GST Refunds — Complete Guide to Rules 89-96

Under Section 54(1) of CGST Act, a refund application must be filed within 2 YEARS from the 'relevant date'. The relevant date varies by refund type: (1) Export of goods: Date of shipment (date on shipping bill/bill of export); (2) Export of services: Date of receipt of payment in convertible foreign exchange OR date of issue of invoice (whichever is later); (3) Deemed export: Date of filing of return (GSTR-3B) for the period in which supply was made; (4) Inverted Duty: Due date of filing GSTR-3B for the relevant period; (5) Excess cash in ledger: Date of payment; (6) Provisional assessment: Date of adjustment after final assessment. IMPORTANT: The 2-year limit is strictly enforced — even one day late means the refund is time-barred with no discretion available to the officer.

The formula under Rule 89(4) is: Maximum Refund Amount = (Turnover of zero-rated supply of goods + Turnover of zero-rated supply of services) × Net ITC ÷ Adjusted Total Turnover. WHERE: Net ITC = ITC availed during the period MINUS ITC on capital goods and input services used exclusively for exempt/non-business; Adjusted Total Turnover = Turnover in the state/UT MINUS value of exempt supplies (other than zero-rated) and turnover of supplies for which refund claimed under inverted duty. EXAMPLE: If export turnover is ₹50L, total turnover is ₹100L, and Net ITC is ₹8L, then Maximum Refund = 50L × 8L ÷ 100L = ₹4L. You can claim up to ₹4L as refund. Any excess ITC remains in credit ledger for future use.

Under Rule 91, for refund claims related to zero-rated supplies (exports/SEZ), the government grants 90% provisional refund within 7 days of acknowledgment. Conditions: (1) Person has not been prosecuted for tax evasion exceeding ₹250L in past 5 years; (2) GST compliance rating is above threshold (once implemented); (3) No pending proceedings under Section 73/74 for the applicant. Process: RFD-01 filed → RFD-02 acknowledgment → RFD-04 (provisional sanction of 90%) → Amount credited within 7 days. The remaining 10% is released after full verification (may take 30-60 days). This mechanism ensures exporters don't face working capital stress while waiting for full verification.

NO — the Supreme Court in Union of India vs VKC Footsteps (2021) ruled that ITC on INPUT SERVICES cannot be included in the refund formula for inverted duty structure. Only ITC on INPUT GOODS qualifies. This means: If your inverted duty refund scenario involves services (e.g., you pay 18% GST on job work services but output is 5% on finished goods), the job work ITC CANNOT be claimed as refund. However: (1) You CAN still accumulate this ITC and use it against future output tax; (2) If you have both goods and services inputs, only goods portion qualifies for IDS refund; (3) The government has not amended the law despite industry demands since 2021. Affected sectors: Textiles (heavy job work services), Solar panels, Food processing.

Under Section 56 of CGST Act, if refund is not paid within 60 days from date of receipt of application, the government must pay INTEREST at 6% per annum. Key points: (1) 60-day clock starts from date of filing RFD-01 (not acknowledgment date); (2) Interest is automatic — no separate application needed; (3) Interest calculated from day 61 until date of actual payment; (4) If provisional refund (90%) paid on time but final 10% delayed, interest applies only on delayed portion; (5) In practice: Many officers delay sanction to avoid interest liability by issuing deficiency memos; (6) Remedy: If delayed beyond 60 days, file complaint on GST grievance portal or approach jurisdictional Commissioner. Average processing time as of 2025: 45-55 days for exports, 90-120 days for IDS refunds.