Inverted duty, export refunds

Category: GST Services. From ₹4,999. Typical timeline: 30–60 days.

Overview

GST refund applications recover excess tax paid or accumulated input tax credit that cannot be utilised, most commonly arising from inverted duty structures (where input tax rate exceeds output tax rate) or from zero-rated exports made with IGST payment. The process is fully online through Form RFD-01 but requires careful computation and documentation to avoid rejection or delay.

Who needs it

• Manufacturers facing inverted duty structure with input GST rates higher than output rates
• Exporters who paid IGST on shipping bills instead of filing under LUT
• Businesses with excess balance lying in the electronic cash ledger
• SEZ suppliers and deemed export suppliers seeking refund of tax paid

Eligibility

• Exporters who paid IGST on exports and did not use the LUT route can claim a refund of that IGST
• Businesses with an inverted duty structure (input tax rate higher than output tax rate) can claim accumulated ITC refund
• Refund is also available for excess balance in the electronic cash ledger, deemed exports, and finalisation of provisional assessment
• Refund application must be filed within two years from the relevant date prescribed under Section 54

Documents required

• GST returns (GSTR-1, GSTR-3B) for the refund period
• Statement of invoices for inverted duty structure or export refund as applicable
• Shipping bill and export invoice details (for export refunds)
• CA/Cost Accountant certificate for refund above prescribed threshold (where applicable)
• Bank account details for refund credit (linked to GSTIN)

Process

1. Refund category identification — Determine the applicable refund category — inverted duty, export with tax payment, or excess cash ledger balance.
2. Computation and statement preparation — Prepare the refund computation statement and reconcile with filed GST returns.
3. RFD-01 filing — File the refund application online on the GST portal with supporting documents and the ARN is generated.
4. Department processing — The proper officer scrutinises the application, may issue a deficiency memo, and sanctions the refund via RFD-06.

Government fees

• Form RFD-01 filing: Nil — no government fee for filing the refund application

Professional fee

Kanoons charges from ₹4,999 for refund computation, documentation and RFD-01 filing, depending on the refund category and volume of invoices.

Timeline

Refunds are typically processed in 30–60 days from ARN generation where the application is in order; provisional refund of 90% can be granted within 7 days for export-related claims in certain cases.

Deliverables

• Filed RFD-01 application with ARN
• Refund computation statement/annexures
• Refund sanction order (RFD-06) once approved
• Response drafts for any deficiency memo issued by the department

Frequently asked questions

Is there a minimum refund amount for GST refund claims?

Yes, refund claims below ₹1,000 are generally not processed under Section 54 of the CGST Act.

What is the time limit to claim a GST refund?

A refund application must be filed within two years from the relevant date, which varies by refund category (e.g., date of export, date of payment of tax).

Can refund be claimed for inverted duty structure on services?

No, the inverted duty structure refund is generally not available where the accumulation is on account of services with a higher tax rate than the output supply.

Common mistakes

• Filing refund claims without reconciling figures against GSTR-1/3B, leading to deficiency memos
• Missing the two-year limitation period from the relevant date
• Claiming inverted duty refund on ineligible categories such as certain notified goods
• Not responding to deficiency memos within the stipulated time, causing the claim to lapse

Penalties for non-compliance

• Refund claims found to be fraudulent attract recovery with interest and penalty under Section 74 of the CGST Act
• Delay beyond 60 days in refund sanction by the department entitles the taxpayer to interest at 6% per annum on the delayed refund
• Wrongful refund availed must be repaid along with interest at 24% per annum if found to be incorrect

Legal references

• Central Goods and Services Tax Act, 2017, Section 54 — refund of tax
• CGST Rules, 2017, Rule 89-97A — refund application and processing procedure
• Circular No. 125/44/2019-GST — consolidated guidelines on GST refund processing