GST

Section 54 of CGST Act: Refund of Tax under GST

The goal of a tax refund on exports is to encourage exports and increase the competitiveness of Indian goods and services abroad. Similarly, the tax rebate on supplies that are zero-rated aims to increase the appeal of goods to Special Economic Zones (SEZs), developers, or units. For taxpayers who have paid more tax on their inputs than the tax due on their output suppliers, the return of unused ITC offers assistance.

However, Section 54 also outlines a number of requirements and limitations for claiming refunds, including the need to provide documented proof, a time limit for doing so, and guidelines for validating and sanctioning reimbursements. To be eligible for a refund under this provision, taxpayers must adhere to certain requirements and limitations.

Detailed Explanation of Section 54 of CGST Act

Now, we’ll be discussing all the clauses of Section 54 of the CGST Act for better understanding:

Section 54(1) of the CGST Act

Before the passing of two years from the relevant date, depending upon the reason for claiming a GST refund, anybody requesting a refund of any tax and interest, if any, paid on such tax or any other sum paid by him may submit an application in the format and manner as prescribed:

Provided that a registered person may submit a claim in [such form and] manner as may be specified for the reimbursement of any balance in the electronic cash ledger in line with the requirements of sub-section (6) of section 49.

Explanation – This clearly means that the person who has paid tax or any other such amount may get a refund on GST¹. For that, the person has to submit a form in the specified manner and within the time period of 2 years from the specified date. Moreover, the specified date will vary from case to case, depending on the reason for claiming the GST refund.

Section 54(2) of the CGST Act

The United Nations (Privileges and Immunities) Act, 1947 (46 of 1947), or any Multilateral Financial Institution and Organisation, Consulate or Embassy of a foreign country, or any other group of people, as mentioned under section 55, who are entitled to a refund on the paid tax amount on inward supplies of goods or services or both, are allowed to make an application for such refund in such form and manner as may be prescribed by the United Nations (Privileges and Immunities) Act, 1947 (46 of 1947).

Explanation – Any person or government agency, such as a multilateral financial institution, United Nations, etc., or any other group of people specified under section 55 may claim a refund on inward supplies of goods and services by making an application within the specified time.

Section 54(3) of the CGST Act

At the conclusion of any tax period, a registered person may, subject to the conditions of sub-section (10), seek a refund of any unused input tax credit:

Provided that as long as there are no exceptions, no reimbursement of unused input tax credit is permitted.

1. non-taxed supplies that are zero-rated;
2. in cases where the tax rate on inputs is greater than the tax rate on inputs, and due to which the credit has built up (other than nil rated or completely exempt supplies), excluding supplies of goods or services or both as may be announced by the Government in response to recommendations from the Council:

Provided if the items being exported out of India are subject to export duties, no refund of unused input tax credit shall be permitted:

Provided if the provider of goods or services, or both, requests a drawback in relation to central tax or a refund of the integrated tax paid on such suppliers, no input tax credit return will be permitted.

Explanation -Only zero-rated supplies produced without incurring GST or ITC accumulation due to greater tax rates on input supplies than output supplies (other than nil-rated or exempt goods) are eligible for refunds at the conclusion of a tax period. Additionally, a drawback or claim for a refund of the IGST paid on such supplies is not permitted, nor are refunds for exported items subject to export tax.

Section 54(4) of the CGST Act

The application must be submitted with –

1. any documented proof that may be required to prove that the applicant is entitled to a refund and
2. Any documentation or other evidence the applicant may offer to demonstrate that the tax and interest, if any, paid on the tax or other amount paid in relation to which the refund is requested 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, including the documents mentioned in section 33, is required:

Provided the applicant may file a declaration, based on the documentary or other evidence that is in his possession, attesting that the incidence of such tax and interest had not been passed on to any other person, provided that the amount sought as a refund is less than two lakh rupees in that case.

Explanation -An applicant must submit the required documented proof to establish their eligibility for a tax refund before they may make a claim. Additionally, they must show proof that any tax or interest they paid in relation to the refund has not been transferred to another party. However, a statement stating that the incidence of tax and interest paid was not passed on is adequate based on other available information if the refund amount is less than Rs. 2 lakhs.

Section 54(5) of the CGST Act

The amount thus calculated shall be credited to the Fund mentioned in section 57 if, upon receipt of any such application, the proper official is satisfied that all or a portion of the amount sought as a refund is refundable.

Explanation – After the person has filed an application for a refund, the authorized officer will check the application and, on being satisfied that the amount asked by the applicant to be refunded is refundable, either half or full, shall be credited to the Fund as specified under section 57.

Section 54(6) of the CGST Act

Despite what is stated in subsection (5), the proper officer may, in the case of any claim for refund on account of a zero-rated supply of goods or services or both made by registered persons other than the category of registered persons that may be notified by the Government upon the Council’s recommendations, refund on a provisional basis 90% of the total amount so claimed, excluding the amount of input tax credit provisionally accepted, in the form of a credit to the registered person’s account.

Explanation – The competent officer may, subject to stipulated criteria, reimburse 90% of the amount requested for refund claims relating to zero-rated deliveries of goods or services. After the necessary document verification, the competent official can then issue a directive for the ultimate resolution of the refund claim.

Section 54(7) of the CGST Act

After receiving a full application, the competent official must issue the order required by subsection (5) within sixty days.

Explanation – After receiving the application, the authorized official is required to issue an order within the time period of 60 days.

Section 54(8) of the CGST Act

Regardless of what is stated in subsection (5), the refundable sum will be given to the applicant rather than being deposited to the Fund if it relates to –

1. a refund of taxes paid on the exports of products, services, or both, as well as on the inputs or input services utilized to create such “exports” of zero-rated supply;
2. Input tax credit refunds under subsection (3);
3. the return of tax paid on a supply that is not made, in whole or in part, for which an invoice has not been produced or for which a voucher for the refund has been issued;
4. a tax refund made in accordance with section 77;
5. If the applicant had not passed on the incidence of the tax and interest to another person, the tax and interest, if any, or any other sum paid by the applicant; or
6. the tax or interest paid by any other type of applicants that the Government may define by notification, based on the Council’s recommendations.

Explanation – Refundable sums may, in some cases, be given directly to the applicant rather than being deposited to the Consumer Welfare Fund if –

• Tax refunds on exports or the components required to produce such exports,
• Input tax credit that was not used but was refunded under subsection (3),
• Reimbursement of taxes paid on goods and services that were neither delivered nor invoiced nor for which a return voucher had been issued,
• Refund of tax paid incorrectly in accordance with section 77’s comprehensive provisions (section 77 of the CGST Act, 2017 addresses the issue of reimbursing taxpayers for the tax that was mistakenly collected and paid to the Central or State Government),
• Taxes or interest paid by the applicant;
• Taxes or interest paid by a specified group of applicants.

Section 54(8A) of the CGST Act

The State tax refund may be paid out by the Government in the way that may be prescribed.

Explanation – The Government shall pay the refund on state tax in the manner as may be prescribed.

Section 54(9) of the CGST Act

No refund shall be made unless in accordance with the requirements of subsection (8), regardless of anything to the contrary contained in any judgment, decree, order, or direction of the Appellate Tribunal or any court, in any other provisions of this Act or the rules made thereunder, or in any other law currently in effect.

Explanation – An applicant is only allowed to apply for a refund as per the provisions of subsection (8), irrespective of any judgment or decree of the conflicting court.

Section 54(10) of the CGST Act

When a registered person owes a refund but has failed to provide a return or is obligated to pay tax, interest, or a penalty, and neither of those obligations has been stayed by a court, tribunal, or appellate authority by the deadline, the relevant official may:

1. withhold payment of any refund due until the aforementioned individual has filed a return or paid any applicable taxes, interest fees, or penalties;
2. deduct from the refund any tax, interest, penalty, charge, or other amount that the taxpayer owes but has not yet paid under this Act or other applicable legislation.

Explanation – The proper officer may withhold payment of the refund until the taxpayer has filed their returns or paid the outstanding tax dues, as applicable, if the applicant has not done either by the deadline. This also applies if the applicant has not paid any tax, interest, or penalty that has not been suspended by a court, tribunal, or appellate authority.

• The officer has the authority to take any unpaid taxes, interest, penalties, fees, or other amounts from the applicant’s return.
• The given date is the final day to file an appeal in accordance with the Act.

Section 54(11) of the CGST Act

The Commissioner may, after providing the taxable person with an opportunity to be heard, withhold the refund until such time as he may determine in situations where an order for refund is under appeal or if any other proceedings under this Act are pending before the court, and the Commissioner thinks that such refund, if granted to the applicant, may affect the revenue in the prescribed appeal or any other proceedings on account of malfeasance or fraud committed.

Explanation – If the Commissioner believes that releasing the refund might result in revenue loss owing to fraud or other misconduct, they may choose to withhold it if there is an appeal pending or any other procedure involving the refund order. However, this will only happen after providing the taxpayer a chance to be heard.

Section 54(12) of the CGST Act

In cases where a refund is withheld pursuant to subsection (11), the taxable person shall be entitled to interest at a rate not to exceed six percent that may be announced based on the Council’s recommendations if, as a result of the appeal or further proceedings, he becomes entitled to a refund.

Explanation – This subsection clearly states that if the amount of refund of any individual has been withheld by the Commissioner as per subsection 11, then in such cases, the person shall be entitled to get interested at the maximum rate of six percent. The rate of interest shall be decided on the recommendations of the Council.

Section 54(13) of the CGST Act

Despite anything else in this section to the contrary, the amount of advance tax deposited by a non-resident taxable person or casual taxable person under sub-section (2) of section 27 cannot be refunded unless that person has submitted all returns required by section 39 for the entire time his certificate of registration was valid.

Explanation – According to this provision, a casual or non-resident taxable person who has paid advance tax cannot request a refund of that tax unless they have submitted all necessary returns in accordance with section 39 for the whole time that their registration certificate was in effect.

Section 54(14) of the CGST Act

No applicant will get a refund under subsections (5) or (6) if the sum is less than one thousand rupees, despite anything else in this section.

Explanation – An applicant is not entitled to get any refund under subsection (5) or (6) if the amount of the refund will be less than Rs. 1,000.

Conclusion

There are various conditions under which a person can claim a refund on the GST that he or she has already paid. Now, the refund cannot be granted under all circumstances. Therefore, section 54 lists all the provisions where a person can claim a GST refund. This section also specifies the procedure as to how the applicant will get the refund. It can be said that all the provisions related to refund on GST are mentioned under section 54. Starting with the filing of an application till the transfer of refund to the Fund or applicant’s personal account. There are different provisions for both circumstances. If you wish to claim a refund on the GST paid, then the basic requirement will be to check whether you qualify for a refund or not. You can contact Corpbiz; our tax experts will assist you in claiming a refund on the GST that you have paid.

Frequently asked questions

1. https://www.gst.gov.in/