Chapter 10: GST refunds - Filing Claims and Compliances to Note


GST is all about the smooth flow of funds and transactions alike. The provisions with regard to the refund of taxes are essential for business to run smoothly as any delay in this refund would adversely impact exporters, manufacturers and the like. The process relating to the claim of refund is on an online basis, hence it facilitates quick processing of the refund.

Types of Refunds

There are mainly four types of refunds that are available under GST:-

  • Unutilised Input Tax Credit (ITC)

The accumulation of Input Tax Credit happens when tax paid on inputs is more than the output tax liability. This ITC can be utilised by the taxpayer on a monthly basis. However, the balance of ITC that remains unused at the end of the year constitutes the Unutilised Input Tax Credit.

  • Balance in Electronic Cash Ledger

The balance in the Electronic Cash Ledger is generally used for the payment of GST liability. Any excess amount transferred to the Electronic Cash Ledger which is left unutilised at the end of the year can be claimed as refund using the prescribed form.

  • Advance Tax deposited with the Casual Taxable Person or Non Resident Taxable Person
  • The casual taxable person will be eligible for refund of any balance of advance tax deposited by him only after his tax liability is adjusted. The balance deposit will be refunded only after all the returns have been furnished for that respective period.
  • The advance tax deposit for a non-resident taxable person will be refunded only after the returns have been furnished for the entire period.  

GST Refund by specified persons

Supplies made to UN bodies and embassies may be exempted from payment of GST as per international obligations. However, this exemption is being operationalized by way of a refund mechanism. The claim has to be made before the expiry of six months from the last day of the quarter in which such supply was received.

GST refunds by exporters

Under the GST regime, export of goods and services are deemed to be inter-state supplies and attract Integrated GST (IGST). All these transactions are subject to a zero percent rate of GST. Therefore, these exporters are allowed to claim input tax credit on all the inputs used by them to produce a good or render a service without charging GST to their customers.

In order to avail the option of export without payment of IGST, a bond or a Letter of Undertaking has to be furnished prior to the export. This is used basically to establish that the goods will be exported within 3 months and 15 days from the date of invoice and foreign currency for services will be received within 1 year and 15 days of the date of the invoice.

Eligibility to claim a refund with respect to Zero-rated supply depends on:-

  • Supply the goods or services or both under a bond or LUT subject to the prescribed conditions without paying IGST and then claim a refund.
  • Supply the goods or services or both subject to the prescribed conditions, safeguards on payment of IGST and then claim a refund.

Refund Application Process for different types of refund claims

Every refund claim has to be filed online in the standardised form that is provided, RFD-01/01A. RFD – 01/01A has to be prepared by a certified Chartered Accountant. It is to be noted that the GST refund claim must be made within 2 years from the relevant date of the GST application.

RFD – 01/01A is applicable in the following scenarios:-

  • Excess balance in the Electronic Cash Ledger
  • Export of Goods and Services (IGST Paid)
  • Export of Goods and Services
  • Supplies made to the SEZ unit and developer
  • Excess tax payment
  • Accumulated ITC due to excess tax paid
  • Refund due to appeal/provisional assessment

Once the form is submitted, an auto-generated acknowledgement on the GST RFD – 02 form will be sent to the concerned email address as well as the mobile number. 

ICEGATE and its Importance

ICEGATE stands for the Indian Customs Electronic Commerce/Electronic Data interchange (EC/EDI) Gateway. It is basically a portal that provides e-filing services to trade and cargo carriers and other clients of the Customs Department. The e-filing of Bill of Entry, shipping bills, and other related services are offered on this portal.

  • Transactional services with regard to imports and exports can be availed. For instance, e-filing of import and export related documents, check on the status of a query reply can be carried out.
  • Data is also exchanged between Customs and other regulatory authorities such RBI, DGFT etc.
  • Online verification of licenses is possible with the help of ICEGATE
  • The Import Export Code status, if applied for, can be checked at any point.
  • Registration of Intellectual Property Rights can also be done.

LUT and Bond -differences and when to use either of them

Letter of Undertaking is a document of guarantee issued by a banking entity to its client which allows its client to raise money from another Indian bank’s foreign branch as a means of short term credit financing. It is given by the exporters to the Government when exports are made without the payment of IGST.

Bonds refer to financial instruments where the issuer of the bond owes the holder an amount and has an obligation to pay them interest or repay the principal at a later date. The bonds used in GST are called B-1 Surety/Security Bonds. These bonds have a surety who guarantees the performance on part of the issuer of the bond.

LUTs can be issued by any registered taxpayer who is exporting goods or services. But it is to be noted that where a person has been persecuted for tax evasion for an amount equal to or exceeding Rs. 2.5 crore, he is not eligible to furnish LUTs. Such a person may issue only bonds where the exports are made without the payment of IGST.