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.
Key points
- 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)).
HistoryCOVID-19 exclusion from limitation— The period 01.03.2020 to 28.02.2022 is excluded in computing the time limit for refund claims.
Following the Supreme Court's suo motu orders extending limitation during the pandemic, Notification 13/2022-Central Tax (05.07.2022) excluded the period from 01.03.2020 to 28.02.2022 in computing the time limit for refund applications under sections 54 and 55. The CBIC text refers to this notification beneath the section heading.
The provisions
54(1)–(2)Who may claim, and when
Statutory text
(1) Any person claiming refund of any 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 in such form and manner as may be prescribed:
Provided that a registered person, claiming refund of any balance in the electronic cash ledger in accordance with the provisions of sub-section (6) of section 49, may claim such refund in 1[such form and] manner as may be prescribed.
(2) A specialised agency of the United Nations Organisation or any Multilateral Financial Institution and Organisation notified under the United Nations (Privileges and Immunities) Act, 1947 (46 of 1947), Consulate or Embassy of foreign countries or any other person or class of persons, as notified under section 55, entitled to a refund of tax paid by it on inward supplies of goods or services or both, may make an application for such refund, in such form and manner as may be prescribed, before the expiry of 1[two years] from the last day of the quarter in which such supply was received.
** Kindly also refer to Notification No. 13/2022 - CT dated 5th Jul, 2022 (w.e.f. 01.03.2020).
1. Substituted (w.e.f. 1st October, 2022 vide Notification No. 18/2022 - CT dated 28.09.2022) by s. 113 of The Finance Act 2022 (No. 06 of 2022).
- Rules 89–97A, CGST Rules
- Notification 13/2022-Central Tax — exclusion of 01.03.2020 to 28.02.2022
54(3)Refund of unutilised input tax credit
Statutory text
(3) Subject to the provisions of sub-section (10), a registered person may claim refund of any unutilised input tax credit at the end of any tax period:
Provided that no refund of unutilised input tax credit shall be allowed in cases other than-
(i) zero rated supplies made without payment of tax;
(ii) 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:
9[****]
Provided also that no refund of input tax credit shall be allowed, if the supplier of goods or services or both avails of drawback in respect of central tax or claims refund of the integrated tax paid on such supplies.
9. Omitted (w.e.f. yet to be notified) by section 128 of The Finance Act (No. 2) Act, 2024 No. 15 of 2024 dated 16.08.2024.
What it means
Credit accumulated in the ledger is not refundable in general. The first proviso allows only two cases: (i) zero-rated supplies — exports and supplies to SEZs — made under bond or letter of undertaking without payment of IGST (the alternative — paying IGST and claiming it back under Rule 96 — is open from 01.10.2023 only to persons, goods or services notified under section 16(4) of the IGST Act); and (ii) inverted duty structure, where the rate on inputs exceeds that on outputs, except for outputs that are nil-rated or fully exempt and for supplies the Government notifies as ineligible. The refund for inverted duty is computed by the formula in Rule 89(5), and for zero-rated supplies by Rule 89(4).
No refund of credit is allowed if the supplier claims drawback of central tax or refund of IGST paid on the same supplies (last proviso). The former second proviso, which barred refund on goods exported subject to export duty, was omitted from 01.11.2024 and replaced by the wider bar in sub-section (15).
CBIC note 9 says the omission of the second proviso is "yet to be notified". It came into force on 01.11.2024 with section 128 of the Finance (No. 2) Act, 2024, under Notification 17/2024-Central Tax.
Case on this provision
Union of India v VKC Footsteps India Pvt Ltd
(2022) 2 SCC 603 · 13.09.2021 · Supreme Court, 2 Judges (D.Y. Chandrachud, M.R. Shah JJ.)
- Facts
- Footwear manufacturers paying 5% on their output bore 12% or 18% on many inputs and input services, and accumulated credit. Rule 89(5) computed the inverted-duty refund on "net ITC" defined as credit on inputs only, leaving out input services. The Gujarat High Court read down the rule to include input services; the Madras High Court (Transtonnelstroy Afcons, 2020) upheld it.
- Held
- The Gujarat view was reversed and the Madras view affirmed. Section 54(3)(ii) speaks of credit accumulated because "the rate of tax on inputs" is higher than on output supplies; "inputs" in the Act means goods, not services. Refund is a statutory entitlement, and Parliament may confine it as it has: Rule 89(5) is consistent with the section and not discriminatory. The Court noted anomalies in the formula and asked the GST Council to reconsider it as a matter of policy.
- Since then
- The formula in Rule 89(5) was revised by Notification 14/2022-Central Tax (05.07.2022) to correct the computation of tax on inverted-rated supplies, but credit on input services remains outside the refund.
- Here
- An inverted-duty refund is limited to credit on input goods; credit on input services accumulates and can only be used against output tax.
54(4)–(9)Evidence, unjust enrichment, provisional refund, order
Statutory text
(4) The application shall be accompanied by-
(a) such documentary evidence as may be prescribed to establish that a refund is due to the applicant; and
(b) such documentary or other evidence (including the documents referred to in section 33) as the applicant may furnish to establish that the amount of tax and interest, if any, paid on such tax or any other amount paid in relation to which such refund is claimed was collected from, or paid by, him and the incidence of such tax and interest had not been passed on to any other person:
Provided that where the amount claimed as refund is less than two lakh rupees, it shall not be necessary for the applicant to furnish any documentary and other evidences but he may file a declaration, based on the documentary or other evidences available with him, certifying that the incidence of such tax and interest had not been passed on to any other person.
(5) If, on receipt of any such application, the proper officer is satisfied that the whole or part of the amount claimed as refund is refundable, he may make an order accordingly and the amount so determined shall be credited to the Fund referred to in section 57.
(6) Notwithstanding anything contained in sub-section (5), the proper officer may, in the case of any claim for refund on account of zero-rated supply of goods or services or both 11[or of unutilised input tax credit allowed under clause (ii) of the first proviso to sub-section (3)] made by registered persons, other than such category of registered persons as may be notified by the Government on the recommendations of the Council, refund on a provisional basis, ninety per cent. of the total amount so claimed, 8[****], in such manner and subject to such conditions, limitations and safeguards as may be prescribed and thereafter make an order under sub-section (5) for final settlement of the refund claim after due verification of documents furnished by the applicant.
(7) The proper officer shall issue the order under sub-section (5) within sixty days from the date of receipt of application complete in all respects.
(8) Notwithstanding anything contained in sub-section (5), the refundable amount shall, instead of being credited to the Fund, be paid to the applicant, if such amount is relatable to-
(a) refund of tax paid on 2[export] of goods or services or both or on inputs or input services used in making such 1[exports];
(b) refund of unutilised input tax credit under sub-section (3);
(c) refund of tax paid on a supply which is not provided, either wholly or partially, and for which invoice has not been issued, or where a refund voucher has been issued;
(d) refund of tax in pursuance of section 77;
(e) the tax and interest, if any, or any other amount paid by the applicant, if he had not passed on the incidence of such tax and interest to any other person; or
(f) the tax or interest borne by such other class of applicants as the Government may, on the recommendations of the Council, by notification, specify.
3[(8A) The Government may disburse the refund of the State tax in such manner as may be prescribed.]
(9) Notwithstanding anything to the contrary contained in any judgment, decree, order or direction of the Appellate Tribunal or any court or in any other provisions of this Act or the rules made thereunder or in any other law for the time being in force, no refund shall be made except in accordance with the provisions of sub-section (8).
11. Inserted (w.e.f. yet to be notified) by section 155 of The Finance Act, 2026 No. 4 of 2026 dated 30.03.2026.
8. Omitted (w.e.f. 1st October, 2023 vide Notification No. 28/2023-C.T., dated 31st July, 2023.) by s. 146 of The Finance Act 2023 (No. 8 of 2023).
2. Substituted for "zero-rated supplies" by s. 23 of The Central Goods and Services Tax (Amendment) Act, 2018 (No. 31 of 2018) - Brought into force w.e.f. 01st February, 2019.
3. Inserted by s. 103 of The Finance (No. 2) Act, 2019 (No. 23 of 2019) - Brought into force w.e.f. 01st September, 2019 vide Notification No. 39/2019 - Central Tax dt. 31st August, 2019.
What it means
The applicant must show that the refund is due, and that the incidence of tax was not passed on — by documents, or for claims below Rs. 2 lakh by a declaration. An amount found refundable is credited to the Consumer Welfare Fund under section 57, unless it falls within sub-section (8): tax on exports or on inputs used in exports, unutilised credit under sub-section (3), tax on a supply not made where no invoice was issued or a refund voucher was issued, tax refundable under section 77, tax whose incidence was not passed on, or tax borne by a notified class. Sub-section (9) makes this exclusive: no court order can direct refund otherwise. The presumption that tax was passed on is in section 49(9); see Mafatlal Industries there.
For zero-rated supplies, 90% of the claim may be refunded provisionally within seven days of acknowledgement (Rule 91), except for notified categories of persons; the final order follows verification. From 01.10.2023 the provisional amount is no longer reduced by credit "provisionally accepted". The final order under sub-section (5) must be issued within sixty days of a complete application; delay attracts interest under section 56. Sub-section (8A), from 01.09.2019, lets the Centre disburse the State tax component, so that one authority pays the whole refund.
The words in sub-section (6) extending provisional refund to unutilised credit under clause (ii) of the first proviso to sub-section (3) (inverted duty) were inserted by section 155 of the Finance Act, 2026 with effect from a date yet to be notified, as CBIC note 11 records; they are shown in the text without that qualification.
54(10)–(15)Withholding, minimum amount, advance tax, export duty
Statutory text
(10) Where any refund is due 4[***] to a registered person who has defaulted in furnishing any return or who is required to pay any tax, interest or penalty, which has not been stayed by any court, Tribunal or Appellate Authority by the specified date, the proper officer may-
(a) withhold payment of refund due until the said person has furnished the return or paid the tax, interest or penalty, as the case may be;
(b) deduct from the refund due, any tax, interest, penalty, fee or any other amount which the taxable person is liable to pay but which remains unpaid under this Act or under the existing law .
(11) Where an order giving rise to a refund is the subject matter of an appeal or further proceedings or where any other proceedings under this Act is pending and the Commissioner is of the opinion that grant of such refund is likely to adversely affect the revenue in the said appeal or other proceedings on account of malfeasance or fraud committed, he may, after giving the taxable person an opportunity of being heard, withhold the refund till such time as he may determine.
(12) Where a refund is withheld under sub-section (11), the taxable person shall, notwithstanding anything contained in section 56, be entitled to interest at such rate not exceeding six per cent. as may be notified on the recommendations of the Council, if as a result of the appeal or further proceedings he becomes entitled to refund.
(13) Notwithstanding anything to the contrary contained in this section, the amount of advance tax deposited by a casual taxable person or a non-resident taxable person under sub-section (2) of section 27, shall not be refunded unless such person has, in respect of the entire period for which the certificate of registration granted to him had remained in force, furnished all the returns required under section 39.
(14) Notwithstanding anything contained in this section, no refund under subsection (5) or sub-section (6) 11[, other than cases where refund of tax is claimed on account of goods exported out of India with payment of tax,] shall be paid to an applicant, if the amount is less than one thousand rupees.
10[(15) Notwithstanding anything contained in this section, no refund of unutilised input tax credit on account of zero rated supply of goods or of integrated tax paid on account of zero rated supply of goods shall be allowed where such zero rated supply of goods is subjected to export duty.]
4. Omitted (w.e.f. 1st October, 2022 vide Notification No. 18/2022 - CT dated 28.09.2022) by s. 113 of The Finance Act 2022 (No. 06 of 2022).
10. Inserted by section 128 of The Finance Act (No. 2) Act, 2024 No. 15 of 2024 dated 16.08.2024.
What it means
The officer may withhold a refund until a defaulting registered person files its returns or pays dues that have not been stayed by the last date for appeal, or set off unpaid dues against it (sub-section (10); applicable to all refunds since 01.10.2022, earlier only to unutilised credit). Where an order giving rise to a refund is under appeal and the Commissioner considers that malfeasance or fraud makes payment risky, he may withhold it after a hearing (sub-section (11)), with interest up to 6% if the taxpayer finally succeeds (sub-section (12)).
Advance tax paid by casual and non-resident taxable persons is refunded only after all returns are filed (sub-section (13)). No refund below Rs. 1,000 is paid (sub-section (14)). From 01.11.2024, where goods are subject to export duty, neither unutilised credit nor IGST paid on their zero-rated supply is refunded (sub-section (15)), whether exported or supplied to an SEZ.
The words in sub-section (14) excluding exports of goods with payment of tax from the Rs. 1,000 minimum were inserted by section 155 of the Finance Act, 2026 with effect from a date yet to be notified (CBIC note 11). Sub-section (15) is in force from 01.11.2024 (Notification 17/2024-Central Tax); CBIC note 10 gives only the date of the Act.
54 Expl."Refund" and "relevant date"
Statutory text
Explanation.- For the purposes of this section,-
(1) "refund" includes refund of tax paid on zero-rated supplies of goods or services or both or on inputs or input services used in making such zero-rated supplies, or refund of tax on the supply of goods regarded as deemed exports, or refund of unutilised input tax credit as provided under sub-section (3).
(2) "relevant date" means-
(a) in the case of goods exported out of India where a refund of tax paid is available in respect of goods themselves or, as the case may be, the inputs or input services used in such goods,-
(i) if the goods are exported by sea or air, the date on which the ship or the aircraft in which such goods are loaded, leaves India; or
(ii) if the goods are exported by land, the date on which such goods pass the frontier; or
(iii) if the goods are exported by post, the date of despatch of goods by the Post Office concerned to a place outside India;
(b) in the case of supply of goods regarded as deemed exports where a refund of tax paid is available in respect of the goods, the date on which the return relating to such deemed exports is furnished;
5[(ba) in case of zero-rated supply of goods or services or both to a Special Economic Zone developer or a Special Economic Zone unit where a refund of tax paid is available in respect of such supplies themselves, or as the case may be, the inputs or input services used in such supplies, the due date for furnishing of return under section 39 in respect of such supplies;]
(c) in the case of services exported out of India where a refund of tax paid is available in respect of services themselves or, as the case may be, the inputs or input services used in such services, the date of-
(i) receipt of payment in convertible foreign exchange 6[or in Indian rupees wherever permitted by the Reserve Bank of India] , where the supply of services had been completed prior to the receipt of such payment; or
(ii) issue of invoice, where payment for the services had been received in advance prior to the date of issue of the invoice;
(d) in case where the tax becomes refundable as a consequence of judgment, decree, order or direction of the Appellate Authority, Appellate Tribunal or any court, the date of communication of such judgment, decree, order or direction;
(e) 7[in the case of refund of unutilised input tax credit under clause (ii) of the first proviso to sub-section (3), the due date for furnishing of return under section 39 for the period in which such claim for refund arises;]
(f) in the case where tax is paid provisionally under this Act or the rules made thereunder, the date of adjustment of tax after the final assessment thereof;
(g) in the case of a person, other than the supplier, the date of receipt of goods or services or both by such person; and
(h) in any other case, the date of payment of tax.
5. Inserted (w.e.f. 1st October, 2022 vide Notification No. 18/2022 - CT dated 28.09.2022) by s. 113 of The Finance Act 2022 (No. 06 of 2022).
6. Inserted by s. 23 of The Central Goods and Services Tax (Amendment) Act, 2018 (No. 31 of 2018) - Brought into force w.e.f. 01st February, 2019.
7. Substituted for "(e) in the case of refund of unutilised input tax credit under sub-section (3), the end of the financial year in which such claim for refund arises;" by s. 23 of The Central Goods and Services Tax (Amendment) Act, 2018 (No. 31 of 2018) - Brought into force w.e.f. 01st February, 2019.
What it means
"Refund" includes refund of tax on zero-rated supplies or on inputs used in them, of tax on deemed exports, and of unutilised credit under sub-section (3).
- Exports of goods — the date the ship or aircraft leaves India, the goods pass the land frontier, or the post office despatches them.
- Deemed exports — the date the return relating to them is filed.
- Supplies to an SEZ — the due date of the return for the period (from 01.10.2022).
- Exports of services — the date of receipt of payment in foreign exchange (or in rupees where RBI permits), or the invoice date where payment was received in advance.
- Refund resulting from an order — the date the order is communicated.
- Inverted duty — the due date of the return for the period in which the claim arises (from 01.02.2019; earlier, the end of the financial year).
- Provisional assessment — the date of final adjustment; a person other than the supplier — the date of receipt of the goods or services; any other case — the date tax was paid.
Statutory text as published on the CBIC tax information portal, as on 03.10.2026; the numbered notes record each amendment. Official source
Common questions
- What is the time limit for a GST refund claim?
- Two years from the relevant date defined in the Explanation to section 54 of the CGST Act — for example, the date the ship leaves India for exported goods. The period 01.03.2020 to 28.02.2022 is excluded (Notification 13/2022-Central Tax). A cash ledger balance may be claimed at any time.
- Is credit on input services refundable under the inverted duty structure?
- No. In Union of India v VKC Footsteps (2021) the Supreme Court upheld Rule 89(5), which limits inverted-duty refunds to credit on inputs (goods).
- When is unutilised input tax credit refundable?
- Only for zero-rated supplies made without payment of tax (exports or SEZ supplies under LUT or bond) and where the rate on inputs exceeds the rate on outputs (section 54(3)).
Commentary and case notes checked against the judgments and CBIC sources on 04.10.2026.
What it means
Any person — registered or not — may claim refund of tax, interest or other amounts paid, within two years from the relevant date (Form GST RFD-01, Rule 89). A balance in the electronic cash ledger is refundable under the proviso without that limit. UN agencies, multilateral financial institutions, consulates, embassies and other persons notified under section 55 claim refund of tax on their inward supplies within two years from the end of the quarter in which they received them (six months before 01.10.2022).