Zero Rated Supplies – How to claim Refunds Manually ?
Supply has been defined as an inclusive definition under GST laws which includes ––
1. All forms of supply of goods or services or both for a consideration include sale, transfer, exchange, rental, lease or disposal made or agreed to be made by a person in the course or furtherance of business;
2. Import of services for a consideration whether or not in the course or furtherance of business;
3. All activities as specified in Schedule I, for without consideration, for e.g. transfer of goods from principal to agent etc.
4. All activities as specified in Schedule II to be treated as a supply of goods or supply of services.
5. All activities or transactions as specified in Schedule III, for e.g. services from employee to employer etc.
6. Such other activities or transactions are undertaken by the Central Government, a State Government in which they are engaged as public authorities shall be treated as a supply of goods or services.
7. The Central Government may, on the recommendations of the Council, specify, by notification, the transactions that are to be treated as—
- a supply of goods and not as a supply of services; or
- a supply of services and not as a supply of goods.
Zero Rated Supply
Means any of the following supplies of goods or services or both, namely:––
- Export of goods or services or both; or
- Supply of goods or services or both to a Special Economic Zone developer or a Special Economic Zone unit. (Section 16 of the Integrated GST Act 2017.)
Conditions to avail Input Tax Credit
The credit of input tax may be availed for making zero-rated supplies; however, such supplies may be an exempt supply. (Sub-Section 5 of Section 17 of the Central GST Act 2017.) A registered person making zero-rated supply shall be eligible to claim a refund on satisfaction of certain conditions, they are:
- The supplier may supply goods or services or both under bond or Letter of Undertaking, without payment of integrated tax and claim refund of unutilized input tax credit. Or
- The supplier may supply goods or services or both, subject to such conditions, on payment of integrated tax and claim a refund of such tax paid on goods or services or both supplied. (Section 54 of the Central GST Act 2017.)
Key Differences between “Nil Rated, Exempted, Zero Rated Zero Rated Supply
|Nil Rated Supply||Exempted Supply||Zero Rated Zero Rated Supply|
|Goods or services on which GST rate of 0% is applicable are called nil rated goods or services.||Exempted supply also defined as an inclusive definition, which includes nil rate supplies, non-taxable supplies and specific supplies which are notified as exempt from tax.||Supply of goods or services or both supplied in the ordinary course of business to |
1. Export or
2. Special Economic Zones or Special Economic Zone developers.
Refund – Goods & Services Tax Regime
Section 54 of the CGST Act, 2017, reads that any person claiming refund of tax and interest, if any, paid on such tax or any other amount paid by him, may make an application before the expiry of two years from the relevant date.
If there is any balance in the electronic cash ledger, he may claim such refund in the return furnished under section 39 of the said Act.
Mode of claiming
|Nature of Refund||Mode of claiming|
|Balance left in the electronic cash ledger||Claim such refund in the return under section 39|
|In case of Balance left in the electronic credit ledger||Claim such refund by an application within 2 years|
Manual filing and processing of refund claims in respect of zero-rated supplies
Due to the non-availability of the refund process, the Central Government has decided that the applications relating to refund claims on account of zero-rated supplies shall be filed and processed manually till online system in a place.
Three different refund registers are to be maintained for record keeping of the manually sanctioned refunds, namely Receipts, Sanction of provisional refunds and Sanction of final refunds.
Conditions and procedure for the manual filing and processing of refund claims:
1. Refund of integrated tax paid with respect to goods exported:
The shipping bill filed by an exporter shall be deemed to be an application for a refund in such cases.
The application shall be deemed to have been filed only when the applicant filed an application on a prescribed Form.
Upon receipt of the Form, the system designated by the Customs shall process the claim for refund and an amount equal to the integrated tax paid in respect of such export shall be electronically credited to the bank account of the applicant.
Any order regarding withholding of such refund or its further action shall be done manually till the refund module is in place.
2. Refund of integrated tax paid with respect to zero-rated supply of goods or services to a Special Economic Zone developer or a Special Economic Zone unit
The applicant is required to submit a prescribed Form through online and a print out of the said form shall be submitted before the jurisdictional proper officer along with all necessary documentary evidence, within the time stipulated for filing of such refund.
3. Refund of unutilized input tax credit on inputs or input services used in making such zero-rated supplies
The prescribed application shall be submitted online and the amount claimed as refund shall be debited from the amount in the electronic credit ledger to the extent of the claim.
The portal will generate an Acknowledgement Receipt Number (ARN), which requires being mentioned in the FORM GST RFD-01A submitted manually, along with the print out of FORM GST RFD-01A to the jurisdictional proper officer, and with all necessary documentary evidence, within the time stipulated for the filing of such refund.
4. Jurisdictional Authority to file refund claims
The registered person is required to file his refund claim with the concerned jurisdictional tax authority to which the taxpayer has been assigned by the Chief Commissioner of Central Tax and the Commissioner of State Tax.
In absence of such an order, the registered person, with an undertaking stating that the claim for sanction of refund has been made to only one of the authorities, is at liberty to apply for a refund before the Central Tax Authority or State Tax Authority till such Order issued.
Once such a refund application in FORM GST RFD-01A is received, the jurisdictional proper officer shall make an entry with all requisite details in his refund register maintained for this purpose.
After the sanction of provisional refund, the claim shall be processed and the final order issued within sixty days of the date of receipt of the complete application form. The process shall be recorded in the refund register as prescribed.
5. Rejection of Refund Claims
Where any amount claimed as a refund is rejected according to CGST Rules, either fully or partly, the amount debited, to the extent of rejection, shall be re-credited to the electronic credit ledger by an order.
The amount would be credited by the proper officer using a prescribed Form.
Detailed procedure for manual processing of refund claims
|Submission of refund application through online – To claim refund of unutilized ITC |
• Rule 89
|The corresponding electronic credit ledger of CT / ST / UT / IT/ Cess would get debited and an ARN number would get generated.|
|Filing of printout |
• Rule 89(1) – Application
• Rule 89(2) – Requisite Documents
• Rule 89(3) – Debiting of electronic credit ledger
|The printout of the ARN along with an application for refund shall be submitted manually to the concerned Jurisdictional officer. |
The Form shall also contain the debit entry in the electronic credit ledger of the amount claimed as refund.
The said Form shall be accompanied by the all requisite documentary evidence.
|Initial scrutiny of the Documents |
• Rule 90(2) – 15 day time for scrutiny
• Rule 90(3) – Issuance of Deficiency memo
• Rule 90(3) – Fresh refund app. requirement
• Rule 93(1) – re-credit of refund amount
|The proper officer shall validate the returns submitted online. |
A declaration is required to be submitted by the claimant that no refund has been claimed against the relevant invoices.
Communication of Deficiencies, if any –
Documentary evidence are required be ascertained and communicated deficiency, if any, in FORM GST RFD-03 within 15 days of the filing of the refund application.
Deficiency Memo should be complete in all respects and only one Deficiency Memo shall be given.
Submission of application after Deficiency Memo –
The application shall be treated as a fresh application.
Resubmission of the application –
After rectifying the deficiencies pointed out in the Deficiency memo, shall be made by using the ARN and debit entry number generated originally.
If the application is not filed afresh within thirty days of the communication of the deficiency memo, the proper officer shall pass an order and re-credit the amount claimed as refund.
|Issuance of acknowledgement within 15 days |
• Rule 90(2) – Acknowledgement
Grant of provisional refund within 7 days of issue of acknowledgement
• Rule 91(1) – Requirement of no prosecution for last 5 years
• Rule 91(2) – Prima facie satisfaction, seven-day requirement
• Rule 91(3) – Payment advice, electronic credit to bank account
|The date of submission of an application for which acknowledgement has been given will be considered as the date for ensuring whether the refund application has been sanctioned within the stipulated time period. |
The amount of provisional refund shall be calculated taking into account the total input tax credit, without making any reduction for credit being provisionally accepted.
The provisional refund shall be granted separately for each head CT / ST / UT / IT/ Cess within 7 days of acknowledgement.
Before sanctioning of the refund a declaration shall be obtained that the applicant has not contravened rule 91(1).
Payment advice to be issued.
The refund would be made directly in the bank account mentioned in the registration.
|Detailed scrutiny of the refund application |
• Rule 89(4) – Refund Amount Calculation
• Rule 92(1) – Any adjustments made in the amount against existing demands
• Rule 92(2) – reasons for withholding of refunds
|The proper officer shall validate details in Refund application filed online. |
The Shipping bill details shall be checked by officer through ICEGATE SITE (www.icegate.gov.in).
Details of IGST paid to be verified from FORM GSTR- 3 or FORM GSTR- 3B, as the case may be, filed by the applicant.
The proper officer also required to ascertain
1. final amount to be sanctioned;
2. adjustment against any outstanding liability;
3. amount of input tax credit is sanction-able,
4. amount of refund, if any,
5. amount liable to withheld.
|If the sanction-able amount is less than the applied amount |
• Rule 92(3) – Notice for refund not admissible/payable
• Rule 92(3) – Requirement of reply to the notice within 15 days
• Rule 92(3), 92(4), 92(5) – Sanction of Refund order
|Notice has to be issued to the applicant. |
The applicant has to reply within 15 days of receipt of the said notice.
|Pre-Audit||Pre-audit of the manually processed refund applications will not be carried out, irrespective of the amount involved, till separate detailed guidelines are issued. |
However, Post-audit of the orders may continue on the basis of extant guidelines.
|Final sanction of refund |
• Rule 92(3), 92(4), 92(5) –
Sanction of Refund order
• Rule 92(4), 92(5) –
Payment advice issue
|The proper officer may issue the Final refund order manually for each head i.e. CT / ST / UT / IT/ Cess. |
Amount paid provisionally needs to be adjusted accordingly.
The amount of credit rejected has to be re-credited to the credit ledger by an order and shall be intimated to the common portal in a prescribed Form.
Refund, if any, will be paid by an order with payment advice.
The details of the refund along with taxpayer bank account details shall be manually submitted in PFMS/[States’] system by the jurisdictional Division’s DDO and a signed copy of the sanction order shall be sent to PAO office for release of payment.
|Payment of interest if any |
• Rule 94
|Amount, if any, will be paid by an order with Payment advice.|
- The refund application for various taxes i.e. CT / ST / UT / IT/ Cess can be filed with any one of the tax authorities.
- Payment of the sanctioned refund amount shall be made only by the respective tax authority of the Centre or State government.
- The refund order issued either by the Central tax authority or the State tax/UT tax authority is required to communicate to the concerned counter-part tax authority within three days for the purpose of payment of the relevant sanctioned refund amount of tax or cess.
Prescribed Manual Forms
|Sl. No.||Form||Particulars |
|1.||GST RFD-02||Acknowledgement |
Rules 90(1) and 90(2) of CGST Rules, 2017
|2.||GST RFD-03||Deficiency memo |
Rule 90(3) of CGST Rules, 2017
|3.||GST RFD-04||Provisional refund order |
Rule 91(2) of CGST Rules, 2017
|4.||GST RFD-05||Payment advice |
Rules 91(3), 92(4), 92(5) and 94 of CGST Rules, 2017
|5.||GST RFD-06||Refund sanction/Rejection order |
Rules 92(1), 92(3), 92(4), 92(5) and 96(7) of CGST Rules, 2017
|6.||GST RFD-07||Order for complete adjustment/withholding of sanctioned refund. Rules 92(1), 92(2) and 96(6) of CGST Rules, 2017|
|7.||GST RFD-08||Notice for rejection of application for refund |
Rule 92(3) of CGST Rules, 2017
|8.||GST RFD-09||Reply to show cause notice |
Rule 92(3) of CGST Rules, 2017
- Central Goods and Services Tax Act, 2017
- Central Goods and Services Tax Rules, 2017
- Circular No. 17/17/2017 – GST Dated 15th November 2017
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