Refund Claims of Accumulated ITC


    If certain conditions are met, taxpayers can claim a refund of accumulated ITC or input tax credit. First, the applicant must file form RFD-01 along with the necessary supporting documents within the time limit specified in Section 54 of the CGST Act and Rule 89 of the CGST Rules.

    Cases under which accumulated ITC claims are valid 

    The taxpayers can claim ITC in the following situations

     Cases under which accumulated ITC claims are invalid. 

    ITC cannot be claimed if:

    Frequency and the time limit for claiming accumulated ITC 

    Any individual who seeks refunds is required to fill out form RDF-01 under section 54 of the CGST Act. It can be done two years from the relevant date. 

     If an applicant has unused ITC from exports or supplies to SEZs (zero-rated supplies), they can file RFD-01 at any time throughout the tax year.

    If the refund claims are to be made by embassies or international organizations, they must file for a refund within six months of the last day of the quarter in which goods/services were obtained. Following the submission of the GSTR-11 return, the form used is RFD-10.

    How to calculate the maximum amount of unutilized ITC 

    1. Refund of accrued ITC for zero-rated supplies not subject to tax (exports and supplies to SEZ units or developers)

    The following calculation determines the qualifying refund amount:

    Amount of Refund = [ Net ITC x (Turnover of zero-rated supply of goods + Turnover of zero-rated supply of services) ] ÷ Adjusted Total Turnover

    2. The refund of accrued ITC due to the tax structure being reversed

    The following calculation determines the qualifying refund amount:

    Amount of Refund = {[ Net ITC x (Turnover of inverted rated supply of goods and services)] ÷ Adjusted Total Turnover} – Tax liability on inverted rated supply of goods and services

    Definitions of the terms in the formulae 

    NET ITC (1) 

    Input tax credit claimed for a specific period on goods and services purchased (inputs and input services).

    NET ITC (2)

    The input tax credit is claimed on the goods purchased for the specific period (inputs).

    Turnover of zero-rated supply of goods

    It can be one of the two values listed below:

    Turnover of zero-rated supply of services

    Total payments for the zero-rated supply of services received during the defined time progress toward the zero-rated supply of services concluded for that specific period. Still, they received in any prior period, excluding advances received in the previous period for which service is not met.

    Adjusted total turnover

    Total state or territory turnover, excluding turnover from delivering services and turnover from zero-rated and non-zero-rated service provision. The value obtained does not include the value of exempt supplies.

    The ITC or sales turnover of supplies obtained with the benefit of CGST Rules 89(4A) and 89 (4B) are not included in the net ITC turnovers at either (1) or (2).

    Procedures for claiming and processing accrued ITC refunds

    One should follow the following steps while claiming the accumulated ITC:

    The following things should be noted while filing for accumulated ITC. 

    Types of refunds that can be filled for in respect to the form RFD-01A 

    Cases when a provisional refund is allowed 

    Section 54(6), in conjunction with CGST Rule 91, governs the grant of a provisional refund. In the following cases, a refund of unused ITC is requested. Up to 90% of the submitted claims may be refunded temporarily using form RFD-04.

    The provisional refund shall not include ITC that has been provisionally accepted (for example, under CGST Rule 36(4)). The provisional refund order is issued within seven days of the date of acknowledgement in RFD-02. The GST refund processing officer needs to examine the RFD-06 application for final settlement and order to revalidate this.

    Situations where the refund is paid to the applicant 

    Assume the applicant’s refund amount is related to one of the following types: unutilized ITC. In that instance, it can be directly paid to the applicant rather than being credited to the Consumer Welfare Fund:

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