GST

Integrated Goods and

Services Tax

GST
GOODS AND SERVICES TAX

Refund of
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Unutilised Input
Tax Credit (ITC)
(Updated as on November 2022)

Published by:
Directorate General of Taxpayer Services,
C.R. Building, New Delhi-110109

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CENTRAL BOARD OF INDIRECT TAXES & CUSTOMS
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Refund of Unutilised Further, the drawback in respect of Central tax should not have
been availed for claiming refund of accumulated ITC under section

Input Tax Credit (ITC)

54(3)(ii) of the CGST Act, 2017.

Where to file the refund claims

Accumulation of Input Tax Credit (ITC) happens when the tax paid
on inputs is more than the output tax liability. Such accumulated ITC The registered person needs to file the refund claim online which
is allowed to be carried over to the subsequent tax periods till such will be transferred to the jurisdictional tax authority to which the
time it can be utilised by the registered person for payment of output taxpayer has been assigned as per the administrative order issued
tax liability. However, the GST Law permits refund of unutilised ITC in this regard by the Chief Commissioner of Central Tax and the
in two scenarios if such credit accumulation is on account of zero Commissioner of State Tax.
rated supplies or on account of inverted duty structure, subject to
certain exceptions. In case such an order has not been issued in the State, the registered
person is at liberty to apply for refund before the Central Tax
As per Section 54(3) of the CGST Act, 2017, a registered person may Authority or State Tax Authority till the administrative mechanism
claim refund of unutilised Input Tax Credit at the end of any tax for assigning of taxpayers to respective authority is implemented.
period. A tax period is the period for which return is required to be However, in the latter case, an undertaking is required to be
furnished. submitted stating that the claim for sanction of refund has been
Refund of unutilised Input Tax Credit is allowed only in following two made to only one of the authorities. It is reiterated that the Central
Tax officers shall facilitate the processing of the refund claims of all
scenarios:
registered persons whether or not such person was registered with
(a) Zero rated supplies made without payment of tax: As per the Central Government in the earlier regime.
Section 16(3) of the IGST Act, 2017, a registered person making
zero rated supply is eligible to claim refund under either of the Conclusion
following options, namely:
Supply of goods or services or both under bond or Letter of The GST Law provides for two options to the suppliers of zero rated
Undertaking (LUT), subject to such conditions, safeguards supplies either to export under bond or LUT and claim refund of
and procedure as may be prescribed, without payment unutilised ITC or to export with payment of tax and then claim refund
of integrated tax and claim refund of un-utilised input tax of such tax paid The law also provides for refund of unutilised ITC
credit; or where credit accumulation is on account of inverted duty structure,
subject to certain riders.
Supply of goods or services or both, subject to such
conditions, safeguards and procedure as may be prescribed, It also includes cases where supply has been made to merchant
on payment of integrated tax and claim refund of such tax exporters under Notification no. 40/2017- Central Tax (Rate) dated
paid on goods or services or both supplied. 23.10.2017 or Notification No. 41/2017-Integrated Tax (Rate) dated
23.10.2017 or both. Time lines have been prescribed for processing
The first option pertains to refund of unutilised ITC for which of refund claims and claims not settled within 60 days will be paid
the registered person has to supply under Bond / LUT (as with interest @6%. Moreover, 90% of the claim would be paid within
prescribed in Rule 96A of CGST Rules, 2017) and in the 7 days of acknowledgement of claim on provisional basis in case of
second option supply has been made on payment of Tax claims on account of zero rated supplies.
(IGST). In both the cases, refund would be available in
accordance with Section 54 of the CGST Act, 2017 read with Claims are to be filed with minimum documentation and the refund
Rule 89 or Rule 96, as the case may be, of the CGST Rules, 2017. amount will be credited directly to the claimant’s bank account.

(b) Inverted duty structure: Where the credit has accumulated ************
on account of rate of tax on inputs being higher than the rate
of tax on output supplies (other than nil rated or fully exempt
supplies), except supplies of goods or services or both as may
be notified by the Government on the recommendations of the
Council. This would include even those cases where supply

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containing the number and date of invoices received and issued has been made to merchant exporters under Notification No.
during a tax period. Rule 89(3) of CGST Rules, 2017 provides that 40/2017- Central Tax (Rate) dated 23.10.2017 or Notification No.
where the application relates to refund of input tax credit, the 41/2017-Integrated Tax (Rate) dated 23.10.2017.
electronic credit ledger shall be debited by the applicant in an
In such cases also, refund would be available in accordance with Section 54
amount equal to the refund so claimed.
of the CGST Act, 2017 read with Rule 89 of the CGST Rules, 2017.
Formula for calculation of refund of unutilised ITC on account of
It shall be noted that no refund of unutilised Input Tax Credit is
inverted rated structure has been amended vide Notification No.
allowed in cases where the goods exported out of India are subjected
14/2022-CT dated 05.07.2022 so as to take into account utilisation of
to export duty. Further, no refund of Input Tax Credit is allowed,
ITC of input services for discharge of outward tax liability.
if the supplier of goods or services or both avails of drawback in
Refund of unutilised ITC on account of export of electricity respect of central tax or claims refund of the integrated tax paid on
such supplies.
CGST Rules, 2017 has been amended vide Notification No. 14/2022-
CT dated 05.07.2022 by way of insertion of clause (ba) in sub-rule Refund of ITC on account of zero-rated supplies
(2) of rule 89 and Statement 3B in FORM GST RFD-01 to provide for
The application for refund of unutilised ITC on account of zero-
filing of an application of refund of unutilised ITC by an exporter of
rated supplies (without payment of tax under Bond/LUT) has to be
electricity. Further, Circular No. 175/07/2022-GST dated 06.07.2022
accompanied by documentary evidence as may be prescribed to
has been issued to prescribe procedure for filing and processing of
establish that a refund is due to the applicant; and such documentary
refund of unutilised ITC on account of export of electricity.
or other evidence as the applicant may furnish to establish that the
amount of tax and interest, if any, paid on such tax or any other
Provisions similar for refund of accumulated ITC for both
amount paid in relation to which such refund is claimed was collected
types of Refund Applicants (suppliers making zero-rated
from, or paid by, him and the incidence of such tax and interest had
/ inverted duty supplies)
not been passed on to any other person.
Where the application relates to refund of input tax credit, the
Rule 89(2) of the CGST Rules, 2017, specifies documents to be
electronic credit ledger shall be debited by the applicant by an
furnished with the application for refund under each category.
amount equal to the refund so claimed as per Rule 89(3) of CGST
Rule 89(3) of CGST Rules, 2017 provides that where the application
Rules, 2017.
relates to refund of input tax credit, the electronic credit ledger shall
be debited by the applicant in an amount equal to the refund so
Also, interest will be paid for any delay in sanctioning of Refund
claimed.
beyond the mandated period of 60 days (as per Rule 94 of CGST
Rules, 2017).
Further, sub-section (6) of section 54 of the CGST Act, 2017, provides
for sanction of 90% of refund amount, excluding the amount of ITC
The refund and/or interest sanctioned, if any, will be directly credited
provisionally accepted, on provisional basis in cases where the claim
to the bank account of the applicant. for refund is on account of zero-rated supply of goods or services
or both made by registered persons, other than such category of
Refund claims in respect of inverted duty structure registered persons as may be notified by the Government on the
Refund claims on account of inverted duty structure shall be filed recommendations of the Council;.
for a tax period or by clubbing tax periods in FORM GST RFD-01.
However, the registered persons having aggregate turnover of up Sub-section (7) of Section 54 provides that the final refund sanction/
to Rs. 1.5 Cr in the preceding financial year or the current financial rejection order shall be issued within sixty days from the date of
year and who have opted to file FORM GSTR-1 on a quarterly basis receipt of application, complete in all respects.
shall apply for refund on a quarterly basis or by clubbing quarters.
Rule 91 of CGST Rules, 2017 provides that the provisional refund is
Further, it is stated that the refund claim for a tax period may be filed to be granted within 7 days from the date of acknowledgement
only after filing the details in FORM GSTR-1 for the said tax period. of the refund claim and the order for provisional refund is to be
It is also to be ensured that a valid return in FORM GSTR-3B has issued in FORM GST RFD 04 along with payment order in the name
been filed for the last tax period before the one in which the refund of the claimant in FORM GST RFD 05. The rules also prescribe the
provisional refund will not be granted if the person claiming refund
application is being filed.
has, during any period of five years immediately preceding the tax
period to which the claim for refund relates, been prosecuted for
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any offence under the Act or under an earlier law where the amount
Sr. Tariff item, Description of Goods
of tax evaded exceeds ` 2.5 Cr.
No heading, sub-
heading or
It may also be noted that as per sub-section (8) of section 54 of the
Chapter
CGST Act, the refund is to be credited to the applicant instead of
Consumer Welfare Funding the following cases :- 1E 1511 Palm oil and its fractions, whether or not
refined, but not chemically modified.
(a) refund of tax paid on Export of goods or services or both or on
inputs or input services used in making such Exports; 1F 1512 Sunflower-seed, safflower or cotton-seed
oil and fractions thereof, whether or not
(b) refund of unutilised Input Tax Credit under section 54(3) of the refined, but not chemically modified.
CGST Act, 2017. 1G 1513 Coconut (copra), palm kernel or babassu
oil and fractions thereof, whether or not
(c) refund of tax paid on a supply which is not provided, either refined, but not chemically modified.
wholly or partially, and for which invoice has not been issued,
or where a refund voucher has been issued; 1H 1514 Rape, colza or mustard oil and fractions
thereof, whether or not refined, but not
(d) refund of tax in pursuance of Section 77; chemically modified.
1I 1515 Other fixed vegetable or microbial fats
(e) the tax and interest, if any, or any other amount paid by the and oils (including jojoba oil) and their
applicant, if he had not passed on the incidence of such tax and fractions, whether or not refined, but not
interest to any other person; or chemically modified.

the tax or interest borne by such other class of applicants as 1J 1516 Vegetable fats and oils and their
(f)
the Government may, on the recommendations of the Council, fractions, partly or wholly hydrogenated,
by notification, specify. interesterified, re-esterified or elaidinised,
whether or not refined, but not further
Formula for grant of refund in cases where the refund of accumulated prepared.
Input Tax Credit is on account of zero rated supply is prescribed in
1K 1517 Edible mixtures or preparations of
sub-rule (4) of Rule 89, which is
vegetable fats or vegetable oils or of
fractions of different vegetable fats or
Refund Amount = (Turnover of zero-rated supply of goods +
vegetable oils of this Chapter, other than
Turnover of zero-rated supply of services) x Net ITC ÷ Adjusted Total
edible fats or oils or their fractions of
Turnover Where,
heading 1516
(a) “Refund amount” means the maximum refund that is 1L 1518 Vegetable fats and oils and their fractions,
admissible; boiled, oxidised, dehydrated, sulphurised,
blown, polymerised by heat in vacuum or in
(b) “Net ITC” means input tax credit availed on inputs and input inert gas or otherwise chemically modified,
services during the relevant period other than the input tax excluding those of heading 1516
credit availed for which refund is claimed under rule 89(4A) or
89(4B) or both; 1M 2701 Coal; briquettes, ovoids and similar solid
fuels manufactured from coal
(c) “Turnover of zero-rated supply of goods “ means the value of 1N 2702 Lignite, whether or not agglomerated,
zero-rated supply of goods made during the relevant period excluding jet
without payment of tax under bond or letter of undertaking or
the value which is 1.5 times the value of like goods domestically 1O 2703 Peat (including peat litter), whether or not
supplied by the same or, similarly placed, supplier, as declared agglomerated
by the supplier, whichever is less, other than the turnover of
supplies in respect of which refund is claimed under sub-rules Rule 89(2) (h) of CGST Rules, 2017 stipulates that refund claim on
(4A) or (4B) or both; account of accumulated ITC (where such accumulation is on account
of inverted duty structure) has to be accompanied by a statement

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It was clarified by the Government vide Circular no. 18/18/2017-GST (d) “Turnover of zero-rated supply of services” means the value
dated 16.11.2017, that the aforesaid notification having been issued of zero-rated supply of services made without payment of tax
under clause (ii) of the proviso to sub-section (3) of Section 54 of the under bond or letter of undertaking, calculated in the following
CGST Act, 2017, restriction on refund of unutilised input tax credit manner, namely:-
of GST paid on inputs will not be applicable to zero rated supplies,
that is (a) export of goods or services or both; or (b) supply of goods Zero-rated supply of services is the aggregate of the payments
or services or both to a Special Economic Zone Developer of special received during the relevant period for zero-rated supply of
Economic Zone Unit. services and zero-rated supply of services where supply has been
completed for which payment had been received in advance in
Accordingly, as regards export of fabrics, it has been clarified that any period prior to the relevant period reduced by advances
subject to provisions of Section 54(10) of the CGST Act, 2017, a received for zero-rated supply of services for which the supply
manufacturer of such fabrics will be eligible for refund of unutilised of services has not been completed during the relevant period;
input tax credit of GST paid on inputs (other than input tax credit of
GST paid on capital goods) in respect of fabrics manufactured and (e) “Adjusted Total Turnover” means the sum total of the value of-
exported by him.
the turnover in a State or a Union territory, as defined under
However, vide Notification no. 20/2018-Central Tax (Rate) dated clause (112) of section 2, excluding the turnover of services; and
26.07.2018, the restriction of refund on account of inverted rate the turnover of zero-rated supply of services determined
structure for items mentioned at Sr.no. 1 to 7 of the above table has in terms of clause (D) above and non-zero-rated supply of
been removed w.e.f. 01.08.2018 and it has been further provided services, excluding-
that in respect of said goods, the accumulated input tax credit lying
(i) the value of exempt supplies other than zero-rated
unutilised in balance, after payment of tax for and up to the month supplies; and
of July, 2018, on the inward supplies received up to the 31st day of
July 2018, shall lapse. (ii) the turnover of supplies in respect of which refund is
claimed under sub-rule (4A) or sub-rule (4B) or both,
Further, Notification No. 05/2017- Central Tax (Rate) dated if any, during the relevant period;
28.06.2017 has been amended vide Notification No. 09/2022- Central (f) “Relevant period” means the period for which the claim has
Tax (Rate) dated 13.07.2022 vide which the government has notified been filed.
the following goods in respect of which refund of unutilized ITC will
not be admissible w.e.f. 18.07.2022: Explanation.–For the purposes of this sub-rule, the value of goods
exported out of India shall be taken as –
Sr. Tariff item, Description of Goods (i) the Free on Board (FOB) value declared in the Shipping
No heading, sub- Bill or Bill of Export form, as the case may be, as
heading or per the Shipping Bill and Bill of Export (Forms)
Chapter Regulations, 2017; or
1A 1507 Soya-bean oil and its fractions, whether
or not refined, but not chemically (ii) the value declared in tax invoice or bill of supply,
modified whichever is less.

1B 1508 Ground-nut oil and its fractions, whether It may be noted that rule 89(4A) has been inserted, w.e.f. 23.10.2017
or not refined, but not chemically in CGST Rules, 2017, vide Notification no. 3/2018-Central Tax dated
modified. 23.01.2018 provides for refund of ITC availed in respect of other
inputs or input services used in making zero-rated supply of goods
1C 1509 Olive oil and its fractions, whether or not or services or both, where the supplier has availed benefit of
refined, but not chemically modified. Notification No. 48/2017-Central Tax dated 18.10.2017. Further, rule
1D 1510 Other oils and their fractions, obtained 89(4B) has been inserted, w.e.f 23.10.2017, vide Notification No.
solely from olives, whether or not 3/2018-Central Tax dated 23.01.2018 and amended vide Notification
refined, but not chemically modified, No. 54/2018-Central Tax dated 09.10.2018 so as to provide that refund
including blends of these oils or fractions of input tax credit, , availed in respect of inputs received under the
with oils or fractions of heading 1509 said notifications for export of goods and the input tax credit availed
in respect of other inputs or input services to the extent used in

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making such export of goods, when the exporter has received
Sr. Tariff item, Description of Goods
supplies on which supplier has availed benefit of under Notification
No heading, sub-
no. 40/2017-Central Tax (Rate) dated 23.10.2017 or Notification no.
heading or
41/2017-Integrated Tax (Rate) dated 23.10.2017, or when the exporter
Chapter
has himself availed the benefit of duty/tax free procurement under
the Notification No. 78/2017-Customs dated 13.10.2017 or Notification 6A 5608 Knotted netting of twine, cordage or
No. 79/2017-Customs dated 13.10.2017. rope; made up fishing nets and other
made up nets, of textile materials
Refund of ITC on account of inverted duty structure 6B 5801 Corduroy fabrics
As per clause (ii) of the first proviso of Section 54(3) of CGST Act, 6C 5806 Narrow woven fabrics, other than goods
2017, refund of accumulated ITC shall be allowed where the credit of heading 5807; narrow fabrics consisting
accumulation has taken place on account of inverted duty structure. of warp without weft assembled by
It may be noted that this would include even those cases where means of an adhesive (bolducs)
supply has been made to merchant exporters under Notification 7 60 Knitted or crocheted fabrics [All goods]
no. 40/2017- Central Tax (Rate) dated 23.10.2017 or Notification No.
41/2017-Integrated Tax (Rate) dated 23.10.2017 or both. However, no 8 8601 Rail locomotives powered from an
refund on account of inverted duty structure is available when the external source of electricity or by electric
output supply is Nil rated or exempt supply. accumulators
9 8602 Other rail locomotives; locomotive
Further, the Government, on the recommendations of Council, has
tenders; such as Diesel-electric
power to notify supplies where refund of ITC will not be admissible
locomotives, Steam locomotives and
even if there is credit accumulation is on account of an inverted duty
tenders thereof
structure. In exercise of the powers conferred by this section, the
government has issued Notification no. 15/2017-Central Tax (Rate) 10 8603 Self-propelled railway or tramway
dated 28.06.2017 wherein it has been notified that refund of unutilised coaches, vans and trucks, other than
input tax credit shall not be allowed under sub-section (3) of Section 54 of those of heading 8604
the said CGST Act, 2017, in case of supply of services specified in sub-item 11 8604 Railway or tramway maintenance or
(b) of item 5 of Schedule II of the CGST Act, 2017. The supplies specified service vehicles, whether or not self-
under item 5(b) of Schedule II are construction services. propelled (for example, workshops,
cranes, ballast tampers, track liners, testing
In respect of goods, the central government has issued Notification
coaches and track inspection vehicles)
no. 5/2017- Central Tax (Rate) dated 28.06.2017 as amended by
Notification no. 44/2017-Central Tax (Rate) dated 14.11.2017. The 12 8605 Railway or tramway passenger coaches,
government has notified the following goods in respect of which not self-propelled; luggage vans, post office
unutilised ITC will not be admissible as refund: - coaches and other special purpose railway
or tramway coaches, not self-propelled
Sr. Tariff item, Description of Goods (excluding those of heading 8604)
No heading, sub- 13 8606 Railway or tramway goods vans and
heading or wagons, not self-propelled
Chapter
14 8607 Parts of railway or tramway locomotives or
1 5007 Woven fabrics of silk or of silk waste rolling-stock; such as Bogies, bissel-bogies,
2 5111 to 5113 Woven fabrics of wool or of animal hair axles and wheels, and parts thereof
3 5208 to 5212 Woven fabrics of cotton 15 8608 Railway or tramway track fixtures and
fittings; mechanical (including electro-
4 5309 to 5311 Woven fabrics of other vegetable textile
mechanical) signalling, safety or traffic
fibres, paper yarn
control equipment for railways, tramways,
5 5407, 5408 Woven fabrics of manmade textile roads, inland waterways, parking facilities,
materials port installations or airfields; parts of the
6 5512 to 5516 Woven fabrics of manmade staple fibres foregoing

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