Query Regarding GST Refund Claim Post Registration Cancellation, Goods and Services Tax - GST

[Sudhir M]

Our company’s business operations are closed, but we have pending GST appeals for refund and litigation (with pre-deposit made). We are currently filing NIL returns, but the department has suspended our registration and issued a SCN for cancellation. Since we need to file a refund application after the appeal order, can we still claim the refund if the GST registration is cancelled by the department?

Posts / Replies

[KASTURI SETHI]

Refund claim cannot be denied, if registration has been cancelled. You can file refund claim manually under Rule 97A. 

Even unregistered person can file refund claim subject to conditions. See Circular No.188/20/2022-GST dated  27.12.22 

[YAGAY andSUN]

Query Regarding GST Refund Claim Post Registration Cancellation

Yes, it is possible to claim a GST refund even after the cancellation of your GST registration, but there are specific conditions and procedures to consider under the GST law in India. Let’s break this down step by step based on the current legal framework and your situation:

1. Impact of GST Registration Cancellation on Refund Claims

- Cancellation of GST Registration: Once your GST registration is cancelled, you are no longer a "registered person" under GST law. This means you cannot collect GST, issue tax invoices, or claim Input Tax Credit (ITC) post-cancellation. However, the cancellation does not automatically bar you from claiming refunds for amounts already paid or credits accumulated during the period when your registration was active.

- Pending Refunds and Appeals: The GST law allows for refund claims related to transactions or liabilities from the period when you were registered, even after cancellation. Section 54 of the CGST Act, 2017, governs refunds and permits claims for:

- Excess tax paid (e.g., pre-deposit made for appeals).

- Unutilized ITC (e.g., due to exports, inverted duty structure, etc.).

- Any other amount paid but not due, subject to conditions.

- Time Limit: Refund applications must be filed within 2 years from the "relevant date" as defined under Section 54(14) of the CGST Act. The relevant date varies based on the type of refund (e.g., for excess tax paid, it’s the date of payment; for appeal-related refunds, it may be linked to the date of the appeal order). Cancellation does not reset or nullify this timeline for prior periods.

2. Current Situation: Suspended Registration and SCN for Cancellation

- Suspension of Registration: When the GST department suspends your registration, you are temporarily restricted from performing GST-related activities (e.g., filing returns beyond NIL returns, claiming ITC). This is often a precursor to cancellation and is typically initiated via a Show Cause Notice (SCN) under Section 29 of the CGST Act, 2017.

- Reasons for SCN: The SCN for cancellation might be issued due to reasons like:

- Continuous filing of NIL returns, indicating no business activity.

- Closure of business operations (as you’ve stated).

- Non-compliance with GST provisions (e.g., delayed filings, non-payment of dues, etc.).

- Response to SCN: You have 30 days from the date of the SCN to respond using Form GST REG-18 on the GST portal, explaining why your registration should not be cancelled. You can highlight:

- The closure of business operations but the need to keep registration active for pending appeals and refund claims.

- Compliance with NIL return filings and payment of any pre-deposit for appeals.

- If the department proceeds with cancellation despite your response, the cancellation order will be issued in Form GST REG-19.

3. Claiming Refund After Cancellation

- Eligibility Post-Cancellation:

- As per Section 54 of the CGST Act, 2017, and Rule 89 of the CGST Rules, 2017, a person (registered or unregistered) can claim a refund of:

- Excess balance in the electronic cash ledger (e.g., pre-deposit made for appeals).

- Unutilized ITC accumulated during the registered period (subject to conditions, e.g., no claim if duty drawback was availed).

- Any tax, interest, penalty, or other amounts paid but not due.

- The Calcutta High Court has ruled that GST refunds cannot be credited to the electronic ledger of a closed business but can be disbursed to the bank account of the applicant, ensuring usability after cancellation.

- Process to Claim Refund:

- File Final Return: Upon cancellation, you must file a final return in Form GSTR-10 within 3 months of the date of cancellation or the date of the cancellation order (whichever is later), as per Section 45 of the CGST Act. This return includes:

- Details of supplies made before cancellation.

- Reversal of any unutilized ITC on closing stock (inputs, semi-finished, or finished goods).

- Confirmation of all tax liabilities discharged.

- Refund Application: After the appeal order is issued in your favor, file Form GST RFD-01 on the GST portal under the category “Refund of excess balance in electronic cash ledger” (for pre-deposit) or other relevant categories (e.g., “Excess payment of tax” or “ITC accumulated due to inverted duty structure”).

- Documents Required:

- Copy of the appeal order favoring the refund.

- Proof of pre-deposit payment (e.g., challans, electronic cash ledger statements).

- Statement of unutilized ITC (if applicable).

- Bank account details for refund disbursement.

- Form GSTR-10 (final return) acknowledgment.

- Other supporting documents as per Rule 89(2) of the CGST Rules or as requested by the refund sanctioning authority.

- Upload up to 10 documents (max 5 MB each) with the application.

- Time Limit: File within 2 years from the relevant date (e.g., date of appeal order for pre-deposit refund or date of payment for excess tax).

- Processing: The refund application will be assigned to the jurisdictional Refund Processing Officer. A debit entry for the claimed amount will be made in your electronic cash ledger upon filing. The officer will scrutinize the application, and if approved, the refund will be credited to your bank account (not the electronic ledger, post-cancellation).[](https://tutorial.gst.gov.in/userguide/refund/Application_for_Refund.htm)

- Unjust Enrichment: You must prove the tax burden wasn’t passed to customers, or the refund may be credited to the Consumer Welfare Fund unless an exception applies (e.g., pre-deposit refunds are generally exempt).

4. Key Considerations

- Pending Appeals and Pre-Deposit: The pre-deposit (typically 10% of the disputed tax or a fixed sum, as per Section 107 of the CGST Act) made for litigation/appeals is eligible for a refund if the appeal is decided in your favor. Cancellation of registration does not affect this right, as it relates to payments made during the registered period.

- NIL Returns and Compliance: Your continued filing of NIL returns shows compliance, which strengthens your case. Ensure all pending returns (GSTR-1, GSTR-3B) are filed up to the date of cancellation before applying for a refund.

- Revocation Option: If you believe maintaining registration is necessary for smoother refund processing or future operations:

- Apply for revocation of cancellation in Form GST REG-21 within 30 days of the cancellation order (Section 30 of the CGST Act and Rule 23 of the CGST Rules).

- File all pending returns, pay any tax, interest, penalty, or late fees, and provide reasons for revocation (e.g., need to pursue refunds and appeals).

- The time limit for revocation was extended for certain cases (e.g., cancellations before 31st December 2022) via Notification No. 03/2023, but check for any 2025 updates   -

CBIC Clarification: Refunds will not be credited to the electronic credit ledger of a non-operational business, but direct bank account disbursement is permitted, aligning with your closed business status.

5. Recommendations

- **Respond to SCN**: File a reply to the SCN in Form GST REG-18 within 30 days, explaining:

- Your business is closed, but you have pending appeals and refund claims.

- You are compliant with NIL return filings.

- Request to either revoke the suspension or allow cancellation but preserve refund rights.

File Final Return: Post-cancellation, submit Form GSTR-10 within 3 months, reversing any unutilized ITC and settling liabilities.

Prepare for Refund: Once the appeal order is received, file Form GST RFD-01 promptly with all required documents. Track the status via the GST portal’s “Services > Refunds > Track Application Status” option using the Application Reference Number (ARN).

Consult an Expert: Given the complexity of appeals, litigation, and post-cancellation refunds, consider engaging a GST practitioner or chartered accountant to ensure compliance and maximize your refund claim.

6. conclusion

Yes, you can claim a GST refund after cancellation of your registration for amounts like the pre-deposit or excess tax paid during the period when you were registered, provided you file Form GST RFD-01 within 2 years from the relevant date and comply with all procedural requirements (e.g., filing GSTR-10, submitting appeal order, etc.). The refund will be credited to your bank account, not the electronic ledger, due to the closure of your business. Respond to the SCN to either prevent cancellation or ensure your refund rights are safeguarded, and stay updated on any 2025 notifications or circulars from CBIC that might affect this process.

If you need further assistance, consider contacting a GST expert or visiting the GST portal (www.gst.gov.in) for detailed guidance process. https://tutorial.gst.gov.in/userguide/refund/Application_for_Refund.htm

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