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GST refund : What is a Provisional order for refund?

Updated on: Jun 22nd, 2021


6 min read

In our previous article, we had covered the form GST RFD-02 (acknowledgement) and the form GST RFD-03 (discrepancy memo). We will cover the form used for provisional sanction of refund by the proper officer (GST RFD-04) and the form used for payment of the final net refund.

Latest Updates on GST Refund

21st December 2021
From 1st January 2022, CBIC made the aadhaar authentication mandatory to apply for a refund under the CGST Rules 89 (Excess tax, interest, penalty, fees paid) and 96 (IGST paid on goods or services exported out of India) in RFD-01.

1st May 2021
Where the time limit to pass orders for rejecting any refund claim fully or partly falls between 15th April 2021 and 30th May 2021, it is extended. The extended time limit shall be later of two dates:
(1) 15 days after reply to the notice OR
(2) 31st May 2021

Grant of Provisional Refund

On application of GST refund, the GST Officer grants Provisional Refund in certain cases. Rules for Provisional Refund are made because the entire refund process takes quite a long time to complete. Meanwhile, exporter or genuine claimant can face working capital shortfalls due to refunds getting delayed.   In order to cater to the short-term hardship of the exporter, the refunds are released on a temporary basis to the extent of 90% before a complete scrutiny of application and related records.

Once a complete check is done within the stipulated time limit, the final order for sanction or rejection ( RFD-06  or RFD-08) replaces the provisional refund order (RFD- 04).   Consequently, the actual refund amount decided in final order shall be adjusted for the amount already refunded on a provisional basis. Suppose, the GST officer rejects the refund claim, then the claimant has to pay back to the Government the entire amount that he received earlier   The Provisional Refund will be granted after Initial Scrutiny of the Application and documents by the Jurisdictional GST Officer.

Provisional refund is applicable in case of Zero-rated Supplies Zero-rated supplies include :

  1. Export of Goods or Services
  2. Supplies made to Special Economic Zone(SEZ) units and Developers

In these cases, The GST officer shall grant the provisional refund to the extent of 90% of the Refund claimed.   The Refund claimed will be excluding the amount of ITC that got adjusted if any in the Electronic Credit Ledger on applying for the refund in RFD-01A/01.  

Provisional Refund shall be granted by the issue of Form RFD-04 within seven days of giving the Acknowledgement in RFD-02.   This Provisional Refund amount is to be credited directly to the Bank account of the Refund applicant. Payment advice in RFD-05 is sent along for this payment.  

Exception: The Provisional Refund is not granted if the applicant was prosecuted for the offence under any Indian Laws where the tax evaded is more than  Rs. 250 Lakhs anytime in the last five years preceding the tax period for which refund is claimed.  

Contents of the form RFD-04

  • ARN / Refund Application Number with date
  • Acknowledgement Number( as per RFD-02 ) with date
  • The amount of refund claimed by the applicant, the balance amount left to be refunded later(10% of refund claimed), The amount sanctioned now on a provisional basis will be given under each category of tax- IGST or CGST and SGST/UTGST with cess if any.
  • Point to be noted that the balance amount arrived at (iii) as per the form and the Provisional Refund sanctioned at (iv) need not be same.

Amount at (iv) can be less than or equal to the amount arrived at in (iii)

  • At last details of Bank account to which the Refund amount is credited shall be mentioned in the Form.

Let’s check out how the Form RFD-04 looks like:

The GST officer after scrutiny of the Application and the documentary evidence, after being satisfied about the genuineness of the claims made, shall issue the Payment advice in RFD-05 alongwith the Final Order of Refund Sanction.

The GST officer shall transfer/ credit the Refund amount claimed to the account of Consumer Welfare Fund if there is any doubt regarding Unjust Enrichment i.e If there is suspicion that the claimant has passed the tax incidence to the buyer where the buyer has availed the ITC on same supplies. Any such Refund claims can be made by the aggrieved person by applying to the Fund with the necessary declarations and documents to prove the claim.

Exceptions: In following below cases, this Rule does not apply:

  • Zero-rated supplies of goods / services (where refund claim is IGST paid/ ITC on export under LUT)
  • Inverted Duty Structure(refund of Unutilised ITC is claimed)
  • Supply cancelled either wholly or partly and where invoice is not issued( Refund of Tax paid if any)
  • Refund of tax paid , where there is sufficient proof that claimant has not passed the  tax incidence on to any other person
  • Any other case of refund notified by Government.

For better understanding, read more related articles

Orders passed by GST officer for Sanction/ Rejection of Refund

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Quick Summary

The article covers form GST RFD-04 for provisional refund by the proper officer, CBIC updates, extension of time limit for refund orders, process of provisional refund, contents of form RFD-04, and exceptions regarding unjust enrichment. The form is granted for zero-rated supplies and includes details of refund claimed. The refund is granted on a temporary basis and adjusted later based on final order. Exceptions exist for unjust enrichment cases.

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