Indirect Tax Laws and Practice · GST Refunds - Inverted Duty Structure and Zero Rated Supplies

Unjust Enrichment and Refund to Consumer Welfare Fund

Updated 11 October 2026 · Fact-checked

Unjust enrichment means a taxpayer must not keep a GST refund of tax that he already recovered from his customer. Section 57(a) credits the amount referred to in Section 54(5) to the Consumer Welfare Fund. Under Section 54(8), that amount is paid to the applicant instead only in listed cases, such as zero rated supplies or tax whose incidence was not passed on.

Understand Unjust Enrichment and Refund to Consumer Welfare Fund

Start with who really bears the tax. A supplier charges GST in the invoice and collects it from the buyer. If the tax was paid in excess or by mistake, the supplier has still recovered that money from the buyer. A refund to the supplier would give him the tax twice: once from the buyer and once from the Government. This is unjust enrichment.

Two provisions work together. Section 57(a) says the Consumer Welfare Fund (the Fund) is constituted by the Government and that the amount referred to in Section 54(5) is credited to it. The Fund's other credits are income from investment of the Fund and other monies received by it. Section 57 itself does not list exceptions or any passing-on test.

The refund side sits in Section 54. Section 54(5) is where the refundable amount is determined. Section 54(8) lists the cases where the refundable amount is paid to the applicant instead of the Fund. Among others, these are refunds on zero rated supplies, refund of unutilised input tax credit, tax and interest that the applicant did not pass on to any other person, and tax borne by a class of applicants notified by the Government. Keep these tests attributed to Section 54. They are not part of Section 57 or Rule 97.

Rule 97(1) of the CGST Rules lists what is credited to the Fund. It names amounts of duty, central tax, integrated tax, Union territory tax and cess, with income from investment and other monies. Two provisos then deal with integrated tax and cess determined under Section 54(5): an amount equivalent to 50% of each is deposited in the Fund. So do not write that 100% of every refund always goes in. The provisos fix 50% for integrated tax and cess only. For other taxes, do not state a percentage that the Rule does not give, and do not guess where the balance goes.

So the key test is: is the refund within a case listed in Section 54(8), such as a protected category or tax not passed on? If yes, the applicant gets it. If not, it goes to the Fund.

Rule 97 also says what happens inside the Fund. A Standing Committee, with a Chairman, Vice-Chairman, Member Secretary and other members, recommends how the money is used for consumer welfare. Eligible applicants apply for grants. The accounts of the Fund kept by the Central Government are audited by the Comptroller and Auditor General of India. If an amount credited to the Fund is later ordered by the proper officer, appellate authority or court to be paid to a claimant, it is paid from the Fund.

For exams, remember the logic first and the details second. The logic is: tax passed on to the customer cannot be refunded to the supplier. The details are the Section 54(8) cases, the 50% provisos in Rule 97(1) and the Committee rules.

Key rules to remember

Core rule on unjust enrichment: Amount referred to in Section 54(5) → credited to the Fund (Section 57(a)), unless it is paid to the applicant in a case listed in Section 54(8); Section 57(a) only says the Section 54(5) amount is credited to the Fund. The cases where the applicant is paid instead, including tax whose incidence was not passed on, are in Section 54(8).
Rule 97(1) first proviso: integrated tax: Amount deposited in Fund = 50% × integrated tax determined under Section 54(5); Read with Section 20 of the IGST Act, as in the Rule text. This proviso names integrated tax only.
Rule 97(1) second proviso: cess: Amount deposited in Fund = 50% × cess determined under Section 54(5); Read with Section 11 of the Goods and Services Tax (Compensation to States) Act, 2017.
Publicity share (Rule 97(7A)): Board gets 50% of the amount credited to the Fund each year, provided funds for consumer welfare activities of the Department of Consumer Affairs are not less than ₹25 crore a year; Used for publicity or consumer awareness on GST.
Standing Committee meetings (Rule 97(5)): Meets as necessary, generally four times a year; at least ten days' written notice; valid only if presided by Chairman or Vice-Chairman and attended by at least three other members; Notice must state place, date, hour and business.
Fund credits (Section 57): Credits = amount referred to in Section 54(5) + income from investment of Fund + other monies received; The mode is as prescribed.

How to solve Unjust Enrichment and Refund to Consumer Welfare Fund questions

Use this sequence for any question on whether a GST refund is paid to the applicant or credited to the Fund.

1Identify the nature of the refund (excess tax paid, export, inverted duty ITC or other) and the type of tax involved (central tax, integrated tax or cess).
2Check whether it falls in a case listed in Section 54(8). Zero rated supplies and unutilised ITC refunds go to the applicant.
3If not, ask whether the incidence of tax was passed on to the buyer or any other person. Look at invoices, price, and whether the buyer got a credit note. Tax not passed on is also a Section 54(8) case.
4If the incidence was passed on and no Section 54(8) case applies, state that the amount referred to in Section 54(5) is credited to the Fund under Section 57(a). If it was not passed on, state that it is paid to the applicant, supported by evidence.
5If the question asks for amounts under Rule 97(1), note the tax type. For integrated tax and cess determined under Section 54(5), deposit 50% of each, as the provisos say. Do not apply 50% to central tax or other taxes, since the provisos do not name them, and do not invent another percentage.
6If the question is on the Fund's working, answer from Rule 97: Standing Committee, meeting and quorum rules, applicants and powers, and audit by the CAG.
7Close with a one-line conclusion naming who receives the money.

Quickest way: Two-question filter

When to use it: For MCQs and short case-based questions where you must decide the recipient of a refund.

Question 1: Is it a zero rated supply refund, unutilised ITC, tax the applicant did not pass on, or tax borne by a notified class? If yes, the applicant gets it.
Question 2: If not, did he pass the tax on? If yes, the Fund gets it. If no, the applicant gets it.
For Rule 97 number questions, take half of the integrated tax and half of the cess, as the two provisos say. Do not apply 50% to central tax or Union territory tax amounts, since the provisos name only integrated tax and cess.

Common mistakes in Unjust Enrichment and Refund to Consumer Welfare Fund

Paying every refund to the applicant because it is 'his money'.
Students focus on the claim and ignore who bore the tax.
Fix: Always test passing on of incidence first, then check the protected categories.
Sending an export or inverted duty ITC refund to the Fund.
Students apply unjust enrichment to every refund.
Fix: Refunds on zero rated supplies and unutilised ITC are protected and go to the applicant.
Applying the 50% rule to CGST, SGST or all taxes, or saying 100% of every refund goes to the Fund.
The words 'fifty per cent' are remembered but not what they apply to.
Fix: The Rule 97(1) provisos name integrated tax and cess only. Quote the Rule wording and state the tax type.
Mixing up the Section 57 Fund with the Rule 97(7A) publicity share.
Both mention 50% and both concern the Fund.
Fix: Remember 7A as a yearly share of the amount credited to the Fund, made available to the Board for publicity, with the ₹25 crore condition on Consumer Affairs funds.
Writing wrong quorum or notice details for the Standing Committee.
Students recall these loosely from older rules, which said 'not less than once in three months'.
Fix: Current Rule 97: generally four meetings a year, ten days' notice, Chairman or Vice-Chairman plus at least three other members.
Stating that the Fund is only for refunds.
The topic is taught under refunds.
Fix: The Fund also holds investment income and other monies, and the Committee recommends use for consumer welfare, including grants to eligible applicants.

Worked examples

Example 1

Shreeram Traders, Pune, paid ₹3,00,000 of central tax on a supply by mistake at a higher rate and recovered the full amount from the buyer through the invoice. The proper officer finds the excess tax refundable. Another claim by it is for unutilised ITC of ₹1,20,000 on zero rated supplies made under LUT. Decide where each refund goes. (This example tests the principle of who receives the refund; the 50% provisos for integrated tax and cess are applied in Example 2.)

Show the solution

Claim 1: the excess central tax of ₹3,00,000 is not in a Section 54(8) case. The incidence was passed on to the buyer.
Paying it to the supplier would unjustly enrich him, so it is not paid to Shreeram Traders.
It is the amount referred to in Section 54(5), which Section 57(a) credits to the Consumer Welfare Fund. Do not apply the 50% provisos, which name only integrated tax and cess, and do not state a Rule 97 percentage for central tax.
Claim 2: unutilised ITC on zero rated supplies is a Section 54(8) case.
So ₹1,20,000 is paid to the applicant.

Answer: The excess central tax of ₹3,00,000 is not paid to Shreeram Traders; it is credited to the Consumer Welfare Fund under Section 57(a). The ₹1,20,000 ITC refund is paid to Shreeram Traders.

Example 2

For an amount referred to in Section 54(5), the integrated tax is ₹6,00,000 and the cess is ₹2,00,000. Applying the provisos to Rule 97(1) of the CGST Rules, find the amount deposited in the Fund.

Show the solution

Rule 97(1) first proviso: 50% of integrated tax is deposited in the Fund.
50% × ₹6,00,000 = ₹3,00,000.
Second proviso: 50% of cess is deposited in the Fund.
50% × ₹2,00,000 = ₹1,00,000.
Total = ₹3,00,000 + ₹1,00,000 = ₹4,00,000.

Answer: ₹4,00,000 is deposited in the Consumer Welfare Fund (₹3,00,000 for integrated tax and ₹1,00,000 for cess).

Exam tips

Write the logic in one line first: tax passed on cannot be refunded to the supplier. Then list the protected categories.
In case scenarios, hunt for clues on passing on: tax shown in invoice, no credit note, price unchanged. These decide the answer.
For number questions, name the tax type and show the 50% working separately for integrated tax and cess. Marks follow the steps.
Quote Section 57 for the Fund and Rule 97 for its working. Cite Section 54(5) for the refund side.
MCQs often test who is an eligible applicant or the Committee's quorum. Revise Rule 97(5) and the Explanation.

Practice questions from GST Refunds - Inverted Duty Structure and Zero Rated Supplies

Unjust Enrichment and Refund to Consumer Welfare Fund: frequently asked questions

What is unjust enrichment under GST refund?

It is the situation where a taxpayer would get back tax that he has already recovered from his customer. GST prevents this by crediting the amount referred to in Section 54(5) to the Consumer Welfare Fund under Section 57(a), unless Section 54(8) provides for payment to the applicant.

When is a GST refund not payable to the applicant?

When the refundable amount determined under Section 54(5) does not fall in a case listed in Section 54(8), for example because the incidence of tax was passed on. It is then credited to the Consumer Welfare Fund under Section 57(a). For integrated tax and cess, the Rule 97(1) provisos fix the deposit at 50%.

Do export refunds go to the Consumer Welfare Fund?

No. Refunds on zero rated supplies and unutilised input tax credit are among the cases in Section 54(8) where the amount is paid to the applicant. Unjust enrichment does not block them.

Who can get a grant from the Consumer Welfare Fund?

Under Rule 97, eligible applicants include the Central or State Government, regulatory or autonomous bodies set up by law, and organisations engaged in consumer welfare for at least three years. They also include village or mandal or samiti or samiti level co-operatives of consumers, especially Women, Scheduled Castes and Scheduled Tribes, and qualifying educational or research institutions. A complainant can apply for reimbursement of legal expenses in a consumer dispute.