Section 54 of the Central Goods and Services Tax (CGST) Act, 2017, lays down the provisions for claiming refund of tax, interest, or any other amount paid under GST. It provides a structured mechanism for both registered and unregistered persons to seek refunds in defined circumstances. The refund framework plays a crucial role in ensuring liquidity, compliance, and fairness in the indirect tax regime.
Who Can Claim a Refund under Section 54?
Refund can be claimed by:
(i) Any taxpayer (registered/unregistered)
(ii) Special entities (e.g. UN bodies, consulates, embassies)
(iii) Exporters of goods/services
(iv) Persons who have paid excess tax or tax by mistake
Time Limit for Filing Refund Application
🔹The refund application must be filed within 2 years from the relevant date.
🔹For notified international agencies and embassies, the application must be filed within 2 years from the end of the quarter in which the inward supply was received.
Note: Refund of balance in the Electronic Cash Ledger can be claimed anytime, without adhering to the 2-year restriction.
Refund of Unutilised Input Tax Credit (ITC)
Refund of unutilised ITC is available only in the following cases:
✅ Eligible Cases:
🔸Zero-rated supplies (without payment of tax under Bond/LUT)
🔸Inverted Duty Structure – tax rate on inputs > tax rate on outputs
❌ Ineligible Cases:
🔸Where output supplies are nil-rated or fully exempt
🔸Where drawback of central tax is claimed
🔸Where IGST refund is claimed on the same supply
Timeline & Processing of Refunds
✔️Provisional refund of 90% may be granted for zero-rated supply exporters
✔️Final refund order must be issued within 60 days from the date of submission of complete application
✔️Refund is directly paid to the applicant where applicable (Section 54(8))
Refund Withholding & Adjustments
A. Refund may be withheld if:
✔️Taxpayer fails to file returns or pay dues
✔️There is pending demand or proceedings
✔️Refund order is under appeal and may affect revenue (Section 54(11))
B. Adjustments Permitted:
✔️Refund can be adjusted against any outstanding liability under the Act
C. Interest on Withheld Refund:
✔️Interest (up to 6%) is payable if refund withheld under appeal is later found to be admissible
Refund Not Permitted in Specific Cases
(i) No refund if exported goods are subject to export duty
(ii) Refund under Section 54(5) and 54(6) not admissible if refund amount < ₹1,000
(iii) Advance tax of casual/non-resident taxable person is non-refundable unless all returns are filed.
Circumstances Where Refund Can Be Claimed
Refund may arise under the following scenarios:
