Understanding Section 54 of the CGST Act for GST Refunds

Section 54 of the Central Goods and Services Tax (CGST) Act, 2017, outlines the stipulations for reclaiming tax payments under the Goods and Services Tax (GST) framework. This section details the criteria and processes for initiating a refund claim, including crucial aspects such as the effective date for calculating refund claim deadlines, the categories of taxes eligible for reimbursement, and the necessary documentation for refund applications. This article provides further insights into Section 54 of the CGST Act, its refund provisions, and the required paperwork for submitting a refund claim.

Latest Update 28th August 2025 On August 28th, 2025, the GSTN released an advisory clarifying system modifications for processing refunds stemming from assessment, enforcement, appeal, revision, or other official orders (ASSORD). The key changes include: claimants can now seek refunds regardless of the Demand ID status, provided the demand amount is negative. Refunds are permissible even if a minor head shows a negative balance, even if the overall balance is positive or zero. The negative balance will automatically populate into the RFD-01 refund application. The GST portal will also automatically recommend the most recent demand order linked to a negative balance, such as an original order, rectification order, or appellate order.

Core Principles of Section 54 of the CGST Act

Section 54 of the CGST Act 2017 applies to individuals who have remitted tax or other amounts, such as interest on tax, and wish to seek a refund under GST regulations. Such refunds can be claimed for exports of goods, services, or both, zero-rated supplies, deemed exports, and the reimbursement of unutilised input tax credit (ITC).

Refunds for taxes paid on exports are intended to foster exports and enhance the competitiveness of Indian goods and services in the global market. Similarly, tax refunds on zero-rated supplies aim to make provisions to Special Economic Zones (SEZs), developers, or units more appealing. The refund of unutilised ITC offers relief to taxpayers who have paid a higher tax on inputs than the tax due on their output supplies.

However, Section 54 also outlines specific conditions and limitations for claiming refunds, including the necessity of submitting documentary proof, adherence to the time limit for claiming refunds, and the verification and sanctioning processes for refunds. Taxpayers must comply with these stipulations to successfully claim a refund under this section.

Below is a detailed, clause-by-clause explanation of Section 54 of the CGST Act:

Section 54(1) of the CGST Act

An individual may apply for a refund of taxes, interest, or any other amount paid within two years from the relevant date using the prescribed form (GST RFD-01) and procedure.

The relevant dates for various refund scenarios are provided below:

Refund Claim Reason	Relevant Date
Export of goods or services	Dispatch, loading, or frontier crossing date
Deemed exports	Date of filing the return associated with such deemed exports
Export of services prior to payment	Date of receiving convertible foreign exchange, or Indian rupees if allowed by RBI
ITC accumulation due to tax-exempt or nil-rated output	Date for filing the Section 39 return for the period when the refund claim arises
Conclusion of provisional assessment	Date of tax adjustment following the final assessment
Refund claim by a non-supplier	Date of receiving goods or services by that individual
Favorable order from Appellate Authority, Tribunal, or Court	Date when the judgment, order, or directive is communicated
Any other scenario	Date when tax was paid

Registered individuals seeking a refund of any balance in their electronic cash ledger can claim it in the specified form and manner under Section 49(6).

Section 54(2) of the CGST Act

Specialized United Nations agencies, multilateral financial institutions, foreign consulates, and other designated persons can submit a refund application for tax paid on inward supplies within two years from the last day of the quarter in which the supply was received.

Section 54(3) of the CGST Act

Refunds for unutilised ITC at the end of a tax period are permissible only for zero-rated supplies made without GST payment, or when ITC accumulates due to higher tax rates on input supplies compared to output supplies (excluding Nil-rated or exempt supplies). Furthermore, a refund is not granted for exported goods subject to export duty, or if the supplier benefits from a drawback or claims an IGST refund on such supplies.

Section 54(4) of the CGST Act

To claim a tax refund, applicants must furnish prescribed documentary evidence verifying their eligibility. They must also demonstrate that the burden of tax or interest paid for the refund has not been transferred to another party. However, for refund amounts less than Rs. 2 lakh, a declaration asserting that the tax and interest incidence was not passed on, supported by other available evidence, suffices.

Section 54(5) of the CGST Act

Upon receipt of a refund application, if the proper officer confirms that a refund is due, an order for the refund will be issued, and the amount will be credited to the Consumer Welfare Fund, as specified in section 57.

Section 54(6) of the CGST Act

For refund claims related to zero-rated supplies of goods or services, the proper officer may provisionally refund 90% of the claimed amount, subject to specific conditions. Subsequently, a final settlement order for the refund claim can be issued after thorough document verification.

Section 54(7) of the CGST Act

The officer is required to issue the refund order within 60 days of receiving a complete refund application.

Section 54(8) of the CGST Act

Refundable amounts, under certain circumstances, can be directly disbursed to the applicant instead of being credited to the Consumer Welfare Fund. These circumstances include: refunds for tax paid on exports or inputs used in such exports; refunds of unutilised input tax credit under sub-section (3); refunds for tax paid on supplies not provided or invoiced, or where a refund voucher has been issued; refunds for tax paid incorrectly as specified under section 77 (which addresses wrongly collected and paid tax to the Central or State Government); tax or interest directly borne by the applicant; and tax or interest borne by other specified categories of applicants.

Section 54(8A) of the CGST Act

The government retains the authority to disburse state tax refunds as per established procedures.

Section 54(9) of the CGST Act

Refund applications must strictly adhere to the provisions outlined in subsection (8), irrespective of any conflicting court judgments or orders.

Section 54(10) of the CGST Act

If an applicant has not filed their returns or has not settled any outstanding tax, interest, or penalty that has not been stayed by a court, tribunal, or appellate authority by the specified date, the proper officer may defer the refund payment until the taxpayer has met their obligations. The officer can also deduct any pending tax, interest, penalty, fee, or other amounts owed from the refund due to the applicant. The specified date refers to the final date for filing an appeal under the Act.

Section 54(11) of the CGST Act

If an appeal or other proceeding related to the refund order is underway, and the commissioner believes that granting the refund could result in revenue loss due to fraud or malfeasance, they may withhold the refund. This action will be taken after providing the taxpayer with an opportunity to be heard.

Section 54(12) of the CGST Act

The government is entitled to withhold refunds as per the condition specified in subsection (11). However, if the taxpayer is subsequently found eligible for the refund, they will also be entitled to receive interest at a rate not exceeding 6%.

Section 54(13) of the CGST Act

This section stipulates that a casual or non-resident taxable person who has made an advance tax deposit cannot claim a refund of that tax unless they have submitted all mandatory returns under section 39 for the entire duration their registration certificate was valid.

Section 54(14) of the CGST Act

No refund will be processed under subsections (5) and (6) if the refund claim amount is less than Rs. 1,000.

Section 54(15) of the CGST Act

The Finance Ministry amended Section 54 of the CGST Act, effective August 16th, 2024, to disallow refunds of unutilised input tax credit or integrated tax on zero-rated supply of goods that are subject to export duty, as per the Finance Act, 2024.

Refund Categories Included and Excluded

Section 54 of the CGST Act, 2017, provides for tax refunds on goods or services supplies under specific conditions. The types of refunds encompassed and excluded are detailed as follows:

Included Refund Types:

Export of goods or services
Supply of goods or services to an SEZ developer or unit, or for authorized offshore banking operations
Deemed exports
Refund of unutilised ITC
Reimbursement of tax or interest borne by other government-notified applicant categories
Refund of tax, interest, or other amounts paid by the applicant and not transferred to others
Reimbursement of tax paid in error under Section 77
Refund of tax paid on a supply that was not executed or invoiced, or where a refund voucher has been issued

Excluded Refund Types:

Tax paid on supplies not governed by the CGST Act, such as alcohol for human consumption
If excise duty applies to goods exported from India, the unutilised ITC cannot be claimed for a refund
If the supplier of goods has claimed a duty drawback or IGST refund on the supply, a GST refund is not available

It is imperative that refund claims under this section adhere to the specified conditions and restrictions.

Necessary Documentation for Tax Refunds

The documents required for a tax refund under Section 54 of the CGST Act, 2017, may differ based on the nature of the refund claim. However, some standard documents include:

GST refund application form (GST RFD-01)
Tax invoices
Shipping bills and export invoices
Bill of entry
Bank statement
Authorisation letter
Any additional documents requested by the proper officer

You can find a comprehensive list of documents required for filing a refund application here.

Criteria for Granting Refunds

Here are some conditions for granting a refund under Section 54 of the CGST Act, 2017:

Application Process

You must submit a refund application electronically on the common GST portal using Form GST RFD-01. This application can be for a refund of tax paid on zero-rated supplies, ITC accumulation due to an inverted tax structure, or any other grounds specified by the government.

Time Limit

As per Section 54 of the CGST Act, 2017, the proper officer must issue a refund order within sixty days from the date of receiving a complete refund application. If the refund is delayed beyond this period, you are entitled to additional interest at a government-notified rate.

Verification Procedures

The conditions for granting a refund under Section 54 of the CGST Act, 2017, mandate that a proper officer verifies the refund application and all accompanying documents. The officer may scrutinize the application, request clarifications or supplementary documents, and authenticate the submitted evidence to ensure its relevance and genuineness to the claim.

General Stipulations

Section 54 of the CGST Act, 2017, also includes several general conditions:

You must be a registered person under GST law.
You must have paid the tax or the amount for which a refund is claimed.
The claimed refund amount must exceed Rs. 1,000.
You must claim the refund within the time limit specified in Section 54(1), which is two years from the relevant date.
You must provide all pertinent documents, such as invoices and payment receipts, to substantiate the refund claim.
You must not have committed any offense under the GST Act or any other applicable law.
The goods or services for which the refund is sought must not have been used for personal consumption.
You should not have utilized an ITC on the inward supply of goods or services, or both, for which the refund has been claimed.
The refund will only be available to the extent of the tax paid on supplies received for export out of India.
The refund claim must be verified according to the prescribed procedure.

Conclusion

Section 54 of the CGST Act outlines the provisions for registered persons to claim refunds for excess GST payments. It establishes various conditions and deadlines for these claims, along with the specific dates determining eligibility for refunds. Taxpayers can seek refunds for taxes paid on inputs, input services, and capital goods utilized for business purposes, as well as for exports and zero-rated supplies. Adherence to the conditions and procedures specified in Section 54 is crucial for seamless refund processing and to avoid any penalties or legal complications.