Refunds: formula sheet

Key formulas

Zero-rated supply without payment of tax (Rule 89(4))

Refund = (Turnover of zero-rated supply of goods + Turnover of zero-rated supply of services) × Net ITC ÷ Adjusted Total Turnover

Net ITC here is ITC availed on inputs and input services in the relevant period, excluding ITC for which refund is claimed under sub-rules (4A) or (4B). ITC that is not eligible is not part of ITC availed, so it stays out.

Adjusted Total Turnover (Rule 89(4))

Adjusted Total Turnover = Turnover of goods and services other than zero-rated supplies (excluding exempt turnover) + Turnover of zero-rated supplies

Exempt turnover is left out. Zero-rated turnover is added back at the value taken for the refund. In a question, first list domestic taxable turnover, then add the zero-rated turnover.

Turnover of zero-rated supply of goods

Lower of: value in the tax invoice, and FOB value as per the shipping bill

Using the lower value stops inflated invoices from raising the refund.

Inverted duty structure (Rule 89(5))

Maximum refund = [Turnover of inverted rated supply of goods and services × Net ITC ÷ Adjusted Total Turnover] − [Tax payable on such inverted rated supply × (Net ITC ÷ ITC availed on inputs and input services)]

Net ITC here means ITC availed on inputs only, not input services. The tax payable is scaled by Net ITC ÷ ITC availed on inputs and input services, so it is not deducted in full. The result is a maximum, and refund cannot exceed the balance in the electronic credit ledger.

Zero-rated supply with payment of tax

Refund = IGST paid on the export of goods or services

For goods, refund is based on the shipping bill and the matched return data. For services, you file the prescribed application (RFD-01). It needs no separate formula.

Time limit

Two years from the relevant date

Applies to the refund claim under section 54.

Key restrictions

No refund of unutilised ITC if goods are exported subject to export duty, or if drawback of central tax or refund of IGST is claimed on the same supply

Drawback of customs duty only is not a bar. Inverted duty refund under section 54(3)(ii) does not cover nil-rated or fully exempt output supplies, or goods or services notified by the Government on the recommendation of the Council.

Time limit to apply

Application within 2 years from the relevant date

Section 54(1). The relevant date differs by type of refund. A fresh application after a deficiency memo must also satisfy the Section 54(1) limit, measured from the relevant date.

Form of application

FORM GST RFD-01, filed electronically on the common portal

Rule 89. Supporting documents are uploaded with it.

Scrutiny and acknowledgement

Within 15 days: RFD-02 (complete) or RFD-03 (deficient)

Rule 90. On acknowledgement in RFD-02 the application is treated as complete, and the 60-day period runs from the date of the complete application. On a deficiency memo, the Rule 90 position is to file a fresh application after rectifying the defects; the 60-day period runs from the date the fresh application is complete, and the Section 54(1) limit is measured from the relevant date.

Provisional refund

Provisional refund = 90% × refund amount claimed (as computed under Rule 89(4)/(5)), within 7 days of acknowledgement

Rule 91. Zero-rated supplies of goods or services only, excluding categories under Section 54(6). Not available to an applicant prosecuted in the preceding five years for tax evasion of more than ₹2,50,000. Provisional order in RFD-04, payment order in RFD-05.

Final order

Order within 60 days from receipt of complete application

Section 54(7). Final sanction order in RFD-06, payment order in RFD-05. RFD-04 is only the provisional order. Delay attracts interest under Section 56, which runs from 60 days after receipt of the complete application.

Rejection route

Show cause notice RFD-08 → reply RFD-09 within 15 days → order RFD-06

Rule 92. The applicant must get an opportunity of being heard before rejection.

Minimum refund

No refund if the amount is less than ₹1,000

Section 54(14).

Unjust enrichment declaration

Claim ≤ ₹2 lakh: self-declaration. Claim > ₹2 lakh: CA or cost accountant certificate

Section 54(8) is the unjust enrichment provision and lists the exceptions. Under Section 54(8)(a) the test does not apply to refund of tax on exports of goods or services. The refund of unutilised ITC on zero-rated supplies made without payment of tax is allowed under Section 54(3). The certificate is under Rule 89(2)(l) and the declaration under Rule 89(2)(m). Check the claim type.

Trigger for interest

Refund not paid within 60 days from the date of receipt of the application under Section 54(1)

Interest is on the tax ordered to be refunded under Section 54(5). It is payable only if the refund is delayed beyond 60 days.

Period of interest

From the day immediately after expiry of 60 days to the date of refund

The 60 days themselves carry no interest. Always compute the delay, not the total days since application.

Normal rate

6% per annum (cap in Section 56: not exceeding 6%)

Applies to refunds ordered by the proper officer under Section 54(5).

Higher rate (proviso)

9% per annum (cap in Section 56: not exceeding 9%)

The proviso applies where the refund claim arises from an order of the adjudicating authority, Appellate Authority, Appellate Tribunal or court that has attained finality, and it is not refunded within 60 days of the application filed consequent to that order. The Explanation brings a refund ordered by an Appellate Authority, Tribunal or court under Section 54(5) as a deemed order, so Section 56 applies.

Interest computation

Interest = Refund amount × Rate ÷ 100 × Days of delay ÷ 365

Simple interest. Use the number of days of delay beyond 60 days. Use 365 days unless the question says otherwise.

Rule 94 (interest on delayed refund)

Order sanctioning interest on delayed refunds, with payment advice in FORM GST RFD-05

Rule 94 deals with the order sanctioning interest on delayed refunds. The order is passed with the payment advice in FORM GST RFD-05 as part of the refund payment process, not as a separate step afterwards. Rule 92 deals with the order sanctioning the refund itself. No separate application for interest is needed under Section 56.

Quick revision

• Refund is claimed by application, and the time limit is counted from the relevant date.
• The relevant date differs for goods exports, services exports, SEZ supplies, deemed exports and other cases. Learn each one.
• Tax paid in the wrong head, such as CGST/SGST instead of IGST, has its own refund route and relevant date.
• Zero-rated supplies can be made under bond or LUT without paying IGST, or with payment of IGST and then claiming refund.
• Refund of unutilised ITC on inverted duty is limited to the cases the law permits, and uses a prescribed formula.
• Inverted duty refund covers ITC on inputs and input services. ITC on capital goods is excluded from Net ITC in the formula.
• Always compute the claim step by step and state the formula before substituting figures.
• A deficiency memo is issued in FORM GST RFD-03 within 15 days of filing the application. The applicant must file a fresh application after rectifying the deficiencies (Rule 90).
• Interest on delayed refund runs when the refund is not paid within the statutory period from the date of receipt of the application.
• Unjust enrichment applies when the tax burden has been passed on to another person.
• A refund that fails the unjust enrichment test is credited to the Consumer Welfare Fund.
• Section 54(8) lists the refunds excepted from the unjust enrichment test: refund of tax on zero-rated exports of goods or services, unutilised ITC under Section 54(3), tax paid on a supply not provided, tax where the incidence has not been passed on to any other person, and others. Check the full list in the Act.

Common mistakes

• Using the invoice value of exported goods when it is higher than the FOB value. Fix: For goods, always take the lower of the invoice value and the FOB value shown on the shipping bill.
• Including input services in Net ITC for the inverted duty formula. Fix: In the inverted duty case use ITC on inputs only. Input services are excluded.
• Treating the deficiency memo as a chance to correct the same application. Fix: Under Rule 90 you must file a fresh application after rectification. The 60 days run from the fresh application, and the Section 54(1) limit is measured from the relevant date.
• Allowing a 90% provisional refund for inverted duty structure claims. Fix: Rule 91 provisional refund is for claims on zero-rated supplies. Inverted duty claims are not covered. It is also not available to an applicant prosecuted in the preceding five years for tax evasion of more than ₹2,50,000.
• Computing interest from the date of application or from the date the tax was paid. Fix: Interest starts only from the day after the 60 days from receipt of the application expire. The first 60 days are interest-free.
• Using 6% for every refund. Fix: Read the facts. If the refund flows from an order of an appellate authority, Tribunal or court that has attained finality, the proviso applies and the rate is 9%.

Exam tips

• Case scenario MCQs often test the bars to refund, such as export duty, drawback of central tax or IGST refund on the same supply, or exempt output. Check these before computing.
• In written answers, name the route (LUT or IGST paid) and the formula first, then show the working line by line.
• Memorise the difference in Net ITC: inputs and input services for zero-rated supply (excluding ITC refunded under sub-rules (4A) or (4B)), inputs only for inverted duty.
• Write the definition of Adjusted Total Turnover and build it line by line: other-than-zero-rated non-exempt turnover plus zero-rated turnover.
• Always state the lower-of rule for the value of exported goods, and compare the result with the ledger balance.
• End with one line on the two-year time limit from the relevant date. It earns a mark in many answers.
• Write the form numbers in every answer. Examiners award marks for RFD-01, RFD-02, RFD-03, RFD-05, RFD-06 and RFD-08/09 correctly named.
• In case-scenario MCQs, check the claim type first. Provisional refund is for zero-rated supplies only.