Major Updates in GST Refund Filing Process
Jagrit Tenani
CA Jagrit Tenani has emerged as a seasoned professional in the domains of Risk-Based Audit, SoP Formulation and Implementation, Internal Audit, Statutory Audit, and Goods and Services Tax (GST).
His experience in the Corporate Audit Department of ITC Ltd. encompassed him with a keen awareness of the critical role that stringent internal controls play in ensuring organizational excellence and compliance.
Introduction:
A crucial component of the Goods and Services Tax (GST) regime is the refund claim, which enables taxpayers to recoup overpaid taxes or accrued Input Tax Credits (ITC). Refunds may arise due to exports, an inverted duty structure, an excess balance in the electronic cash ledger, and other factors. Organizations must understand the GST refund procedure due to the various types of documentation required, depending on the category of refund being requested.
Latest highlights:
12th June, 2025 –
The latest GSTN advisory introduces a validation on the GST portal. It enables QRMP taxpayers to file refund claims using invoices submitted through the Invoice Furnishing Facility (IFF) for the first two months of the quarter. This resolves earlier issues where the platform wrongly flagged non-filing of returns for those months, despite no such requirement under GST law.
8th May, 2025 –
The new GSTN advisory simplifies refund reporting for services exported with tax, supplies to SEZ units/developers with tax, and deemed exports. Applicants are no longer required to indicate the tax period, but must instead select the refund category and provide invoice data along with the applicable statements (2 for exports, 4 for SEZ supplies, and 5B for supposed exports). Filing GSTR-1 and GSTR-3B before the refund deadline is still crucial.
Who can claim a GST Refund?
Refunds are permitted under three primary circumstances:
- Export of goods and services.
- Excess Balance in Cash Ledger.
- Deemed Exports.
These are high-value, high-volume refund categories, and the new method aims to increase refund transparency, traceability, and accuracy.
Documents required for GST Refund:
1. Application Form (Form GST RFD-01).
2. Statement of Invoices.
3. Annexure B.
4. Bank account details (the account must be registered under the GST profile).
5. Export Documents (if applicable): Export General Manifest (EGM), FIRC/BRC (Foreign Inward Remittance Certificate/Bank Realization Certificate), and shipping bills.
6. Declaration/Undertaking required.
7. Other supporting documents:
a. Bond copy for exports.
b. GSTR-2B reconciliation.
c. GSTR-3B and GSTR-1 returns for the relevant period.
Recent changes in the GST Refund Filing process:
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1. Elimination of the “From” and “To” Tax Period Requirement: In the previous system, when submitting refund claims RFD-01, taxpayers had to choose between a monthly or quarterly tax period. Without selecting a tax period, applicants can proceed directly to the ‘Create Refund Application’ step after choosing the return category.
What this implies:
a. Quicker start of refund claims.
b. Decreased errors brought on by choosing the wrong era.
c. The ability to incorporate qualified invoices from different tax periods.
d. Change to Invoice-Based Filing: GSTN has shifted refund filing from tax-period-based to invoice-based, affecting how data is uploaded and verified. Now, depending on the return type, taxpayers must upload individual invoices into specific statements:
e. Export of Services with Tax Payment → Statement 2.
f. Tax-Paid SEZ Supplies → Statement 4.
g. Supplier-Deemed Exports → Statement 5 B.
2. Uploaded invoices lock with the refund application and can be unlocked only if the application is withdrawn. The only way to unlock these invoices is if:
a. The GST RFD-01 refund application has been withdrawn, or
b. The officer issues a deficiency memo in the GST Refund Status.
Implications for Tax Professionals: When inputting invoice data, you need to be precise and cautious.
3. Return Filing Requirement: To get a GST refund, all due returns, including GSTR-1 and GSTR-3B, must be filed first. If this requirement is not fulfilled, refund requests will not be processed.
Advantages of the new process:
- Improved fraud control: Invoices included in a refund claim are locked, preventing their use in subsequent applications until the application is withdrawn or a deficiency is noted. This protects against false claims.
- Ensures compliance before refunds: Refunds are processed only if all returns, including GSTR-1 and 3B, are filed on time. This keeps the compliance record spotless.
- Faster and more flexible filing: You can now apply immediately by selecting the refund category instead of using the “From–To” tax period option for refund (RFD-01). This minimizes period-selection errors and expedites the procedure.
Case: SICPA India Private Limited and Another Vs Union of India and Others (Sikkim High Court)
Facts of the case:
- Between January 2019 and March 2020, SICPA India, a Sikkim-based security ink company, sold its equipment and closed.
- At closing, the company had ₹4.37 crore of unused Input Tax Credit (ITC) in its electronic credit ledger.
- The company claimed a refund under Section 49(6) of the CGST Act, but both the Assistant Commissioner and the appeal authority denied it, citing that the business shutdown is not covered by Section 54(3), which only authorizes ITC refunds for zero-rated supply or inverted duty structures.
Judgment passed by the court:
- On June 10, 2025, Justice Rai correctly noted the petitioners’ acquired statutory rights under Sections 49(6) and 54.
- The Court ruled that the lack of an explicit prohibition in the CGST Act precluded the tax authorities from keeping ITC only owing to the business shutdown.
- The Court rejected the government’s reliance on the two-category limitation under Section 54(3), citing precedents (e.g., Slovak India Trading) that allowed ITC refunds notwithstanding plant closures.
- The Sikkim High Court overturned the appellate decision, noting that Section 112’s option to appeal to a Tribunal does not completely bar relief under Article 226. It ordered the repayment of ₹4.37 crore in unutilized ITC to SICPA India.
Observation: The ruling is binding only within the jurisdiction of the Sikkim High Court, with a disclaimer that it may affect other ongoing disputes, decisions, etc. We can anticipate that the law will be clarified or even amended to prohibit the return of unused ITC upon the closure of a business.
Conclusion:
The recent changes introduced by the department in GST refund filing mark a significant shift toward a more transparent, efficient, and secure system. Switching from a tax-period-based method to an invoice-level refund system increases flexibility, cuts down clerical mistakes, and lowers the chance of fraud. Stricter compliance measures, like requiring return filings before claiming refunds, help ensure the process’s integrity.
For any clarifications or queries, please feel free to reach out to us at admin@fintracadvisors.com
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