Refund Under GST

When the tax paid on inputs is more than the output tax liability, your money get stuck in the shape of GST ITC with Government. GST Law permits refund of unutilised ITC in two scenarios, namely if such credit accumulation is on account of zero rated supplies or on account of inverted duty structure, subject to certain exceptions.

Inverted duty structure: Where the credit has accumulated on account of rate of tax on inputs, Like in case of Apparels, many inputs are at 12% or even 18%, but apparels below 1000/- MRP are at 5%, so there is every chance that GST ITC gets accumulated.

In exercise of the powers conferred by this section, the government has issued Notification no. 15/2017-Central Tax (Rate) dated 28.06.2017 wherein it has been notified that refund of unutilised input tax credit shall not be allowed under subsection (3) of section 54 of the said CGST Act, 2017, in case of supply of services specified in sub-item (b) of item 5 of Schedule II of the CGST Act, 2017. The supplies specified under item 5(b) of Schedule II are construction services.

In respect of goods, the central government has issued Notification no.5/2017- Central Tax (Rate) dated 28th June 2017. The government has notified goods in respect of which unutilized ITC will not be admissible as refund. These goods are:-

“6A 5608 Knotted netting of twine, cordage or rope; made up fishing nets and other made up nets, of textile materials

6B 5801 Corduroy fabrics

6C 5806 Narrow woven fabrics, other than goods of heading 5807; narrow fabrics consisting of warp without weft assembled by means of an adhesive (bolducs)”.

As of today the position is that the ITC refund can be claimed only of INPUTS and not INPUT SERVICES.


Section 54(1) of CGST Act 2017 provides the time limit of two years from the relevant date within which refund can be filed by registered taxable person. The relevant statutory text of section 54(1) is reproduced as follows: –

Any person claiming refund of any tax and interest, if any, paid on such tax or any other amount paid by him, may make an application before the expiry of two years from the relevant date in such form and manner as may be prescribed:

In order to have a clear understanding, Clause (e) to explanation (2) to section 54(14) which defines the ‘relevant date’ is reproduced below:

(e) in case of refund of unutilised Input tax credit under sub section 3, within two years from the end of FY in such claim for refund arises.

Further, Clause (e) to explanation (2) to section 54(14) of CGST Act 2017 has been amended by section 23 of CGST (Amendment) Act 2018 in the following manner with effect from 1st Feb, 2019: –

(e) in the case of refund of unutilised input tax credit under clause (ii) of the first proviso to sub-section (3), the due date for furnishing of return under section 39 for the period in which such claim for refund arises;

Now, let us understand the impact of both the said provisions with the help of a following chart for better analysis:


The refund application must be filed in prescribed form RFD-01A. For that GSTR-1 & GSTR-3B has to be filed for the tax period for which a tax payer wants to apply for Refund of accumulated ITC.

Declarations and statements:

While making refund application under Inverted duty structure various declarations and statements needs to be filed which are summarised as follows:


COPIES OF GSTR 2A: In terms of para 36 of circular No. 125/44/2019-GST dated 18.11.2019, the refund of ITC availed in respect of invoices not reflected in FORM GSTR-2A was also admissible and copies of such invoices were required to be uploaded. However, in wake of insertion of sub-rule (4) to rule 36 of the CGST Rules, 2017 vide notification No. 49/2019-GST dated 09.10.2019, various references have been received from the field formations regarding admissibility of refund of the ITC availed on the invoices which are not reflecting in the FORM GSTR-2A of the applicant.

The matter has been examined and it has been decided that the refund of accumulated ITC shall be restricted to the ITC as per those invoices, the details of which are uploaded by the supplier in FORM GSTR-1 and are reflected in the FORM GSTR-2A of the applicant. Accordingly, para 36 of the circular No. 125/44/2019-GST dated 18.11.2019, stands modified to that extent.

New Requirement to mention HSN/SAC in Annexure ‘B’: References have also been received from the field formations that HSN wise details of goods and services are not available in FORM GSTR-2A and therefore it becomes very difficult to distinguish ITC on capital goods and/or input services out of total ITC for a relevant tax period. It has been recommended that a column relating to HSN/SAC Code should be added in the statement of invoices relating to inward supply as provided in Annexure–B of the circular No. 125/44/2019-GST dated 18.11.2019, so as to easily identify between the supplies of goods and services.

The issue has been examined and considering that such a distinction is important in view of the provisions relating to refund where refund of credit on Capital goods and/or services is not permissible in certain cases, it has been decided to amend the said statement. Accordingly, Annexure-B of the circular No. 125/44/2019-GST dated 18.11.2019, stands modified to that extent.


Refund application can now be filed by clubbing any tax periods even across the financial years. Earlier, there was restriction regarding bunching of refund claims across financial years (imposed vide circular 125/44/2019) which is challenged in case of Pitambra Books Private Limited v. Union of India, 2020-VIL-45-Delhi, in which the Court held that a Circular cannot impose a substantive restriction which is not coming from the law. Therefore, in light of the Delhi High court decision, vide recent Circular No.135/05/2020 dated 31.03.2020, this restriction has been removed. This change has been  effective on portal and it will only allow to file refund for tax periods falling within a financial year. 

Compiled By

CA Tarun Kumar Gupta