Sanction of refund under GST

Posted on 10 June 2022 Category : GST terms

What is sanction of refund under GST

The details about sanction of refund under GST are explained here.

Order sanctioning refund

In our previous article, we had covered the form GST RFD-02 (acknowledgment) and the form GST RFD-03 (discrepancy memo). We will cover the form used for provisional sanction of refund by the proper officer (GST RFD-04) and the form used for payment of the final net refund.

The proper officer would assess the application for refund and provide a provisional sanction of refund if there are no discrepancies in the application for refund or when he is satisfied with the response from the applicant for the deficiencies communicated. A provisional refund of 90% of the total amount of refund claimed in the application would be provided in the GST RFD-04.

Following details would appear in the provisional sanction of refund (GST RFD 04):

1. GSTIN and name of the applicant

2. Refund application reference number

3. Acknowledgement number

4. Bank details like account number, name and branch of bank, IFSC, and MICR

The form GST RFD-04 would need to be digitally signed by the proper officer with his name and designation. Provisional refund of 90% would be sanctioned by the proper officer within a period of 7 days of filing the application for refund.

Issue of payment advice

The final payment of refund would be made by the proper officer under form GST RFD 05 on the common portal by issuing a payment advice. Payment advice has to be issued by the proper officer within a period of 60 days from the filing of the application for refund. Payment advice would contain the details of the final refund amount sanctioned and interest on the delayed refund (if any).Payment advice would be digitally signed by the proper officer on the common portal with his name and designation.

Final sanction of refund

The order for sanction of refund is passed in the form GST RFD-06. The proper officer has to select one option from the below options available in form GST RFD-06

1. Refund is sanctioned directly to the bank account of the applicant.

2. Refund is credited to the consumer welfare fund

3. Refund for application is rejected

Refund application has to pass the test of unjust enrichment to check the incidence of tax has not been passed to someone else. A self-declaration stating that incidence of the tax was not passed would suffice if the amount claimed is less than Rs 2 lakh. In the case of the refund claim being more than Rs 2 lakh, a certificate from a chartered accountant/cost accountant would be required.

Concept of unjust enrichment will not be applicable if the refund applied is for the below-mentioned reasons

1. Accumulated ITC

2. Refund for exports

3. Refund of payment for wrong tax

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