Section 54 – Refund of Tax
Section 54 of CGST Act, 2017 – Refund of Tax
Updated on: February 2026 (as applicable till date)
Prepared by: Yours Tax Consultant
1. Scope and Importance of Section 54
Section 54 provides the statutory right to claim refund of tax, interest or any other amount paid under GST.
Refund is a critical aspect of GST because:
- GST is a destination-based tax
- Exports are zero-rated
- Input Tax Credit accumulation must be neutralised
This section is the backbone of:
- Export refunds
- Inverted duty structure refunds
- Excess payment refunds
2. Statutory Provision – Section 54(1)
Any person claiming refund of:
- Tax
- Interest
- Any other amount paid
may make an application for refund before the expiry of two years from the relevant date, in such form and manner as may be prescribed.
3. Meaning of Relevant Date
The term “relevant date” varies depending on the nature of refund.
Examples:
- Exports – date of shipping bill or payment receipt
- Inverted duty structure – end of financial year
- Excess payment – date of payment
Correct identification of relevant date is crucial to avoid time-barred claims.
4. Categories of Refunds under Section 54
Major refund categories include:
- Refund of tax paid on zero-rated supplies (exports / SEZ)
- Refund of unutilised ITC due to inverted duty structure
- Refund of excess tax paid
- Refund of tax paid under protest
- Refund of IGST paid on exports
5. Provisional Refund – Section 54(6)
In case of zero-rated supplies:
- 90% of the claimed refund amount
- May be granted provisionally
within 7 days of acknowledgement, subject to prescribed conditions.
This provision supports exporters’ liquidity.
6. Unjust Enrichment – Section 54(8)
Refund shall be paid to the applicant only if:
- Incidence of tax has not been passed on to any other person
If unjust enrichment applies:
- Refund amount is credited to Consumer Welfare Fund
Certain refunds are exempt from unjust enrichment, such as export refunds.
7. Refund Without Application – Section 54(10)
In certain cases:
- Refund may be granted without filing application
Example:
- IGST paid on export of goods (shipping bill acts as refund application)
8. Interest on Delayed Refund – Section 54(12)
If refund is not sanctioned within:
- 60 days from date of receipt of application
interest is payable under:
9. Section 54 Read with CGST Rules
Section 54 must be read with:
- Rule 89 – Application for refund
- Rule 90 – Acknowledgement
- Rule 91 – Provisional refund
- Rule 92 – Order sanctioning refund
10. Common Grounds for Rejection of Refund
- Time-barred application
- Incorrect relevant date
- Mismatch with returns
- Failure to prove non-passing of tax incidence
11. Related Provisions
- Section 53 – Consumer Welfare Fund
- Section 56 – Interest on delayed refunds
- Section 16 – Zero-rated supplies
12. Professional Insight
Refund is a statutory right but not an automatic one. Accurate classification, correct relevant date, and strong documentation are the keys to successful refund claims under Section 54.
Disclaimer: This article is prepared based on the CGST Act, CGST Rules, notifications and prevailing legal position as applicable till date. Refund provisions are highly procedural and subject to frequent changes.
Comments