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September 14, 2020
All Articles by: Mr. M. GOVINDARAJAN       View Profile
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The term ‘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 unutilized input tax credit as provided under section 54(3).

Section 54 provides that procedure for the claim of refund by the registered person and the disposal of refund by the Department.  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 in Form No. GST RFD 01 electronically, before the expiry of two years from the relevant date.    The application shall be accompanied by documentary evidence to establish that a refund is due to the applicant, if the refund is in excess of ₹ 2 lakhs.

Provisional refund

The proper officer may, in case of claim of refund on account of zero rated supplies of goods or services or both made by the registered person, refund on a provisional basis 90% of the total amount so claimed, excluding the input tax credit provisionally accepted, subject to such conditions.   The claimant shall not be prosecuted during any period of five years immediately preceding the tax period and where the tax evaded exceeds ₹ 2.5 crores.  Such provisional refunds shall be made within sixty days from the date of receipt of application in all aspects. 

The proper officer, after scrutiny of the claim and the evidence submitted in support thereof and on being prima facie satisfied that the amount claimed as refund is due to the applicant in accordance with the provisions of sub-section (6) of section 54, shall make an order in Form GST RFD-04, sanctioning the amount of refund due to the said applicant on a provisional basis within a period not exceeding seven days from the date of the acknowledgement.


If the said refund is not made within sixty days from the receipt of the application in all respects, then the claimant shall be given interest at the rate of not exceeding 6% as specified in the notification issued by the Government.

The proper officer shall issue a payment order in Form GST RFD-05 for the amount sanctioned and the same shall be electronically credited to any of the bank accounts of the applicant mentioned in his registration particulars.


Rule 90(2) provides that the application for refund, other than claim for refund from electronic cash ledger, shall be forwarded to the proper officer.  The proper officer shall, within a period of fifteen days of filing of the said application, scrutinize the application for its completeness.  where the application is found to be complete an acknowledgement in FORM GST RFD-02 shall be made available to the applicant through the common portal electronically, clearly indicating the date of filing of the claim for refund and the time period specified in sub-section (7) of section 54 shall be counted from such date of filing.

Deficiency memo

Where any deficiencies are noticed, the proper officer shall communicate the deficiencies to the applicant in Form GST RFD-03 through the common portal electronically, requiring him to file a fresh refund application after rectification of such deficiencies.


The issue to be discussed in this article whether the right of the proper officer to issue the deficiency memo as discussed above will lapse with reference to the decided case law as discussed below:

Case law

In ‘JIAN INTERNATIONAL VERSUS COMMISSIONER OF DELHI GOODS AND SERVICES TAX’ – 2020 (7) TMI 611 - DELHI HIGH COURT, the present writ petition has been filed seeking a direction to the proper officer to grant refund of ₹ 9,12,893/- claimed under Section 54 of the Delhi Goods and Services Tax Act, 2017 for the month of August 2019 and also for the grant of interest till the date of refund.

The petitioner submitted the following before the High Court-

  • In accordance with DGST Act read with Rule 91(2) of Delhi GST Rules,  the proper officer is required to refund at least 90% of the refund claimed on account of zero rated supply of goods or services or both made by the registered persons within a period of seven days from the date of acknowledgement issued by the proper officer.
  • Despite the period of 15 days from the date of filing of the refund application having expired on 19.11.2019, the proper officer has  till date neither pointed out any deficiency/discrepancy in Form GST RFD – 03 nor it has issued any acknowledgment in Form GST RFD – 2.
  • Even for the refunds for the months of September and November 2017 the petitioner had to file writ petition before the High Court and it was only thereafter the Department had refunded the tax along with partial interest.

The respondent accepted that there has been laxity on the part of the respondent in processing the petitioner’s application.   The respondent submitted that a formal deficiency memo will have to be issued as certain documents though annexed with the writ petition had not been uploaded by the petitioner along with the refund application. 

The High Court heard both the parties.  The High Court observed that Rules 90 and 91 provide a complete code with regard to acknowledgment, scrutiny and grant of refund.  The said Rules also provide a strict timeline for carrying out the aforesaid activities.  Rule 90(2) provides that within 15 days from the date of filing of the refund application, the proper officer has to either point out discrepancies in Form GST RFD – 03 or acknowledge the refund application in Form GST RFD – 2.  In the event deficiencies are noted and communicated to the applicant, then the applicant would have to file a fresh refund application after rectifying the deficiencies.

In the event of default or inaction o carry out the said activities within the stipulated period the payment of interest under 56 is to be made to the claimant.

The petitioner filed the refund application on 19.11.2019.  The same has not been processed.  Neither any acknowledgement in Form GST RFD – 02 has been issued nor has any deficiency memo been issued within a time line of 15 days.  In such a scenario, the refund application would be presumed to be complete in all respects in accordance with the provisions of Rule 89.

The High Court further observed that to allow the respondent to issue a deficiency memo today would amount to enabling the respondent to process the refund application beyond the statutory timelines as provided under Rule 90.  It can be construed as rejection of the petitioner’s initial application for refund as the petitioner would thereafter have to file a fresh refund application.  This would only delay the petitioner’s right to seek refund, but also impair the petitioner’s right to claim interest from the relevant date of filing of the original application for refund.  All the relevant documents have been annexed with the present writ petition and the respondent is satisfied about their authenticity.

The High Court was of the view that the respondent has lost the right to point out any deficiency, in the petitioner’s refund application, at this belated stage.  The High Court directed the respondent to pay the petitioner’s refund amount along with interest within two weeks from the date of receipt of the order.


By: Mr. M. GOVINDARAJAN - September 14, 2020



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