Procedure Relating to the Sanction, Post – Audit, and Review of GST Refund Claims

Procedure Relating to the Sanction, Post – Audit, and Review of GST Refund Claims

Procedure Relating to Sanction, Post-Audit, & Review of GST Refund Claims

Instruction No. 03/2022, dated June 14th, 2022 

Under the mentioned Instruction, reference has been drawn to the following:

  1. As per Section 107 (2) of the CGST Act, 2017, the commissioner has the power to review, if he may, any decision/order (including an order of refund, w.r.t. its legality or propriety). Also, the commissioner may direct any subordinate to file an appeal against the said decision/order, within 6 months of its date of the communication.
  2. Further, as per an entry in the Circular 17/17/2017 – GST dated November 15th, 2017:
  • Pre-audit refund orders are not required to be carried out; &
  • Post-audit refund orders may continue on the basis of extant guidelines.

However, the Board has been receiving reports of different practices being followed by the field formations regarding sanction, review and post-audit of refund claims.

Speaking order in respect of all refund claims has been issued for certain Commissionerate, and not for other Commissionerate in respect of which the refund has been sanctioned in full.

Likewise, different practices have been followed in the case of review and post-audit too. To ensure uniformity and enable monitoring of sanctions in the procedure the matter has been analysed.

Corresponding to the above, the following instructions/guidelines have been issued for the sanction, post-audit and review of refunds:

A. Sanction of Refund

I. Detailed guidelines relating to the processing of refund claims in GST have been issued:

a. For manual processing of refunds - Circular No. 17/17/2017 -GST dated November 15, 2017; &
b. For electronic filing and online processing of refunds - Circular No. 125/44/2019-GST dated November 18, 2019.

II. Under both the aforementioned Circulars, it has been mentioned that prior to making any final decision the Proper Officer shall follow the principle of natural justice. Which provides that a detailed Speaking Order has to be issued providing a basis of refund sanction/rejection. 
III. Hence, while passing the refund sanction order in FORM GST RFD – 06, Proper Officer uploads a detailed speaking order.
IV. The Speaking order shall contain the following details:

a. Details for all categories of refund claims:

  1. Period of the refund claim, date of filing & category of refund;
  2. Whether it has been checked that a refund claim for the same period has not been filed in the same category including any claim filed under the ‘Any Other’ Category;
  3. Details of Deficiency Memo, in FORM GST RFD-03 issued in respect of the said refund claim previously;
  4. Whether the refund has been claimed within the threshold of time as under the CGST Act, & Rules thereof;
  5. Details of the documents/ statements uploaded along with the refund claim. Whether all requisites have been uploaded. Details of documents furnished by the applicant via e-mail/ in soft copy/ in hard copy, if any, may also be provided;
  6. Whether all the due returns have been filed by the applicant or not, whether any dues are pending recovery from the applicant, and whether a refund is required to be withheld/ any amount is required to be deducted as per provisions of section 54(10) of CGST Act on account of non-filing of returns or dues being pending for recovery from the applicant;
  7. Whether any SCN was issued to the applicant. Details of reply of the applicant and PH details;
  8. Discussion and findings in respect of applicant submission. Details of case laws relied upon in deciding the matter, if any;
  9. Whether provisions of unjust enrichment are applicable;

b. Additional details in case of the refund of accumulated ITC (on account of zero-rated supplies/ inverted rated structure) and refund of IGST paid on account of zero-rated supplies:

  1. Whether the refund amount claimed has been debited from the electronic credit ledger, in terms of sub-rule (3) of rule 89 of CGST Rules;
  2. In case of refund of IGST paid on account of zero-rated supplies, whether the amount of IGST has been paid through GSTR-3B return;
  3. Whether the calculation given by the applicant of export/ zero-rated turnover, adjusted aggregate turnover, turnover of inverted duty supplies, as applicable, is correct as per the relevant provisions;
  4. Whether calculation of Net ITC, where ever applicable, is correct as per the relevant provisions. Also, whether the verification of admissibility of ITC as per the provisions of GST Law has been done or not and the findings thereof;
  5. Whether it has been verified that ITC on capital goods has not been included in calculation of Net ITC for refund of ITC in zero rated supplies.
  6. Whether it has been verified that ITC in respect of input services as well as capital goods is not included in calculation of Net ITC in case of inverted tax structure refund
  7. Whether refund has been restricted to the ITC as per those invoices, details of which are uploaded by the supplier in FORM GSTR-1 and are reflected in FORM GSTR-2A of the applicant in terms of Circular No. 135/05/2020-GST dated March 31, 2020;
  8. Whether the refund is barred under the provisions of 2nd and 3rd proviso to section 54(3) of the CGST Act, 2017;
  9. Details of computation of refund claim amount as per the relevant provisions/ prescribed formula in the Act/ Rules and verification whether the refund amount claimed is correct or not;
  10. In case of refund on account of inversion, whether the supply qualifies for refund of unutilised ITC under clause (ii) of 1st proviso to section 54(3) of the CGST Act, 2017;
  11. In case of refund on account of export of goods, whether the details of shipping bill/ bill of exports, where ever applicable, have been verified from the ICEGATE portal;
  12. In case of refund on account of export of services, whether the claimant has furnished the BRC/FIRC/ other relevant documents evidencing receipt of export remittances in respect of zero-rated services for which refund is being claimed;
  13. In case of refund on account of zero-rated supply by DTA to SEZ, whether the said supply is meant for authorized operations on the basis of Letter of Authorisation (LOA). Further, whether the details of supply by the applicant to the SEZ have been cross checked from the SEZ Online portal;
  14. Whether the documents pertaining to zero-rated supply to SEZ have been endorsed by the specified/authorized officer of the zone;
  15. Whether the DTA supplier has received the payment from the SEZ recipient in case of supply of services to SEZ.

c. Additional details in case of refund of tax paid on supplies regarded as deemed export:

  1. Whether necessary procedure was followed while making procurement/supplying of goods regarded as deemed exports.
  2. Whether the ITC claimed against the tax paid on such deemed export supplies has been debited from the electronic credit ledger by the recipient for filing application of refund.
  3. Whether it has been verified that no ITC has been claimed by the recipient when refund is claimed by supplier.

d. Additional details in case of refund of excess balance in cash ledger:

  1. Whether the amount claimed has been debited from the electronic cash ledger.
  2. Whether the amount to be refunded has been calculated in accordance with the provisions of section 49(6) of CGST Act.

e. Additional details in case of refund filed under the other categories of refund except those mentioned above:

  1. Whether the documents furnished/uploaded along with the refund claim have been verified for their correctness from the source like FORM GSTR-1, FORM GSTR-3B, ICEGATE portal etc., where ever required;
  2. Details of the verification conducted and reasoning for grant/ rejection of refund;
  3. In case of refund ITC filed under “Any Other” category, whether the amount claimed has been debited from the electronic credit ledger, wherever required.

V. ACES-GST Portal provides the facility for uploading a document in PDF format along with the FORM GST RFD-06 order. And can be used by the proper officer for uploading the speaking order. The same is made available online to the refund applicant, and the Post-audit/Reviewing Authority.

B. Post-Audit and Review:

I. Section 107(2) of the CGTS Act as mentioned earlier in this instruction has been replicated as follows:
The Commissioner may, on his own motion, or upon request from the Commissioner of State tax or the Commissioner of Union territory tax, call for and examine the record of any proceedings in which an adjudicating authority has passed any decision or order under this Act or the State Goods and Services Tax Act or the Union Territory Goods and Services Tax Act, for the purpose of satisfying himself as to the legality or propriety of the said decision or order and may, by order, direct any officer subordinate to him to apply to the Appellate Authority within six months from the date of communication of the said decision or order for the determination of such points arising out of the said decision or order as may be specified by the Commissioner in his order.

II. As per the abiding practice, all refund orders for the examination of legality, and propriety of refund order, and for the requirement of the appeal to the Appellate Authority, are required to be reviewed.

III. Refund claims are not put through pre-audit, as mentioned in Circular No. 17/17/2017 – GST, November 15, 2017. However, post – audit of the same may continue.

IV. However, considering the volume of refund claims, the decision has been made that post-audit may henceforth be conducted for refund claims amounting to Rs. 1Lakh or more.

V. The following guidelines shall be followed for post–audit and review:

  • All refund orders passed, should after issuance of an order in FORM GST RFD – 06, immediately be transmitted to the review module. The review and post audit officers shall have access to all documentation on ACES - GST;
  • A Post-Audit Cell under a Deputy/Assistant Commissioner along with one/ two Superintendents and Inspectors as required may be created in Commissionerate Headquarters;
  • Post Audit shall be completed within 3 months from the date of issue of FORM GST RFD – 06, and the findings shall also be communicated;
  • The review of the refund order shall be completed at least 30 days before the expiry of the time period allowed for filing an appeal under Section 107(2) of the Act.

VI. Until the functionality is developed on ACES GST, post-audit refund orders may be conducted in offline mode. For this purpose, the relevant documents and the refund orders may be provided to the Post–Audit Cell by the respective Division through-office within 7 days of issuance of the refund sanction order in FORM GST RFD-06.

The report of the post-audit may be furnished by the Post-Audit Cell to the Review Cell through e-Office within 3 months from the date of issue of FORM GST RFD – 06.

For any further clarification related to the notification/article, feel free to contact GST Experts at ASC Group. 



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