GST Refund Law: Sections 54 to 58 and Rules 89 to 97A Explained

This guide explains the law on GST refunds under Sections 54 to 58 of the CGST Act, 2017 and Rules 89 to 97A of the CGST Rules, 2017: who can claim, the time limit, the procedure, export and inverted duty refunds, provisional refund, withholding and interest.

Law stated as on November 2026, including amendments made by Notification No. 05/2026-Central Tax and the Finance Act, 2026 provisions in force from 1 November 2026. Section numbers refer to the CGST Act, 2017 and rule numbers to the CGST Rules, 2017; the SGST/UTGST Acts contain identical provisions.

🗣️ Saral bhasha mein samjhein

• Refund ka claim relevant date se 2 saal ke andar RFD-01 mein karna hota hai. Cash ledger ke balance par koi time limit nahi.
• Exporter LUT par bina tax export karke ITC refund le sakta hai, ya IGST bhar kar shipping bill se refund le sakta hai.
• 1 Nov 2026 se inverted duty refund mein bhi 90% provisional refund milta hai.
• Goods export par IGST refund ab ₹1,000 se kam ho tab bhi milta hai.
• Refund 60 din mein na mile, toh 6% interest milta hai.

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1. When Is a Refund Available? Section 54

• Zero-rated supplies: export of goods or services and supplies to SEZ, either (a) under LUT without tax, claiming refund of accumulated ITC, or (b) on payment of IGST, claiming refund of the IGST paid (Section 16 of the IGST Act).
• Inverted duty structure: where the tax rate on inputs is higher than on output supplies, refund of accumulated ITC on inputs (not input services or capital goods) under Section 54(3)(ii).
• Deemed exports: refund of tax paid on notified supplies, claimable by the supplier or the recipient.
• Excess balance in the electronic cash ledger (Section 49(6)).
• Excess tax paid by mistake, tax paid on a supply later held to be inter-State instead of intra-State or vice versa (Section 77), tax paid under protest, and pre-deposit refunded after a favourable appeal.
• Refunds to UN bodies and embassies, to unregistered buyers where a contract or flat booking is cancelled, and to international tourists.

2. Time Limit and Relevant Date

The application must be filed within two years from the relevant date (Explanation 2 to Section 54):

No time limit applies to refund of a cash ledger balance. Refund of tax paid on a supply later held to be of the wrong type (Section 77) can be claimed within two years of the correct payment.

3. Procedure: Rules 89 to 93

1. File RFD-01 on the portal with the statements and declarations prescribed in Rule 89, including the undertaking on unjust enrichment where required. Aadhaar authentication is required (Rule 10B).
2. The officer issues an acknowledgement in RFD-02 within 15 days, or a deficiency memo in RFD-03 (after which a fresh application is filed).
3. For zero-rated supplies and, from 1 November 2026, inverted duty refunds, a provisional refund of 90% may be granted in RFD-04 within 7 days (Section 54(6), Rule 91). Certain notified categories, such as persons not Aadhaar-authenticated, are excluded.
4. The final order is issued in RFD-06 within 60 days of the application (Section 54(7)). Before rejecting a claim, a show cause notice in RFD-08 must be issued and a reply allowed in RFD-09.
5. Refunds of IGST paid on export of goods are processed automatically through the shipping bill on ICEGATE (Rule 96), once GSTR-1 and GSTR-3B are in order.

4. Formula for ITC Refunds: Rule 89(4) and 89(5)

• Exports under LUT: refund = (turnover of zero-rated supply × net ITC) ÷ adjusted total turnover.
• Inverted duty: refund = (turnover of inverted rated supply × net ITC on inputs ÷ adjusted total turnover) − tax payable on such inverted rated supply × (net ITC ÷ ITC availed on inputs and input services).

Rule 96(10), which restricted IGST-paid export refunds for exporters who had used certain import benefits, was omitted with effect from 8 October 2024.

5. Restrictions and Withholding

• Unjust enrichment (Sections 54(8) and 54(9)): where the tax has been passed on to another person, the refund goes to the Consumer Welfare Fund. Exports, deemed exports and ITC refunds are outside this bar.
• Withholding (Section 54(10)): refund may be withheld while returns are pending or adjusted against confirmed dues not stayed by an appellate forum. Provisionally sanctioned amounts cannot be withheld or adjusted.
• Appeal against the refund (Section 54(11)): refund may be withheld where an appeal is filed and the Commissioner considers that grant would hurt revenue.
• Minimum amount (Section 54(14)): no refund below ₹1,000, except, from 1 November 2026, refund of tax paid on goods exported out of India.
• Export duty (Section 54(15)): no refund of ITC or IGST where the exported goods attract export duty.
• Rule 86A blocks and Rule 96(4) suspensions on IGST refunds can also delay processing.

6. Interest on Delayed Refund: Section 56

If a refund is not paid within 60 days of a complete application, interest at 6% per annum is payable from the 61st day. Where the refund arises from an order of an appellate authority, Tribunal or court that has attained finality, the rate is 9%. Interest is sanctioned in RFD-05 (Rule 94).

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