In case of GST Refund, whenever a situation arises where refund amount can’t be ascertained precisely, then, the proper officer shall sanction refund amount on provisional basis.
1. Provisional GST Refund
Where the proper officer has reasons to believe that due to irregularities in refund application, whole or part of the refund claim may face rejection. Then in such a case, the proper officer shall disburse refund on the provisional basis to the extent of 90% of the refundable amount*.
However, the final refund shall be granted in accordance with provisions of Rule 92 of CGST Rules.
- Order of provisional refund shall be issued in form GST RFD-04.
- A proper officer shall issue an order of granting a refund on a provisional basis. However, he needs to use the form GST RFD-04 within 7 days from the date of the generation of acknowledgment.
- In case of zero-rated supplies, if a proper officer does not have any complaint with the refund amount. Alongside this, he is of the opinion that the claim does not require further scrutiny. Then he may issue a final refund order in form GST RFD-06. Generally, the process completes within 7 days of issuance of acknowledgment. No provisional refund order requires in such a case.
- The refund shall be provided on a provisional basis. But, only if a person claiming refund has not been prosecuted for any offense of the Act or under an existing law where the amount of tax evaded exceeds INR 250 Lakhs.
2. Determination of Final Refund Amount
If final refund amount is less than the provisionally granted refund
There can be the situation where post sanctioning provision refund amount, the jurisdictional officer determines the final refund amount lesser than sanctioned amount.
Example
| Refund amount claimed by taxpayer in refund application | INR 100/- |
| Refund amount granted on provisional basis (GST RFD-04) | INR 90/- |
| Final refund amount determined | INR 70/- |
In such a case, the officer shall issue a show-cause notice to the applicant in form GST RFD-08 in accordance with provisions of Section 54 of the CGST Act read with Section 71 or 74 of the CGST Act. Such notice will require the taxpayer to show cause as to why:
a. The refund claim of INR 30 should not face any rejection as per the relevant provisions of the law.
b. Amount of INR 20/- erroneously refunded should not be recovered under section 73 or section 74 of the CGST Act along with interest and penalty, if any.
Such notice shall be adjudicated following the principle of natural justice. Alongside, an order in form GST RFD-06 shall be issued under section 54, Section 73 or 74 of the CGST Act.
If on both points, the jurisdictional officer determines against the taxpayer:
- The final refund amount of INR 70 shall be sanctioned through form GST RFD-06.
- The excess refund amount of INR 20 shall be debited in the electronic credit ledger of a taxpayer with applicable interest through the issuance of an order in form GST DRC-07.
- If claimed refund pertains to refund of unutilized/accumulated ITC, then INR 30/-, i.e., the amount rejected, shall be re-credited to the electronic credit ledger of the applicant through FORM GST PMT-03.
- However, this re-credit shall be done only after the receipt of an undertaking from the applicant to the effect that he shall not file an appeal, or in case he files an appeal, the same has been finally decided against the applicant.
Furthermore,
No adjustment or withholding of refund, as provided under subsections (10) and (11) of section 54 of the CGST Act, shall be allowed in respect of the amount of refund which has been provisionally sanctioned.
If an outstanding recoverable amount is due from the applicant, then the proper officer may process and sanction refund on the final basis. The officer will initiate the process at the earliest and recover the amount from the amount so sanctioned.
If final refund amount is more than the provisionally granted refund.
If post final calculation, proper officer determines amount payable to the taxpayer in addition to the refund granted on provisional basis then proper officer shall make an order in form GST RFD-06 and payment order in form GST RFD-05.
Example
| Refund amount claimed by taxpayer in refund application | INR 100/- |
| Refund amount granted on provisional basis (GST RFD-04) | INR 70/- |
| Final refund amount determined | INR 90/- |
In such case:
- Proper officer shall issue the order in form GST RFD -06 for INR 90/-.
- Balance refund of INR 20/- will be paid through issuance of payment advice in form GST RFD-05.
Read more on Updated GST refund filing and claims process
