CGST Act · Chapter XI
Refunds
s. 54Refund of tax
Section 54 is the single gateway for refunds under GST: of tax paid in excess or by mistake, of cash ledger balances, of credit accumulated on exports and inverted rate structures, and of tax on deemed exports. Every claim is subject to a time limit and, unless exempted, to the rule that tax passed on to customers is not refunded to the supplier.
- Under section 54(1) of the CGST Act, 2017 a refund of tax, interest or any other amount must be claimed within two years from the "relevant date" defined in the Explanation; a cash ledger balance may be claimed at any time.
- Refund of unutilised input tax credit is allowed only for zero-rated supplies made without payment of tax, and for credit accumulated because inputs bear a higher rate than outputs (inverted duty) (section 54(3)).
- In Union of India v VKC Footsteps (2021) the Supreme Court upheld Rule 89(5), which counts only credit on inputs — not input services — for inverted-duty refunds.
- Refunds are credited to the Consumer Welfare Fund unless the claimant shows the tax was not passed on, or the claim is of a kind listed in section 54(8) — exports, unutilised credit, and others.
- Zero-rated refunds may be paid 90% provisionally (section 54(6)); the final order is due within sixty days of a complete application (section 54(7)), failing which interest is payable under section 56.
- From 01.11.2024 no refund of credit or of IGST is allowed on zero-rated supplies of goods subject to export duty (section 54(15)).
s. 55Refund in certain cases
Section 55 implements India's treaty commitments: bodies such as UN agencies and foreign missions pay GST on what they buy, and then claim it back. The section only enables the notification; the claim is made under section 54(2).
- Under section 55 of the CGST Act, 2017 the Government may notify UN specialised agencies, multilateral financial institutions and organisations under the United Nations (Privileges and Immunities) Act, 1947, foreign consulates and embassies, and other persons as entitled to refund of tax paid on notified inward supplies.
- The notified bodies are listed in Notification 16/2017-Central Tax (Rate); they obtain a Unique Identity Number under section 25(9) and claim refund under section 54(2) within two years from the end of the quarter of receipt.
s. 56Interest on delayed refunds
Section 56 compensates a taxpayer whose refund is paid late. Interest runs once sixty days have passed from the application, at 6% — or 9% where the refund results from an order that has attained finality.
- Under section 56 of the CGST Act, 2017, if a refund ordered under section 54(5) is not paid within sixty days of receipt of the application, interest is payable for the period of delay beyond sixty days, at the notified rate of 6%.
- Where the refund arises from an order of an adjudicating or appellate authority, the Tribunal or a court that has attained finality, the rate is 9%, from sixty days after the application filed following that order (proviso).
- An appellate or court order directing refund against the officer's order is treated as an order under section 54(5) (Explanation).
- In Union of India v Willowood Chemicals (2022) the Supreme Court held that where the statute fixes the rate, interest is awarded at that rate: delayed export refunds carried 6%, not the 9% the Gujarat High Court had allowed.
- From 01.10.2023 the period of delay is computed as prescribed — Rule 94(2) excludes delays attributable to the applicant.
s. 57Consumer Welfare Fund
Section 57 sets up the Consumer Welfare Fund. Tax that has been found refundable but was passed on to customers does not go back to the supplier; it goes to this Fund, to be used for consumers generally.
- Under section 57 of the CGST Act, 2017 the Government constitutes a Consumer Welfare Fund, to which are credited refunds ordered under section 54(5) that are not payable to the applicant, income from investing the Fund, and other monies received.
- Amounts that profiteering suppliers are ordered to deposit, where the recipients cannot be identified, are also credited to it (section 171 and Rule 133).
s. 58Utilisation of Fund
Section 58 governs how the Consumer Welfare Fund is spent and accounted for: only for consumer welfare, with separate accounts audited on a basis settled with the Comptroller and Auditor-General.
- Under section 58(1) of the CGST Act, 2017 sums in the Consumer Welfare Fund are to be used by the Government for the welfare of consumers in the prescribed manner (Rule 97).
- Separate accounts and an annual statement of accounts are maintained in a form prescribed in consultation with the Comptroller and Auditor-General of India (section 58(2)).