the letter of undertaking route cannot claim the accumulated credit, and the exporter who paid integrated tax cannot claim the tax.
Export duty applies to a limited set of goods, so most exporters never encounter this. For those who do, it is the sort of provision that should be identified at the point of deciding how to structure the export rather than at the point of claiming, because by then the choice between the two routes has already been made and neither of them helps.
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The Finance (No. 2) Act, 2024 received assent on 16 August 2024, and its section 128 did two things to section 54 that pull in the same direction. It omitted the third proviso to sub-section (3), with effect from a date to be notified, and it inserted sub-section (15), which is in force.
Taken together with what followed in 2024 and 2025, the period from that August onwards is the most active the refund provisions have been since the tax was introduced. Rule 96(10) went in October 2024. The rate structure was consolidated in September 2025. The provisional refund mechanism was rebuilt around system risk scoring with effect from October 2025. Any guidance written before that August and not revisited since is describing a materially different regime.
That is the practical reason this page carries dates on almost every proposition rather than stating the law flatly. A reader cannot tell from an undated statement whether it was true when written and has since changed. With the date attached, they can at least check.
Anything you read about GST refunds that is undated should be treated as unreliable until dated. Four separate structural changes landed between August 2024 and October 2025, and most published material predates at least one of them.
What an inverted duty claim is worth bears no necessary relation to the accumulated balance. The figure is produced by the formula in rule 89(5) of the Central Goods and Services Tax Rules, 2017, and that formula accounts for nearly all of the distance between what claimants expect and what they receive.
As substituted by Notification No. 14/2022-Central Tax dated 5 July 2022, the maximum refund amount is the turnover of inverted rated supply of goods and services, multiplied by Net ITC, divided by adjusted total turnover; and from that is deducted the tax payable on such inverted rated supply of goods and services, multiplied by the ratio of Net ITC to input tax credit availed on inputs and input services.
Three defined quantities are doing the work: Net ITC, adjusted total turnover, and the turnover of the inverted rated supply. Each is defined in the Rules rather than taking its ordinary commercial meaning, and each has to be computed from the returns rather than estimated from the accounts. Getting any one of them wrong does not produce a slightly different answer; it produces a claim that fails reconciliation.
Net ITC is the quantity that surprises people. For the purposes of this sub-rule it means input tax credit availed on inputs during the relevant period, excluding credit for which a refund is claimed under the sub-rules dealing with zero rated supplies.
Inputs means goods. Credit availed on input services is not in Net ITC. Neither is credit on capital goods. A manufacturer whose cost base includes significant job work, freight, rent, power contracted as a service, professional fees or commission is availing credit on all of it and seeing none of it in the numerator of the formula.
That is why the refund is so often materially less than the ledger balance, and why the ratio of goods credit to services credit in your own business is the single best predictor of how far short it will fall. A business whose inputs are overwhelmingly physical gets most of the accumulation back. A business with a heavy services cost base does not, and no amount of careful filing changes that, because the exclusion is in the definition rather than in the administration.
Work out your goods-to-services credit ratio before anything else. It is the single best predictor of how far short the refund will fall, and it is available from the returns in minutes.
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Adjusted total turnover sits in the denominator, and because it is a denominator, anything that inflates it reduces the refund. It takes the meaning given in the sub-rule dealing with zero rated refunds, which builds it from the turnover in a State or Union territory as defined in the Act, adjusted by excluding the value of exempt supplies other than zero rated supplies and the turnover of supplies in respect of which refund is claimed under certain other sub-rules.
The practical point is that the formula is apportioning. It is asking what proportion of your total activity the inverted rated supply represents, and giving you that proportion of your goods credit. If you also make supplies that are not inverted, they enlarge the denominator and shrink the share, even though the credit attributable to them was perfectly ordinary.
This is the second structural reason a refund comes in low, and it is independent of the first. A business can lose on the numerator because its credit is mostly on services, and lose again on the denominator because the inverted line is only part of what it does. Both losses are built into the design rather than being errors to be corrected.
The formula apportions, it does not reimburse. Supplies that are not inverted enlarge the denominator and shrink your share, even though the credit on them was entirely ordinary.
The deduction at the end of the formula is where the 2022 amendment did its work, and it is a genuine improvement, though a partial one.
Before the substitution by Notification No. 14/2022-Central Tax, the whole of the tax payable on the inverted rated supply was deducted from the apportioned figure. That was indefensible in one specific way. Net ITC counts only credit on goods, but the output tax being deducted had in reality been discharged partly out of credit on services, which Net ITC had never recognised. The claimant was being denied the services credit in the numerator and then charged with the output tax that credit had paid.
After 5 July 2022, the deduction is scaled by the ratio of Net ITC to all credit availed on inputs and input services. If half your credit is on services, only about half the output tax is deducted. It does not bring services credit into the refund, and it was never going to; what it does is stop the same exclusion operating twice against the same claimant.
Take a period in which the turnover of inverted rated supply is sixty lakh rupees and adjusted total turnover is eighty lakh. Credit availed on inputs, meaning goods, is nine lakh. Credit availed on input services is three lakh, so total credit availed on inputs and input services is twelve lakh. Tax payable on the inverted rated supply is three lakh.
The first term is sixty divided by eighty, which is three quarters, applied to Net ITC of nine lakh. That gives six lakh seventy-five thousand. The second term is the three lakh of output tax, scaled by nine over twelve, which is three quarters, giving two lakh twenty-five thousand. The maximum refund is six lakh seventy-five thousand less two lakh twenty-five thousand, which is four lakh fifty thousand.
Notice what happened. Twelve lakh of credit was availed in the period. The formula returned four and a half lakh. Nothing was disallowed, nothing was wrong with the claim, and no officer exercised any discretion. The gap is entirely the design of the formula: three lakh of services credit never entered the numerator, and the apportionment against total turnover took a further quarter.
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It is worth being clear that this is not a drafting accident that somebody will fix. The exclusion of input services from Net ITC is deliberate, it has been challenged at the highest level, and it has survived.
The policy reasoning, as the Union advanced it, is that section 54(3) is a limited statutory concession rather than a general right to recover accumulated credit, and that Parliament was entitled to confine the concession to credit arising on input goods. The counter-argument, which several High Courts found persuasive before the point was settled, was that the proviso describes when a refund may be claimed rather than how much, and that the Rules cannot narrow an entitlement the section grants.
Both arguments were put, fully, and one of them won. For a business sitting on accumulated credit the distinction is academic; what matters is that the shortfall is a feature of the scheme rather than something to be argued about with the officer handling the claim. Officers have no power to depart from the formula, and asking them to is a waste of the limited goodwill a file has.
The point was decided in Union of India v. VKC Footsteps India Pvt. Ltd., Civil Appeal No. 4810 of 2021 and connected matters, decided on 13 September 2021 by a Bench of Dhananjaya Y. Chandrachud and M. R. Shah, JJ.
The Gujarat High Court had held that the exclusion of input services from Net ITC in rule 89(5) was ultra vires section 54(3). The Madras High Court, in Tvl. Transtonnelstroy Afcons Joint Venture, had held the opposite. The Supreme Court resolved the conflict in favour of the Madras view: it upheld rule 89(5), allowed the Union appeals against the Gujarat judgment, and set that judgment aside.
The reasoning turned on reading section 54(3)(ii) as itself drawing the distinction. The clause speaks of credit accumulating because the rate of tax on inputs exceeds the rate on output supplies, and the Court took the statutory architecture as differentiating credit on input goods from credit on input services for refund purposes. Once that reading was accepted, the rule was doing what the section contemplated rather than cutting it down.
Union of India v. VKC Footsteps India Pvt. Ltd., Civil Appeal No. 4810 of 2021 and connected matters, decided 13 September 2021, Dhananjaya Y. Chandrachud and M. R. Shah, JJ. Rule 89(5) upheld; the Madras High Court view in Tvl. Transtonnelstroy Afcons Joint Venture affirmed; the Gujarat High Court judgment set aside.
The more useful part of the judgment, for anyone trying to predict how future challenges will go, is what the Court refused to do rather than what it decided.
It was shown, in detail, that the formula produces anomalous results in identifiable classes of case. It accepted that a formula can be imperfect. And it declined to strike it down on that basis, on the footing that a formula is a familiar device in fiscal legislation, that anomalies in its working are not the same thing as a want of power, and that correcting the design of a fiscal formula is a matter for policy rather than for judicial review.
That has a practical consequence worth stating. Arguments of the form the formula produces an unfair result in my case are not arguments that have anywhere to go, because the highest court has already heard that argument at its strongest and declined to act on it. Arguments about whether a particular quantity has been computed correctly within the formula are an entirely different thing, and those remain fully available.
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The refund application is made electronically on the common portal, and the form is prescribed by the Rules rather than by the Act. This page does not print the form number, and that is a considered omission rather than an oversight: the forms and their annexures are amended often enough that a number printed here and read a year later is a liability rather than a help. The current form on the portal is the authority.
What the form asks for is stable even when its number and layout are not. It wants the period, the head under which the refund is claimed, the amount claimed broken down by central, state, integrated tax and cess, the bank account the money is to be paid into, and a set of statements and declarations whose content depends on the head. For an inverted duty claim it wants the components of the formula separately rather than the result.
Where the registration details on the application do not match the register, nothing proceeds. That is usually a bank account or an authorised signatory that has moved on, and it is fixed by a GST amendment before the refund rather than during it.
Section 54(4) requires the application to be accompanied by such documentary evidence as may be prescribed to establish that a refund is due to the applicant, and such documentary or other evidence as the applicant may furnish to establish that the amount of tax and interest, if any, or any other amount paid in relation to which the refund is claimed was collected from, or paid by, him and that the incidence of such tax and interest had not been passed on to any other person.
Two separate things are being proved there and they are often conflated. The first is that a refund is due at all, which is the entitlement question: the relevant date, the head, the computation. The second is that the burden of the tax stayed with the applicant, which is the unjust enrichment question and has nothing to do with whether the tax was correctly charged.
The prescribed evidence differs by head. Exports bring shipping bills, invoices and the bank realisation or foreign inward remittance certificates. An inverted duty claim brings the statements reconciling the formula components against the returns. A supply to a special economic zone brings the endorsement of receipt. The one constant is that the evidence has to establish the proposition rather than accompany it.
Two separate propositions, often confused. First, that a refund is due at all — relevant date, head, computation. Second, that the incidence of the tax stayed with you. The second has nothing to do with whether the tax was correctly charged.
The proviso to section 54(4) does something sensible. Where the amount claimed as refund is less than two lakh rupees, it is not necessary for the applicant to furnish documentary and other evidence on the unjust enrichment point; a declaration based on the documentary or other evidence available with him, certifying that the incidence has not been passed on to any other person, will do instead.
Above that threshold the position changes, and on larger claims the Rules require a certificate from a chartered accountant or a cost accountant to the same effect. That certificate is a separate professional engagement, it carries its own charge, and that charge is not part of ours. Businesses that keep their books in order have no difficulty obtaining it; businesses that do not, discover at this point that they have a bookkeeping problem rather than a refund problem.
It is worth noting that the carve-outs in section 54(8) mean the unjust enrichment test does not fall on export claims and claims for unutilised credit in the same way. The declaration and certificate machinery still has to be attended to on the form, but the substantive question of who bore the tax does not have the same bite where the statute has already directed that the money be paid to the applicant.
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A refund file that works is a file in which an officer can verify every number without asking a question. That is the whole design brief, and it is unglamorous work.
The reconciliation. The amount claimed, traced line by line to the returns already furnished for the period and to the ledgers. This is the document that most often decides whether a memo issues.
The computation. For an inverted duty claim, each component of the formula shown separately with its source, so that the arithmetic can be re-run rather than taken on trust.
The statement of facts. Short, dated, and confined to what is relevant to the head claimed.
The declarations and undertaking. As the Rules require for the head, including the unjust enrichment declaration or the certificate where the amount requires one.
The annexures. Invoices, shipping bills, realisation certificates or endorsements as the head requires, indexed.
The index. One page, listing every document and the page it starts on.
Where a client has a large volume of underlying documents and no system for them, the indexing becomes the bulk of the work, and it is sometimes worth doing that as a legal file management exercise in its own right before the claim is prepared. Scanned material that nobody can navigate is the commonest reason a straightforward claim takes six weeks instead of two.
A deficiency memo is the officer saying the application as filed is incomplete or defective. It is not a rejection and it decides nothing about the merits. Understanding exactly what it does, though, is important, because its practical effect is more serious than its tone suggests.
It means the application you filed was not a complete application. Since section 54(7) measures the sixty days from the date of receipt of a complete application, the clock you thought was running was not running. The application does not get repaired; a fresh application has to be made.
The danger is the two year window. The original filing date does not reserve your place. If the memo issues late and the fresh application is made later still, a claim that was comfortably in time when first filed can be out of time when refiled. On older periods this is not a theoretical risk, and it is the single best reason to spend longer on the reconciliation before filing than feels necessary at the time.
A memo does not pause anything. It establishes that the clock never started, while the two year window from the relevant date has been running throughout. The older the period, the more expensive a memo becomes.
Where a refund of unutilised credit is claimed, the amount claimed is debited from the electronic credit ledger at the time of filing. That debit is what prevents the same credit being used twice while the claim is pending.
If a deficiency memo issues, the credit debited has to come back, and it is re-credited to the ledger so that it is available either for use or for a fresh application. The reason to check this rather than assume it is that a client who has filed through somebody else and lost contact with them frequently does not know whether it happened. Until it is confirmed, you do not know what your actual position is, and any fresh claim built on an assumed ledger balance is built on sand.
The check takes minutes. Open the credit ledger, find the debit entry made on the original filing, and find the corresponding re-credit. If the re-credit is not there, that is the first thing to take up with the department, before any new claim is prepared. It is also worth reconciling the ledger against the last few GST returns at the same time, since a mismatch there will surface at the reconciliation stage in any event.
Where the application is found to be complete, an acknowledgement issues, and that is the document that matters for every date afterwards. The sixty days in section 54(7) run from receipt of the complete application, and interest under section 56 is computed from the expiry of that sixty days.
So the acknowledgement is not an administrative formality to be filed away. It is the evidentiary anchor for the only two statutory deadlines that work in the claimant favour. We record its date on the file and give it to the client in the handover note, because a year later, when a question of interest arises, the date will matter and nobody will remember it.
There is a useful discipline in diarising the sixtieth day on the day the acknowledgement arrives. Not because anything dramatic happens on the sixty-first day, but because the passage of that date changes the nature of the follow-up from a polite enquiry into a reference to a statutory period that has expired, and that is a different conversation.
Some claims should not be filed, and saying so is part of the work rather than a failure to do it.
We will not file a claim where the entitlement itself is doubtful because the underlying credit looks as though it should not have been availed. The exposure then runs past the refund to the credit and the interest on it, and the filing invites exactly the scrutiny that would be unwelcome. We will not file a claim where the relevant date has passed and the only way to make the application look timely is to characterise it as something it is not.
We will not file a claim where the client wants the figure stated as something other than what the reconciliation supports. And we will not file a claim on the basis of documents we have been told exist but have not seen, because the gap between a document that is described and a document that is produced is where most refund trouble lives. Where a document needs to be obtained and authenticated before it can be relied on, that is a document verification step, and it happens before the application rather than after a memo asks for it.
Section 54(6) has always provided for a provisional refund. In the case of a claim for refund on account of zero rated supply made by a registered person, other than such category of registered persons as may be notified, the proper officer may refund on a provisional basis ninety per cent of the total amount so claimed, excluding the amount of input tax credit provisionally accepted, in the prescribed manner and subject to prescribed conditions, limitations and safeguards; an order under sub-section (5) follows after verification.
The purpose is cash flow. Exporters whose working capital is tied up should not have to wait for the full verification to get most of it back, and the ninety per cent is paid on a provisional footing with the balance and any correction following later.
For most of the life of the tax this was an officer decision taken within the prescribed conditions. That is what changed, and it changed recently enough that a great deal of published material has not caught up with it.
Provisional means provisional. The order under section 54(5) still follows after verification, and if the verified figure is lower the difference is recoverable. It is early money, not settled money.
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Rule 91(2) was amended by Notification No. 13/2025-Central Tax dated 17 September 2025, with effect from 1 October 2025, so that the provisional sanction rests on identification and evaluation of risk by the system.
CBIC Instruction No. 06/2025-GST dated 3 October 2025 sets out how that operates. It applies to refund applications filed on or after 1 October 2025; applications filed up to 30 September 2025 continue to be dealt with under the earlier provisions. Where the system categorises an application as low risk, the ninety per cent provisional sanction follows. Where it does not, there is no provisional refund and the application goes to detailed scrutiny instead.
Read that second limb carefully, because it is the part that costs money. Not being categorised as low risk is not a finding that anything is wrong with the claim. It produces no adverse order, nothing to answer and nothing to appeal. It simply means that the ninety per cent does not arrive, and the business waits for the full verification on a claim that may be entirely sound.
The structural change is in where the judgment sits. Before the amendment, rule 91(2) framed the provisional sanction as something the proper officer was satisfied about on the material before him, which meant there was a person applying a mind to a specific file and a specific claimant.
After it, the gateway is a system evaluation of risk. The officer role at the provisional stage is correspondingly narrowed: the sanction follows the categorisation rather than producing it. The full verification under section 54(5) still involves an officer in the ordinary way, and the sixty day outer date in section 54(7) is untouched, so what has changed is the front end rather than the whole process.
Whether this is an improvement depends on where you sit. It is faster and more consistent for the large number of claims that score low risk, and it removes a source of variation between offices. For a claim that does not score low risk it removes the possibility of persuading anybody at that stage, because there is nobody at that stage to persuade.
The honest answer is that the parameters are not published, and anybody who tells you precisely how the score is computed is describing a guess. What can be said is what the mechanism is for, and what it would be strange for it not to look at.
It is a risk identification and evaluation exercise, so it is looking for indicators that a claim warrants verification before money leaves. Consistency between the claim and the returns already furnished, the filing history of the registration, the profile of the credit being claimed and the registration data itself are the obvious candidates. None of that is confirmed and none of it should be treated as confirmed.
What follows for the preparation of a claim is modest but real. You cannot aim at the score. You can make sure the claim is internally consistent, that the reconciliation against the returns holds without explanation, that returns for the period are filed and clean, and that the registration particulars are current. Those are worth doing on their own merits, and they are the only levers anybody actually has.
The only levers anybody actually has. A reconciliation that holds without explanation. Returns for the period filed and clean. Registration particulars current. An internally consistent claim. None of these aims at the score; all of them are worth doing anyway.
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It buys ninety per cent of the amount claimed, provisionally, and it buys it early. On a claim of significant size that is the difference between a quarter of financed working capital and a quarter of unfinanced working capital, and for a manufacturer running on an inverted structure that difference is the whole reason the refund mattered.
What it does not buy is finality. A provisional refund is provisional. The order under section 54(5) follows after verification, and if the verified amount is lower, the difference is recoverable. A business that treats a provisional ninety per cent as settled money and spends it accordingly has taken a risk that the statute did not offer it.
Nor does it buy the remaining ten per cent on any particular timetable. The balance follows the full order, which answers to the sixty day outer date in section 54(7) measured from the complete application, not from the provisional sanction. So the provisional refund accelerates most of the money without accelerating the process.
Nothing visibly adverse, which is precisely what makes it difficult to deal with. There is no order, no notice, no finding and no allegation. The application proceeds to detailed scrutiny and the provisional ninety per cent does not arrive.
Because there is nothing to answer, there is nothing to appeal, and advising a client in that position is an exercise in managing expectations rather than in taking steps. The claim is alive. The sixty day outer date still applies. The verification will happen and an order will issue. What has gone is the early cash, and it has gone without anybody deciding that it should.
The practical advice is unwelcome but short. Do not plan cash flow around a provisional refund on a claim that has not yet been categorised, and do not let a client plan it either. If the money is needed on a date, it has to come from somewhere that can commit to that date, and a risk score cannot.
The second half of Instruction No. 06/2025-GST is the part that matters most to domestic manufacturers, and it is easy to miss because it reads as an afterthought to an administrative circular.
The ninety per cent provisional sanction has been extended to refund applications on account of inverted duty structure filed on or after 1 October 2025, on the same footing as zero rated supply claims. That is a genuine change of position. Section 54(6) as it stands speaks of claims on account of zero rated supply; inverted duty claimants were outside it and waited for the full order while exporters did not.
The Instruction describes the extension expressly as an interim measure, pending amendment of the Finance Act and of the State legislations. That wording is worth noting rather than glossing over. A facility conferred administratively pending a legislative amendment is a facility whose shape can change when the amendment arrives, and the sensible assumption is that it will be revisited rather than that it is now permanent.
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Notification No. 14/2025-Central Tax dated 17 September 2025 lists the persons not eligible for provisional refund. Two categories account for most of it.
The first is a registered person who has not undergone Aadhaar authentication under rule 10B. This catches registrations that were completed before authentication became the norm and have never been brought up to date, and it catches them silently: nothing tells you at the time of filing that this is why the ninety per cent did not come. Where it applies, the cure is to complete the authentication, which is a GST registration side exercise rather than a refund one.
The second is suppliers of specified goods, namely areca nuts, pan masala, tobacco and manufactured tobacco substitutes, and essential oils. That is a policy exclusion aimed at sectors with a history of refund fraud, and it is absolute for the provisional stage rather than a presumption that can be displaced on the facts of a particular claimant.
Exclusion from the provisional refund is not exclusion from the refund. The claim proceeds to full verification in the ordinary way. What is lost is the early ninety per cent, and for a business in one of these categories that should be planned for rather than discovered.
Exclusion from the provisional refund is silent. Nothing at the time of filing tells you that rule 10B authentication is why the ninety per cent did not arrive. Check it before filing rather than wondering afterwards.
We cannot tell you what your claim will score, and we will not pretend otherwise. The parameters are not published, the evaluation is done by the system rather than by anyone we can ask, and a well-prepared claim from a compliant business can fail to be categorised as low risk for reasons that are never communicated.
Anybody offering a guarantee on this point is selling something. There is a reasonably well-established market in assurances about refund outcomes, and it predates the risk scoring by years; the scoring has simply given it a new vocabulary. A promise about a score is not a professional opinion, because there is no basis on which such an opinion could be formed.
What we will tell you, before you commit to the work, is what the claim is worth on the formula, how much of the window is left, and where the weak points in the file are. That is the information that actually changes a decision about whether to proceed, and it is information we can stand behind.
If anybody guarantees you a low risk categorisation, or a refund within a stated number of days, stop. Neither is within the control of any adviser, and the statute itself offers only a sixty day outer date for the order.
Section 54(7) requires the proper officer to issue the order under sub-section (5) within sixty days from the date of receipt of a complete application. It is the only timetable the statute gives, and it is an outer limit rather than a target.
Three words carry the weight. Receipt, which means when the department got it rather than when you sent it. Complete, which is why a deficiency memo is so expensive, because an application with a deficiency is not a complete one and the period never began. And order, which means the determination under section 54(5), not the money reaching the bank.
Those distinctions are not pedantry. Clients routinely count sixty days from the day they pressed submit and conclude that the department is in default when it is not, and occasionally the reverse, letting a genuine expiry pass unremarked because they were counting from the wrong event. The date to diarise is the acknowledgement date plus sixty.
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Here is a provision that surprises people who have only ever thought about refunds from the claimant side. Under section 54(5), where the proper officer is satisfied that the whole or part of the amount claimed is refundable, he makes an order accordingly, and the amount so determined is credited to the Fund referred to in section 57.
Credited to the Fund. Not paid to you. That is the default position in the statute, and payment to the applicant is the exception carved out by section 54(8). Most claimants never encounter the default, because the carve-outs cover the common heads, but the architecture matters when a claim sits outside them.
The reason for the design is the principle that a person should not recover tax whose burden they have already passed on to somebody else. Where the burden was passed down the chain, returning the money to the claimant would enrich them rather than restore them, and the statute sends it to a fund for consumer welfare instead.
The statutory default is the Fund, not you. Payment to the applicant is the exception in section 54(8). The common heads are inside that exception, which is why most claimants never meet the default.
Section 57 establishes the Consumer Welfare Fund and section 54(5) feeds it. The practical question for a claimant is never what the Fund is for; it is whether their claim falls inside section 54(8) and therefore never reaches it.
Section 54(8) directs payment to the applicant rather than credit to the Fund in six cases: refund of tax paid on export of goods or services, or on inputs or input services used in making such exports; refund of unutilised input tax credit under sub-section (3); refund of tax paid on a supply which is not provided, either wholly or partially, and for which an invoice has not been issued, or where a refund voucher has been issued; refund of tax in pursuance of section 77; the tax and interest, if any, or any other amount paid by the applicant, if he had not passed on the incidence to any other person; and such other class of applicants as the Government may notify.
Read that list against the four common claims and the picture is reassuring. Exports are in. Unutilised credit is in. Wrong head tax under section 77 is in. The cash ledger balance is dealt with separately again. The default to the Fund bites mainly where tax was collected on a transaction and the burden moved on.
Clause (e) of section 54(8) is the general gateway, and it is where the evidence requirement in section 54(4) does its work. The applicant has to establish that the incidence of the tax was not passed on to any other person. Where that is established, the money is paid to the applicant; where it is not, section 54(5) sends it to the Fund.
It is a question of economic incidence rather than of who wrote the cheque. A supplier who charged the tax on the invoice and collected it has passed it on, whatever the commercial pressure that led to the pricing. A supplier who absorbed it, and can show the pricing was unaffected, has not. The second proposition is harder to prove than it sounds, and the proof is in the pricing records rather than in assertion.
The two lakh rupee declaration threshold in the proviso to section 54(4) is the concession that keeps small claims workable, and the chartered accountant certificate above it is the price of the larger ones. For businesses whose accounts are maintained properly through the year, neither is an obstacle; where accounting has been done retrospectively, this is the stage at which that shows.
Section 54(10) deals with the claimant who is owed money and also owes it. Where a registered person has defaulted in furnishing any return, or is required to pay any tax, interest or penalty which has not been stayed by any court, Tribunal or Appellate Authority by the specified date, the proper officer may withhold payment of the refund until the default is made good, or deduct from the refund the amount still due. The specified date is the last date for filing an appeal.
It is a set-off provision and it is not unreasonable, but it produces a recurring and avoidable problem. A refund that has been expected for weeks is withheld because a return for an unrelated period is outstanding, and the business learns about the outstanding return from the withholding. Filing is cheap and withholding is expensive, which is a strong argument for keeping the return filing current for its own sake rather than discovering it this way.
The stay point is worth noting too. A demand that is under appeal but not stayed is still a demand for this purpose. An appeal alone does not protect the refund.
An appeal alone does not protect a refund from set-off. Section 54(10) bites on a demand that is not stayed, and a pending appeal without a stay is not a stay.
Section 54(11) is a different animal from section 54(10), and it has a higher threshold in every respect. Where an order giving rise to a refund is the subject matter of an appeal or further proceedings, or where any other proceedings under the Act are pending, and the Commissioner is of the opinion that grant of the refund is likely to adversely affect the revenue in the said appeal or other proceedings on account of malfeasance or fraud committed, he may withhold the refund.
Four things are required at once, and each is a real constraint. It is the Commissioner, not the proper officer. There must be a pending appeal or proceeding. The opinion must be that the revenue is likely to be adversely affected. And the ground must be malfeasance or fraud committed, which is a serious allegation rather than a general concern about recoverability. The provision also requires that the taxable person be given an opportunity of being heard.
Section 54(12) completes the scheme. Where a refund withheld under section 54(11) is ultimately found payable, the person is entitled to interest at a rate not exceeding six per cent, notwithstanding section 56.
Section 56 provides that where any tax ordered to be refunded under section 54(5) is not refunded within sixty days from the date of receipt of the application under section 54(1), interest at such rate not exceeding six per cent as may be specified in the notification issued by the Government on the recommendations of the Council is payable in respect of such refund, from the date immediately after the expiry of sixty days from the date of receipt of the application until the date of refund. The rate was notified by Notification No. 13/2017-Central Tax dated 28 June 2017.
Two features of the drafting repay attention. The interest is automatic in the sense that it is payable on the facts rather than on an application, and the period is defined by reference to the same sixty days as section 54(7), so the two provisions are keyed to each other. Second, the end point is the date of refund. On the department own circular guidance a refund is treated as granted when the amount is credited to the bank account, which means the interest period runs to the credit rather than to the sanction.
In practice interest is often not computed unless somebody computes it. Having the acknowledgement date recorded is what makes that possible.
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The proviso to section 56 carries a higher rate, not exceeding nine per cent, where a refund arises from an order passed by an adjudicating authority or Appellate Authority or Appellate Tribunal or court which has attained finality and is not refunded within sixty days from the date of receipt of the application filed consequent to such order. The Explanation treats orders of the first appellate authority, the Tribunal or a court as orders of the refund sanctioning authority for this purpose.
The rationale is that money withheld through a dispute the claimant has won should carry a higher price than money merely delayed. What is not settled is the period over which the nine per cent runs, and High Courts have taken different views: some supporting six per cent from the original application with nine per cent from the consequential application, and at least one treating the six per cent as running only to the sixtieth day of the consequential application.
Because the position differs between jurisdictions, this page states the conflict rather than resolving it. Where a consequential refund is involved and the interest is material, the computation should be settled on the authorities applicable in your own High Court before it is claimed.
The second export route is to supply on payment of integrated tax and claim that tax back. For exporters of goods this is largely automated: the shipping bill operates as the refund application and the data flows between the customs and tax systems, which is why this route appeals to businesses that would rather not run a separate refund process at all.
It has always carried more conditions than the letter of undertaking route, and it is the route on which the single largest restriction in this area sat for six years. Getting the export documentation right matters more here than anywhere else, because the matching is machine-driven and a mismatch between the shipping bill and the return stops the refund without anybody issuing anything you can respond to.
Businesses setting up to export for the first time usually need the IEC registration and the letter of undertaking in place before any of this becomes relevant, and the order in which those are done determines which refund route is even available for the first consignments.
On the integrated tax route the matching is machine-driven. A mismatch between the shipping bill and the return stops the refund without producing anything you can reply to, which makes the documentation discipline matter more here than anywhere else.
Rule 96(10), as it stood, restricted the refund of integrated tax paid on exports where the exporter, or a supplier of any of its inputs, had availed of specified concessional or exemption benefits, including those under advance authorisation, export oriented unit, capital goods and deemed or merchant export schemes. The restriction operated on the exporter even where the benefit had been taken by somebody else in the chain.
It generated an extraordinary volume of recovery proceedings, many of them against exporters who had no practical way of knowing what their suppliers had claimed. It was omitted by Notification No. 20/2024-Central Tax dated 8 October 2024.
The omission settles the position going forward. What it did not settle, on its face, was the fate of the very large number of proceedings already on foot when it went, because the omission was made without a saving clause and was expressed to operate prospectively. That question went to court.
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In M/s Addwrap Packaging Pvt. Ltd. and another v. Union of India and others, R/Special Civil Application No. 22519 of 2019, reported as 2025 LiveLaw (Guj) 83, a Division Bench of the Gujarat High Court comprising Bhargav D. Karia and D. N. Ray, JJ., took up the point.
The Court held that the omission of rule 96(10) by Notification No. 20/2024-Central Tax operates prospectively, but that it nonetheless applies to pending proceedings in which final adjudication has not taken place. The reasoning drew on the line of authority beginning with Rayala Corporation on the effect of a repeal or omission made without a saving clause: proceedings that have not reached finality do not survive the disappearance of the provision they rest on. The petition was allowed.
For an exporter with a live proceeding under the old rule, that holding is worth putting in front of whoever is handling the matter. Two cautions go with it. It is a High Court decision, and its authority outside Gujarat is persuasive rather than binding. And decisions of this kind are often taken further, so its current standing should be checked before it is relied on rather than taken from this page.
M/s Addwrap Packaging Pvt. Ltd. v. Union of India, R/Special Civil Application No. 22519 of 2019, 2025 LiveLaw (Guj) 83, Bhargav D. Karia and D. N. Ray, JJ. Omission of rule 96(10) by Notification No. 20/2024-Central Tax dated 8 October 2024 operates prospectively but reaches proceedings in which final adjudication has not taken place. A High Court decision; check its current standing before relying on it.
Paying integrated tax where central and state tax were due, or the reverse, is an ordinary and common error, and the statute treats it as a distinct situation rather than as a mistake to be unwound. Section 77 of the Central Act, read with section 19 of the Integrated Act, provides for the refund of the tax paid under the wrong head where the transaction is subsequently held to be of the other kind.
Two features make this claim different from the others on this page. Section 54(8)(d) places refunds in pursuance of section 77 among those paid to the applicant rather than credited to the Fund, so the unjust enrichment default does not operate in the usual way. And the relevant date, the evidence and the narrative are all quite unlike an export or inverted duty claim, which is why filing it under one of those heads is a reliable way to collect a memo.
Misclassification between heads most often arises from a view about place of supply, and that is a question with consequences well beyond the refund. Where it is in issue, it should be settled on advice before the refund is framed, because the refund claim necessarily asserts a position on it.
A refund claim is not rejected without warning. A notice proposing rejection issues first, in whole or in part, and the claimant has an opportunity to reply before an order is made. Of everything that gets written on a refund file, that reply carries the most weight, and it is routinely the item given the least time.
It is also the point at which the work stops being documentation and becomes advocacy. Answering a proposed rejection means taking a position on law and defending it, and that is work for counsel or for your chartered accountant rather than for us. Our role then narrows to the handover: the complete file, a computation that can be re-run rather than taken on trust, and the correspondence, so that counsel is not rebuilding the claim before being able to argue it.
Where the order does reject the claim, in whole or in part, it is appealable. What that involves is deliberately not set out here.
A notice proposing rejection is the most important document in the sequence, and the most often rushed. It is also where our work ends and advocacy begins. Get it to whoever will answer it on the day it arrives.
An order rejecting a refund is an appealable order like any other, and the appeal framework has its own limitation period, its own deposit requirement, its own condonation power and its own position as the Tribunal comes into operation across the country during 2026.
Those are specific enough, and have moved recently enough, that summarising them in a paragraph here would do a reader more harm than good. They are set out properly on our page on GST appeal filing, which deals with the first appeal and the Tribunal stage in the detail they need, and that page is the one to read if a rejection has actually happened.
The only point worth making here is a timing one. The period for an appeal runs from the communication of the order, not from the date the business decided to do something about it, and it is materially shorter than the two year window that governed the refund claim itself. A rejection order should go to whoever will handle the appeal on the day it arrives, not after a round of internal discussion about whether the amount justifies the trouble.
Keep the registration side current while a claim is running. A refund can be withheld for an unfiled return, and an authorised signatory or bank account that has changed will stop a sanctioned refund from reaching you. Businesses that keep their accounting and filing clean rarely meet either problem.
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Things that commonly need attending to alongside a refund file. A GST amendment where bank or signatory details have moved on. Return filing brought up to date, since an outstanding return can hold the refund. A digital signature that has not expired. For newly formed businesses, the proprietorship registration or MSME certificate that the bank will ask for when the money arrives. PAN and TAN particulars matching the registration. Professional tax and TDS return obligations that are separate from this but tend to surface in the same review. And the income tax return, where a large refund changes the year figures. Where a registration is being wound up rather than maintained, a GST cancellation has its own sequence and a pending refund affects it. The refund work itself is the GST refund service on this page.
We prepare the claim and the material that supports it. That means the statement reconciling the figure claimed against the returns already filed, the computation under whichever head the claim falls, the covering statement of facts, the undertaking and declaration the Rules require, and the index that lets an officer find each number without asking. It also means the arithmetic is checked twice before anything is uploaded, because a claim that fails on a reconciliation is the commonest reason a deficiency memo issues.
What we do not do is argue the claim. If an officer rejects it, or issues a notice proposing rejection, the reply to that notice is advocacy and it is work for counsel or for your chartered accountant, not for a documentation service. We will hand over the complete file, the computation and the correspondence so that whoever takes it forward starts from a prepared record rather than from scratch, and we will say plainly on the day it happens that the matter has moved past what we do.
The same boundary applies to opinions on classification. Whether a particular supply is zero rated, whether a rate pairing genuinely produces an inverted structure, whether a credit was correctly availed in the first place: these decide whether a claim exists at all, and they are matters on which you should have advice you can rely on from a professional who will stand behind it. We will tell you when a question of that kind is sitting underneath your claim. We will not answer it.
A claim built on a credit that should not have been availed is worse than no claim. It invites scrutiny of the credit itself, and the exposure then runs past the refund to the credit and the interest on it. Where the entitlement is genuinely open, settle that question before filing, not after.
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Our charge for preparing a refund claim is ₹2,999, and the working time is 15 – 60 days. That covers the reading of your returns and ledgers for the period, the reconciliation, the computation, the statement of facts, the declarations, the index and the upload, together with the tracking of the application until an acknowledgement or a deficiency memo issues.
Outside it are things paid to people who are not us. Your chartered accountant’s charge for any certificate the Rules require on a larger claim. Any advocate engaged if the matter becomes contentious. Bank charges on a foreign inward remittance certificate where exports are involved. And the cost of obtaining documents that exist with third parties, such as shipping bills or bank realisation certificates, where those have to be sourced rather than supplied.
There is no government fee to apply for a refund. An application under section 54 carries no charge of its own, and anybody telling you that a payment is needed to lodge it or to have it processed is describing something that is not in the statute or the Rules.
What we hand over at the end. The filed application with its reference number. The computation in a form you can re-run. The reconciliation against the returns. The complete annexure set as uploaded. And a short note of the dates that matter afterwards, principally the sixtieth day and what it means.
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Open the electronic credit ledger and look at the balance. Then look at the oldest period in which that balance started building. A two year window runs from a relevant date, and for inverted duty claims that date is tied to the due date of the return for the period concerned, which means the oldest months in an accumulated balance are the ones closest to expiring. People discover this in the order it hurts: they file for the recent periods because those are easier to reconcile, and find later that the early months have gone.
If the balance is large and old, the sensible sequence is the reverse of the comfortable one. Work the oldest claimable period first. It is more work, because the records are colder, and it is the only part of the balance that can be lost by waiting.
Send us the period, the ledger balance and a line about which head the claim falls under. If it is not clear which head it falls under, send the period and the balance anyway and say so; working out which of the two gates in section 54(3) your credit came through is a reading exercise and it takes us very little time.
The cheapest check in the whole exercise. Find the earliest tax period contributing to your accumulated balance and write down the due date of its return. That date, plus two years, is the one deadline on this page that nobody can extend for you.
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Send the period, the ledger balance and the head you think it falls under. You will get the relevant date, the window that is left and an honest view of whether the claim is worth building.
The governing provision is section 54 of the Central Goods and Services Tax Act, 2017; the machinery sits in Chapter X of the Rules made under it. Section 54(1) permits any person claiming refund of tax and interest, if any, paid on such tax or any other amount paid by him, to make an application before the expiry of two years from the relevant date in the prescribed form and manner; a registered person claiming refund of any balance in the electronic cash ledger under section 49(6) may claim it in the return furnished under section 39. Section 54(4) requires the application to be accompanied by documentary evidence establishing that a refund is due and that the incidence of tax and interest has not been passed on to any other person, with a declaration sufficing in place of that evidence where the amount claimed is less than two lakh rupees. Section 54(14) provides that no refund under sub-section (5) or sub-section (6) shall be paid where the amount is less than one thousand rupees.
Unutilised input tax credit is refundable only through two gates. Section 54(3) permits a registered person to claim refund of unutilised input tax credit at the end of any tax period, subject to sub-section (10), but the first proviso allows it in only two cases: (i) zero rated supplies made without payment of tax, and (ii) where credit has accumulated on account of the rate of tax on inputs being higher than the rate of tax on output supplies, other than nil rated or fully exempt supplies, except supplies of goods or services notified by the Government on the recommendations of the Council. The second proviso bars a refund of unutilised credit where the goods exported out of India are subjected to export duty, and where the supplier avails of drawback in respect of central tax or claims refund of the integrated tax paid on such supplies. A third proviso was omitted by section 128 of the Finance (No. 2) Act, 2024, with effect from a date to be notified. Section 54(15), inserted by the same Act, provides that no refund of unutilised input tax credit on account of zero rated supply of goods, or of integrated tax paid on zero rated supply of goods, shall be allowed where such zero rated supply of goods is subjected to export duty.
The Act does not carry the formula; the Rules do. Rule 89(5) of the Central Goods and Services Tax Rules, 2017, as substituted by Notification No. 14/2022–Central Tax dated 5 July 2022, provides that in the case of refund on account of inverted duty structure, the maximum refund amount is {(Turnover of inverted rated supply of goods and services) × Net ITC ÷ Adjusted Total Turnover} less tax payable on such inverted rated supply of goods and services × (Net ITC ÷ ITC availed on inputs and input services). The amendment changed the second term: before July 2022 the whole of the tax payable on the inverted rated supply was deducted, and after it that deduction is scaled by the proportion that Net ITC bears to all credit availed on inputs and input services, which recognises that part of the output tax is discharged out of credit on services that Net ITC does not include.
The validity of that formula has been decided. In Union of India v. VKC Footsteps India Pvt. Ltd., Civil Appeal No. 4810 of 2021 and connected matters, decided on 13 September 2021 by Dhananjaya Y. Chandrachud and M. R. Shah, JJ., the Supreme Court upheld Rule 89(5) as being within section 54(3), set aside the contrary view of the Gujarat High Court and affirmed the view taken by the Madras High Court in Tvl. Transtonnelstroy Afcons Joint Venture. The Court proceeded on the basis that section 54(3)(ii) itself differentiates between credit arising on input goods and credit arising on input services for the purpose of refund, and declined to strike the formula down on the ground that its working produces anomalies in particular cases, that being a matter of fiscal policy rather than of vires.
The provisional refund stopped being a human decision on 1 October 2025. Section 54(6) permits the proper officer, in the case of a claim for refund on account of zero rated supply made by a registered person other than such category of registered persons as may be notified, to refund on a provisional basis ninety per cent of the total amount so claimed, excluding the amount of input tax credit provisionally accepted, in the prescribed manner and subject to prescribed conditions, limitations and safeguards, with an order under sub-section (5) following after verification. Rule 91(2) was amended by Notification No. 13/2025–Central Tax dated 17 September 2025, with effect from 1 October 2025, so that the provisional sanction rests on identification and evaluation of risk by the system. CBIC Instruction No. 06/2025–GST dated 3 October 2025 applies that mechanism to applications filed on or after 1 October 2025: an application the system categorises as low risk receives the ninety per cent provisional sanction, an application not so categorised receives no provisional refund and goes to detailed scrutiny, and applications filed up to 30 September 2025 continue under the earlier provisions. The same Instruction extends the ninety per cent provisional sanction to inverted duty structure claims as an interim measure, pending amendment of the Finance Act and of the State legislations. Notification No. 14/2025–Central Tax dated 17 September 2025 lists the persons not eligible for provisional refund, including those who have not undergone Aadhaar authentication under rule 10B and suppliers of areca nuts, pan masala, tobacco and manufactured tobacco substitutes, and essential oils.
The sixty days, the Fund and the interest run together. Section 54(7) fixes an outer limit of sixty days, counted from receipt of a complete application, for the proper officer to make the order under sub-section (5). Section 54(5) directs the amount determined to be credited to the Fund referred to in section 57, the Consumer Welfare Fund, unless sub-section (8) applies; section 54(8) lists the cases in which the amount is instead paid to the applicant, which include refund of tax paid on export of goods or services or on inputs or input services used in making such exports, refund of unutilised input tax credit under sub-section (3), refund of tax paid on a supply which is not provided and for which an invoice has not been issued or where a refund voucher has been issued, refund of tax under section 77, tax and interest borne by the applicant where he has not passed on the incidence to any other person, and such other class of applicants as may be notified. Section 56 provides that where any tax ordered to be refunded under section 54(5) is not refunded within sixty days from the date of receipt of the application, interest at a rate not exceeding six per cent is payable from the date immediately after the expiry of sixty days until the date of refund, with the proviso carrying a rate not exceeding nine per cent where the refund arises from an order passed by an adjudicating authority or Appellate Authority or Appellate Tribunal or court which has attained finality; the rates were notified by Notification No. 13/2017–Central Tax dated 28 June 2017.
A refund can also be held back. Section 54(10) permits the proper officer, where a registered person has defaulted in furnishing any return or is required to pay any tax, interest or penalty which has not been stayed by any court, Tribunal or Appellate Authority by the specified date, to withhold payment of refund until the default is made good or to deduct from the refund the amount still due, the specified date being the last date for filing an appeal. Section 54(11) permits the Commissioner, where an order giving rise to a refund is the subject matter of an appeal or further proceedings or where other proceedings are pending and he is of the opinion that grant of the refund is likely to adversely affect the revenue on account of malfeasance or fraud committed, to withhold the refund after giving the taxable person an opportunity of being heard. Section 54(12) then provides that where a refund so withheld is ultimately found payable, the person is entitled to interest at a rate not exceeding six per cent notwithstanding section 56.
One restriction on export refunds has gone, and its going was litigated. Rule 96(10), which restricted the refund of integrated tax paid on exports where the exporter or its supplier had availed of specified concessional or exemption benefits, was omitted by Notification No. 20/2024–Central Tax dated 8 October 2024. In M/s Addwrap Packaging Pvt. Ltd. v. Union of India, R/Special Civil Application No. 22519 of 2019, reported as 2025 LiveLaw (Guj) 83, a Division Bench of the Gujarat High Court comprising Bhargav D. Karia and D. N. Ray, JJ., held that the omission operates prospectively but applies to proceedings in which final adjudication has not taken place, reasoning that an omission without a saving clause does not leave pending proceedings alive, and allowed the petition. Readers should check whether the position has been carried further on appeal before relying on it for a pending matter.
Rates themselves moved in September 2025, and that changes who has an inverted structure. The Goods and Services Tax Council at its fifty-sixth meeting on 3 September 2025 recommended consolidation of the rate structure into a standard rate of eighteen per cent and a merit rate of five per cent, with a forty per cent rate on a small set of de-merit goods and services, the changes on goods other than pan masala and tobacco products and on services taking effect from 22 September 2025. A rate change of that scale alters the pairing of input and output rates on which an inverted duty claim depends, in both directions, and it also leaves open questions on stock held on the changeover date which had not been resolved when the rates took effect.
Three things are deliberately absent from this page. There is no table of rates, no list of form numbers for every stage of the process, and no statement of how long a refund takes in practice at any particular office. Rates have just been through a consolidation and are in any event specific to the supply. Forms and their annexures are prescribed by the Rules and are amended frequently enough that a reader is better served by the current form on the portal than by a number printed here. And processing time is not a legal quantity: the statute gives a sixty day outer date for the order and nothing else, and any figure offered as a typical duration is somebody’s experience rather than a rule.
Where the appeal framework becomes relevant, this page points rather than restates. An order rejecting a refund, in whole or in part, is appealable, and the first appeal and the Tribunal stage, with their limitation periods, their deposits and their current position, are set out on our page on GST appeal filing rather than summarised loosely here.
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